Take a look at three key practices organizations that achieve digital maturity employ.
To read more and download the full report, visit: http://deloi.tt/2fm3Stq
Slide owner(s): Doug
Each year MIT Sloan Management Review and Deloitte Digital study the current challenges and opportunities associated with the use of digital technology. Our research is based on a large annual survey of more than 3,500 business executives, managers, and analysts from organizations around the world.
This year’s survey, conducted in the fall of 2016, captured insights from individuals in 117 countries and 29 industries, from organizations of various sizes. More than two-thirds of the respondents were from outside of the United States.
In addition to our survey results, we interviewed business executives from a number of industries and academia to understand the practical issues facing organizations today. Their insights contributed to a richer understanding of the data.
Slide owner(s): Doug
Deloitte and MIT Sloan Management Review have been studying the impact of digital and social business trends on management practices for six years.
Being able to study the digital marketplace year to year provides us with unique insights into how companies are evolving through digital technologies.
Slide owner(s): Doug
An important feature of our research is our focus on understanding the differences between those companies that are advancing digitally and those companies who appear to be struggling.
Slide owner(s): Doug
We view these differences within the frame of digital maturity.
Slide owner(s): Doug and Jerry
Our definition of digital maturity goes beyond technology itself. Digital maturity is about how a business adapts to a digital environment.
Adapting is not ad hoc incremental change but involves fundamental changes to what the business does and how it does it.
These are changes that take root at the core of the organization and involve new mindsets and new ways of operating and working.
Slide owner(s): Doug to transition to Jerry
The change we will be discussing today is significant.
85% consistent across maturity levels.
Story: Walmart.
Legendary dominant global retailer still like other retailers susceptible to the success of online giants like Amazon. Rather than sit tight or make incremental digital changes, WMT is transforming itself, systematically preparing to adapt consistently to ongoing digital change.
WMT:
Ties digital to the core of its strategy.
Its leaders understand the implications of digital technology and consider those implications more than five years out when setting their overall strategy.
Their talent organization is helping drive a shift in the organization’s mindset to embrace concepts such as design thinking and continuous learning.
Leaders like employees are learning new digital skills and will be measured in their ability to drive digital progress.
This is the kind of significant change required to become a digital organization rather than a company that’s simply implementing digital technologies.
Slide owner(s): Doug transition to Jerry
We ask respondents every year to rate the digital maturity of their organization on a 10 point scale.
This year, only about 25 percent of respondents rate their company as more digitally advanced, what we refer to as digitally maturing. A little more than 1/3 are still in the early stages of digital maturity.
Note that these results haven’t changed much since we’ve been tracking digital maturity over the past three years. In fact, the percentage of early stage companies has actually grown from about 25% to 34%.
It appears that many organizations are struggling to advance digitally.
Slide owner(s): Jerry
Those struggling are not doing so for lack of trying to implement technology. The problem is that these companies are not yet making the fundamental changes to their organization that we see more digitally advanced companies make.
These changes can be thought of within three areas.
Making digital core to the business
Creating an environment that is conducive to and enables digital maturity
Delivering the commitment and leadership required to make such extensive change to the organization
We’ll discuss these components in the coming slides.
Slide owner(s): Jerry
One of the biggest challenges we see companies in the early stages face is developing a clear and coherent digital strategy that is core to the overall business strategy. Early stage companies are more likely to look at digital business as an add on to their existing business model.
As our data here shows, when asked what the role of digital business is in their organization, respondents from early stage companies were more likely to say, “digital is mainly talk”. While respondents from developing companies note that digital supports some business objectives but is not core to the business. Those from digitally maturing organizations were far more likely to say that digital business is core to what they do as a business.
The importance of making digital core to the company’s strategy is a meaningful driver of success. 80% of respondents who said digital was core to their company’s strategy claim that their digital efforts are successful or very successful.
Another related point showing importance of strategy. Our data shows that when respondents were asked what their company needs to do differently, nearly 40 percent said fix their strategy and only 13 percent said get better at technology.
Slide owner(s): Jerry
Slide owner(s): Jerry
We found a number of executives are even avoiding using digital terminology when referring to the changes their organization needs to make in order to advance.
Freddie Mac: “It sounds like the catchy new phrase, and there are people who react poorly to that,” says Christine Halberstadt, vice president, servicer and client management, multifamily, at Freddie Mac. “People should speak in words that resonate. There is strong support on the part of our management team for digital transformation. But I don’t think they’d use that phrase.”
An executive at another organization went so far as to say his organization feels it has to “trick” its employees into embracing digital transformation by couching it in non-digital language.
Slide owner(s): Jerry
Different methods to scale. A key challenge to playing the long game is finding resources to move digital initiatives forward while tending to the existing business. Scaling successful initiatives can be accomplished in a number of different ways.
Focus on funding model innovation (Marriott). For example, many companies are finding investment capital through shrewdness and discipline. At Marriott International, for example, George Corbin, senior vice president of digital, says that some of the company’s most important innovations are its funding models.
Make investments self-financing (Marriott). “Finding ways that we can make a growth opportunity become self-financing is critical,” he says. “If I can do that, the digital opportunity can stand on its own two feet, and scale sustainably.”
Invest from cost savings (MetLife). To fund its digital forays, the company relies on operating profit. “Our CEO said that we needed to become a digital business but had to fund the investment out of expense reductions,” says Martin Lippert, executive vice president and head Global Technology & Operations. “We agreed early on that for every three dollars of expenses the company can save, two dollars will be reinvested in digital efforts. We have been using this process for three or four years, and we’re investing up to $300 million a year to modernize our foundation and leapfrog the industry with good returns.”
Slide owner(s): Jerry
Discuss polling question results …
You’ve probably heard the suggestions for companies to fail fast and learn, do more experimentation in order to drive toward digital maturity.
Our results this year indicate that companies are heeding the advice, but the early stage companies appear to be struggling to grow beyond the experimentation phase.
Slide owner: Jerry
Moving on now from our discussion about digital being at the core of the business, let’s discuss now how to create an environment that supports digital maturity, starting first with the ways in which companies can adapt their organizational structure to support digital growth. In particular, breaking down functional silos and focusing on cross-functional collaboration is considered crucial to success in digital environments.
Our data this year shows the extent to which more digitally advanced companies are taking this guidance.
We’ve observed in our research that digitally maturing companies are increasing their use of cross-functional teams to organize work and charging them with implementing digital business priorities. Likewise, these companies are far less likely to say that organizational structures are a barrier to successful digital business.
Slide owner: Jerry
We interviewed a number of companies this year who are making great strides increasing their use of cross-functional teams. And we’re not just talking about collaboration within the organization, but across the ecosystem as well.
Story (Cardinal Health – Fuse). Increasing ecosystem collaboration via digital innovation center.
In an interview with a large health care services organization, we learned of their efforts to enhance cross-functional teaming through their innovation lab. Cross-functional teams, include Cardinal Health engineers, creative designers, and scientists, work alongside pharmacy customers, health care providers, and other ecosystem participants. Customers and employees regularly propose ideas that are screened and tested using agile one-week sprints.
Continued support from Cardinal Health’s leaders helps ensure that Fuse initiatives are integrated successfully into the broader organization. “Senior leadership came with the idea of Fuse, supports it, and talks about it,” says Brent Stutz, senior vice president of Commercial Technologies and chief technology officer at Fuse by Cardinal Health. “Without that, I’m not sure we would have the buy-in or the engagement from the rest of the organization or even from our customers.”
Note, not mentioned in the report, but Stutz said that maintaining collaboration over time was more difficult than maintaining other aspects of the company culture.
Slide owner: Jerry
Digitally maturing organizations are far more confident than are others about having sufficient digital talent in their workforce. To develop and hold onto that talent, developing it needs to go far beyond training to creating an environment where employees are eager to continuously learn, gain digital experiences and grow.
Even the best companies have the talent they need.
Slide owner: Jerry
Maturing companies both develop their talent to succeed in a digital environment and effectively use the skills of their existing employees. Not surprisingly, they are more likely to say they have the talent they need to execute their digital business strategy.
When it comes to developing and learning new skills, an important shift is occurring toward continuous, experiential learning opportunities. Digitally maturing companies are creating environments in which people come and want to learn and grow.
Story – Professor Tambe at NYU speaking about learning / gaining experience / visibility on digital platforms.
To make work a place where people want to learn, Professor Tambe observes that many companies are encouraging employees to participate in platforms and communities where they can share ideas with and learn new skills from experts in other organizations. Instead of asking staff members to be secretive about their work, some businesses encourage them to be active on platforms such as GitHub, where they can collaborate on the development of cutting-edge technologies with experts in other organizations. This can help attract the types of workers who want to be able to learn about the newest technologies, and some of the skills and knowledge gained by working on these projects can directly benefit their employers.
Although working on open-source platforms allows other companies to experience an employee’s capabilities and poach them, environments that stimulate learning are more likely to retain talent.
Paradoxically, those companies still in the early stages of digital development were much more likely to say they lack sufficient talent to execute a digital strategy but, less than 20 percent say they are trying to develop or utilize the talent they have.
Developing and making use of your current talent is feasible and cost-effective.
Story - Unleashing Learning at Cigna
For example, Cigna, the global health care services company, is pursuing a significant talent development program by helping employees pursue relevant degrees and professional programs. These programs have ROIs ranging from 129% to 144%. Employees who participate in these programs are also up to eight times more likely than others to be promoted, given stretch assignments, and be retained.
Further, Cigna ties its development approach to its strategy. As part of the company’s strategic planning, it determines which skill sets will be most important. Cigna then offers employees three times the tuition reimbursement allowance for key strategic skills it has determined will be critical in the coming years.
Cigna’s efforts also go beyond traditional in-house training initiatives, including external degree programs as well as online collaboration platforms that stimulate and support ongoing learning.
Slide owner: Jerry
Paradoxically, those companies still in the early stages of digital development were much more likely to say they lack sufficient talent to execute a digital strategy but, less than 20 percent say they are trying to develop or utilize the talent they have.
Developing and making use of your current talent is feasible and cost-effective.
Story - Unleashing Learning at Cigna
For example, Cigna, the global health care services company, is pursuing a significant talent development program by helping employees pursue relevant degrees and professional programs. These programs have ROIs ranging from 129% to 144%. Employees who participate in these programs are also up to eight times more likely than others to be promoted, given stretch assignments, and be retained.
Further, Cigna ties its development approach to its strategy. As part of the company’s strategic planning, it determines which skill sets will be most important. Cigna then offers employees three times the tuition reimbursement allowance for key strategic skills it has determined will be critical in the coming years.
Cigna’s efforts also go beyond traditional in-house training initiatives, including external degree programs as well as online collaboration platforms that stimulate and support ongoing learning.
Slide owner: Jerry
As we’ve observed in past years and continue to this year, it is risky for a company to neglect developing its employees. Our research indicates that employees are more likely to leave their company if they do not have the opportunities to develop digital skills.
This year’s results further underscore the importance of providing growth and development opportunities across all levels of the organization including leadership levels. For example, vice president-level executives who don’t feel they have access to sufficient digital development opportunities are 15 times more likely to say they are planning to leave in one year or less than are executives who have those chances.
Needless to say, companies can’t afford to lose their leadership ranks at the same time that digital environments are becoming increasingly complex.
Slide owner(s): Jerry
We consistently see in our research year to year the relationship between an enabling digital culture and digital maturity. Digitally maturing companies consistently demonstrate a similar culture regardless of the industry or region they operate in. Traits like agility, having an experimentation mindset, encouraging collaboration, or being more risk tolerant all become more evident as a company digitally matures.
Slide owner(s): Jerry
We consistently see in our research year to year the relationship between an enabling digital culture and digital maturity. Digitally maturing companies consistently demonstrate a similar culture regardless of the industry or region they operate in. Traits like agility, having an experimentation mindset, encouraging collaboration, or being more risk tolerant all become more evident as a company digitally matures.
The effectiveness of digital culture is evident in our research. When we asked respondents what drives digital business in their company, those from early stage companies were more likely to say their leaders mandate digital. Respondents from developing stage companies were more likely to say their leaders expect employees to adopt digital. However, respondents from maturing companies resoundingly say that the company’s culture supports digital business.
Also, while cultivating a supportive culture drives maturity, maturity likewise reinforces the supporting culture. In our previous research, we found that digitally maturing companies were more likely than less digitally mature companies to take active steps to improve their digital culture further. These combined observations suggest the development of a virtuous circle where digital maturity spurs change by increasing adoption of digital business and vice versa.
Slide owner: Jerry
Comment on polling results.
Digital initiatives are two to three times as likely to be successful if there is sufficient commitment behind them. For example, 75% of respondents whose organizations commit sufficient time, energy and resources to digital endeavors say these efforts are successful. Only about one-third of those who don’t make that commitment report the same results.
More than 70% of organizations that provide their employees with the opportunity to thrive and whose leaders have sufficient vision to lead digital efforts say their initiatives are successful. On the part of organizations that don’t, fewer than 25% can make the same claim.
Digitally maturing businesses are also more likely to double down on their success to drive ever-greater results. Already experiencing the greatest progress with digital endeavors, these organizations are planning the most substantive increases in their digital investments: Approximately 75% of digitally maturing entities plan to increase the money and resources they put into digital business initiatives during the next 12 to 18 months. On the part of early-stage companies, the numbers drop to 49%. The gap between the digitally prepared and the rest of the pack threatens to become dangerously wide, leaving many companies decidedly unprepared to compete in rapidly changing digital environments.
Slide owner(s): Transition to Doug.
Summarize the three components and take a moment to reinforce messages by bringing back Walmart.
Walmart wasn’t born a digital company. It is forging its path toward digital maturity in a disciplined and systematic way. “We are constantly looking for ideas that can make a process better and faster,” says Brian Baker. “We have purposeful conversations — whether it’s with finance, HR, or in the stores — to find and do what will help us all reach our larger aspiration and ambition of becoming a digital enterprise.”
It starts with adopting a product mindset, or as Baker puts it, “realizing that with the People function, everything we do is built with the end user and a desired outcome in mind.” Walmart’s iterative process is built with one outcome in mind — creating a people-led, tech-empowered workforce, from the halls of the home office to the aisles of its stores.
As Walmart’s approach demonstrates, digital maturity doesn’t develop accidentally, nor is it the result of a quick fix. Rather, digital maturity is achieved through commitment, investment, and leadership. Digitally maturing companies set realistic priorities, put their proverbial money where their mouth is, and commit to the hard work of making digital maturity happen.