A global IDC survey of 1,000+ senior executives finds there is strong agreement across both vertical markets and geographical regions when it comes to defining the most compelling drivers of digital transformation. As a follow-up to our previous post on the top KPI metrics in such projects, here I’ll drill into these drivers, which go right to the heart of the success factors deemed most mission-critical to surviving, if not prospering, in today’s highly dynamic and ultra-competitive environment.
The Infor-sponsored survey sampled opinions of executives in three geographic areas — Americas, Asia Pacific, and Europe — across the five vertical markets of healthcare, discrete manufacturing/wholesale, process manufacturing, retail, and public sector.
Top driver of digital transformation
With striking consistency and by a wide margin, the top driver of digital transformation is productivity improvement, as shown in the table below. This makes sense in a global competitive environment wherein managers are continually tasked with doing more with the same or even fewer resources. In some regions, falling birth rates combined with increased retirements are impacting productivity. To boost productivity, digital transformation is clearly seen as the path forward.
If productivity improvements are the ‘push’ or greatest allure of digital transformation, fear of being marginalized represents the ‘pull’. Thus, the second-most prominent driver is fear of being outmaneuvered in the market. That fear can be paralyzing without a proper roadmap, and design on what is needed to maintain a competitive advantage, and a sense of urgency to get moving quickly. Laying out a digital transformation roadmap, in conjunction with experts, is an important first step to mitigate the fear of losing competitive advantage.
As seen in the table 1 at the top of this article, a full 40% of global retail respondents say current competitors have already gained an advantage by investing in digital transformation, or will likely do so within a year. As much as any other vertical market, retail has been upended by technology wherein online sales are growing at four times the rate of in-store sales. This clearly explains the attention being paid to digital transformation in retail.
And some 34% of respondents in healthcare and in process manufacturing maintain that current competitors have already gained an advantage by investing in digital transformation, or will likely do so within a year. These are two sectors under great pressure to innovate to cut costs, particularly healthcare in the US.
Security looms large
Finally, the third-most oft-cited driver of digital transformation is security. Year after year, the number of high-profile security breaches continues unabated, with cyber criminals finding ways around sophisticated defenses and managing to stay a step ahead.
Security spending is increasing annually across virtually every vertical market and in virtually every country, according to a major global survey. This situation has led executives everywhere to ask the basic question, ‘What will it take to stop the breaches?’ One good answer is to increase investment in digital transformation, according to the IDC survey.
In particular, organizations are turning to many artificial intelligence and machine learning (AI/ML) techniques to automate threat detection and eradication effort. The key is to bake continuous security improvements into every aspect of digital transformation, and not to treat security as a bolt-on to both existing and developing IT infrastructures, experts widely agree.
For organizations not yet considering digital transformation, the risk is great. The CIOs and CTOs of those high-profile security breaches firmly stood behind their security infrastructure and protocols, yet they were still breached. Even SMB businesses have fallen victim to the cyber viruses. Many organizations do not have the wherewithal to spend on elaborate security software. Thus, trading traditional software deployments for a digital solution is often the first step for many organizations’ digital transformation.
Major barriers – it’s all about people
With so much potential benefit and overall corporate goodness to be derived from digital transformation, what are the most formidable barriers to it? Clearly the top barriers are legacy business models, legacy culture, and legacy organizational structure. In other words, the biggest barriers are people oriented. Surprisingly, legacy technology is close to the bottom of the list of barriers, as shown in table 2 below.
The top barrier to digital transformation selected by the majority of geographic and vertical sectors is the existing business model. The results of the IDC study clearly show that such change is widely incompatible with most current business models. Yet, at Infor, we see new competitors taking away market share from incumbent organizations. Initially, this appears as rather insignificant, and established organizations tend to ignore this. Quite quickly though, organizations wake up and realize that a new competitor is making significant inroads and doing business with their customers in a whole new way, by incorporating digital solutions—and the customers love it. What established organizations fail to realize is all industries are changing. And to survive, they can no longer kick the can down a three-year road.
Organizational culture is the second-most formidable barrier to digital transformation. This is likely a people-driven factor, based on reluctance to change. Digital transformation demands very different ways of using data to drive business-critical decisions. Seen this way, culture and digital transformation are also incompatible. Many organizations are forced to look at their culture and make changes whether they want to or not. Why? Because the workforce is maturing, and next-generation employees think and act differently. They expect organizations to work in a modern capacity. Therefore, to retain younger workers, organizations are embracing digital transformation to lure discerning employees.
The third-most-cited barrier is organizational structure, which is also closely related to culture. In many companies, organizational structure defines the culture. It can stand in the way of a smoother if not quicker transition to digital transformation.
Download a white paper that dives more deeply into the important details of the IDC study.
And, view this video to learn more about Infor’s view of digital transformation.