Wherever your company may have been on the journey toward digitalization earlier this year, chances are that COVID-19 has given it an unexpected and accelerated push down the digital path.
With many parts of the world lifting restrictions on movement, companies are now in a position to craft digitalization strategies for the long term, incorporating everything that has been learned during confinement. Professors Javier Zamora and Joan Enric Ricart have studied hundreds of companies with successful digitalization strategies. Their IESE-Penteo Study on Digital Transformation, written alongside other authors, identifies what those companies have in common.
For these companies, digital transformation is not narrowly focused on cutting costs, though that may well be one of its outcomes. Instead, digital transformation is defined, above all, by achieving greater business agility and workplace productivity, by increasing innovation within the company and by generating value through new business models. “Digital transformation should not be understood as a single project, but rather as a process of change,” Zamora says.
Here are some of the practices companies that are most satisfied with their digital transformation strategy have in common:
Initiatives lasting 1 to 3 years. Most companies successfully complete their digital initiatives in the first and second year, although some take two to three years. There is a clear focus on quick-win initiatives, with a time horizon of a maximum of two years, which, for some companies may end up taking a bit longer.
Use of artificial intelligence. The technologies that differentiate successful companies from the rest are the adoption of platforms, engaging with clients through social networks, and applying artificial intelligence to advanced information analytics.
Change in cost structures. Companies with the most successful digital strategies are also those who report the largest changes in their cost structures, with technology helping to lower costs of serving clients.
Specific KPIs. The most digitally savvy companies establish different and specific indicators for their emerging businesses than for their traditional ones. And the KPIs need not always center around finances.
Leadership from above. In all successful companies, top management drives and leads the transformation process. Only 7% of these companies acknowledge having hybrid structures, that is, they promote digital transformation separately from their day-to-day business operations.
New capabilities. Virtually all companies need to incorporate new capabilities to support digital transformation. Among the three sources to do this — internal training programs, strategic alliances and recruiting new talent — the option of upskilling existing employees is preferred.
Cultural change. Cultural change within a company is even more crucial than structural change. Companies must identify which practices will be most impacted by digitalization and work on those. “Most companies were not born digital. This is a reality, and in order to survive they must continue executing their current operations,” says Zamora. “But at the same time they have to explore new business models.”
Experimentation practices. One of the methodologies most used by companies whose digital initiatives have exceeded their expectations is the search for value creation among customers, employees and suppliers. These companies also use twice as many practices such as A / B testing and hackathons.
The report notes that the coronavirus crisis has highlighted the need for companies to prioritize digital transformation. Fuencisla Clemares, Google’s country manager for Spain and Portugal, agrees. In a recent online session, she said that the crisis has driven home the need for strong digital components in all companies, so that they can pivot most quickly and easily in changing situations.
“I think the benefits (of digitalization) have been understood and without doubt it has gained importance on the agenda of boards of directors,” she said. “I think we’ll see even greater digital adoption going forward.”
Read the full report, in Spanish, Estudio IESE-Penteo sobre transformación digital.
Watch an online session La aceleración de la transformación digital y la nueva realidad with Profs. Zamora and Ricart.
Watch an online session Adaptando al nuevo entorno digital: las lecciones de Google with Fuencisla Clemares and Prof. Julián Villanueva.
This post is also available in: Spanish