In our recent Digital Transformation Study, we have found few success stories of “analog-native” companies developing digital strategies.
Nearly 80% of companies surveyed said they were only “digitally adaptive”, and 50% considered lack of skills and competencies their major challenges in the digitalization journey. To make sense of digital and develop strategies, we suggest exploring four key areas.
How can we adapt organizational structures to accelerate transformation and become more digitally mature?
To match the agility and customer centricity of digital players, analog-native companies need to break down legacy functional silos. They must create organizations that foster cross-functional collaboration, with processes that flow seamlessly across departments, enabling the digitalization of products, processes, and touch points in an end-to-end manner. Collaboration needs to stretch outside the organization to ecosystem partners and customers, as well as internally through the organizational structure.
How can we ensure company-wide digital governance and investments?
Digital-native players leverage the investment and competencies of each component, such as process, product and platform, across the organization.
Successfully replicating this in an analog-native organization requires strong and robust governance to ensure that the right digital investments are made, shared throughout the organization to avoid costly duplication, and managed in the best way possible. Another key responsibility of the governance function is to constantly monitor the organization’s transformation progress, in order to steer the business towards higher levels of maturity.
For analog-natives to create truly digital operating models, the IT focus needs to shift from business process management to digital transformation. This shift can be done by going from a situation in which individual business units request IT development and support from the central IT department, to one in which a digitalization layer can push digital innovation across all group units through a cross-functional team of business and IT experts. This “digitalization factory” works on top of central IT’s existing infrastructure assets, integrating and implementing digital technologies to enable transformation.
What are the skills, competencies and roles required for a digital business model?
Digital-native organizations rely on new digital competencies, processes and working methods, as well as unique leadership roles in their organizations, in order to deliver the core elements in their DNA, such as customer centricity, agility, data centricity and a culture of continuous experimentation.
On the other hand, analog-native firms typically attract people with specific industry and functional specializations, and therefore possess gaps in their digital skills and competencies. The success of digitalization efforts therefore hinges upon their abilities to acquire or develop specific functional competencies around digital skills, technologies and processes (or operating model).
Analog-native companies should aim to develop the new leadership roles needed to facilitate digital transformation, along with corresponding changes to their business and operating models. One such commonly considered role is a business-led, market-driven, and application-minded chief digital officer (CDO) to complement the existing chief information officer (CIO) role. The CDO creates new revenue sources and drives digital transformation through high-speed procedures and by leveraging capabilities from across the organization. The CIO role, on the other hand, is a business-enabling partner, ensuring efficient IT operations and a holistic, efficient IT landscape through business understanding, technology expertise and enforcement of standards.
What cultural shift is required to build a fundamental advantage over digital competitors?
In order for an organization to digitalize successfully across its layers, it needs to overhaul its corporate culture. Analog companies, which have often succeeded through creating systems and structures to control complicated tasks, generally have cultures that hinder rather than help digital transformation, and the traits that hold back digitalization need to be identified to move forward. While the technology to enable the digital shift is often already in place, ways of working and thinking within the organization need to be challenged in order for operational culture to change too.
For analog-native organizations, this shift is normally around areas such as ways of collaborating, employee mobility, and knowledge creation and storage. In digital-native organizations, collaboration is often decentralized, video is frequently used and hierarchies are replaced with cross-functional teams. Employee mobility is enabled through cloud solutions, and the focus is on goal fulfillment rather than process, with knowledge built online through communities and networks.
Digitalization is a cross-societal megatrend affecting and challenging all sectors. Consequently, executive interest in digital transformation is increasing rapidly, as more and more organizations face agile disruptors harnessing new technologies to compete against them. Analog-native companies, which are sometimes ignorant and unaware, and most often unprepared for this important development, can use these key considerations to address the challenges in their digitalization journeys.
* Arthur D. Little is a global management consultancy, founded in 1886, providing thought leadership, including through Prism, its biannual journal that touches on emerging industry trends, strategic thinking and operational excellence.