Digital transformation helps firms boost their performance

The digital revolution has triggered fundamental changes in global organizations over the last two decadesproviding a fertile terrain for new business models as well as prompting the demise of long-established firms, unable to keep pace with evolving consumer behaviors and technologies  

Digital transformation allows companies to achieve greater business agility and workplace productivity by increasing innovation and generating value through new business models. Global organizations have leveraged new technologies to varying degrees depending on their business, industry and areas of operation, yet the pandemic surely gave many an unanticipated push. 

“COVID-19 accelerated the digitalization process in some firms and gave more digitally advanced organizations an edge, at least in the initial stages”.

Javier Zamora, IESE professor

Daily pressures and ‘business as usual’ surely prevented many business leaders from fully embracing and prioritizing digital transformation. Without a doubt, COVID-19 accelerated the process in some firms and gave more digitally advanced organizations an edge, at least in the initial stages,” says Prof. Javier Zamora, head of IESE’s Information Systems Department.  

Digital transformation requires a common language among top leaders 

For Prof. Zamora, firms need to promote a holistic approach and common language among top-level decision makers to cultivate an organization-wide digital mindset and avoid functional silos and groupthink. 

In order tlead a solid digital transformation processmanagers should consider three main questions: the ‘why’ behind the changing business environment, the ‘what’ to define the structural and operational changes needed to build their new business model, and lastly, the ‘how,’ which entails a bimodal ‘learn and earn’ approach so they can execute their current model while exploring new ones”.

8 traits of successful digital strategies 

Prof. Zamora, in collaboration with Prof. Joan E. Enric and other authors, recently led a study to examine the degree of digital maturity in Spanish firms. Titled IESE-Penteo Study on Digital Transformationtheir research explored digital transformation from the vantage point of business context, technical infrastructure, business models and organizational frameworks. Among its conclusions, the study found some common traits among firms with the most successful digital strategies: 

1. Initiatives lasting 1 to 3 years 

Most companies complete their digital initiatives in the first and second year, although some take up to three years, with a clear focus on quick-win initiatives. 

2.  Use of artificial intelligence

Successful companies were most likely to use technologies to adopt new platforms, engage with clients via social networks and apply artificial intelligence to enhance information analytics. 

3.  Change in cost structures

Companies with the most effective digital strategies are also those that report the largest changes in cost structures, with technology helping to lower costs of serving clients. 

4.  Specific KPIs

The most digitally savvy companies establish different and specific indicators for their emerging businesses than for their traditional ones, and KPIs are not necessarily based on financial benchmarks. 

5.  Leadership from above. Top management drives and leads the transformation process

Only 7% of companies in the sample reporting following a hybrid structure, with digital transformation disconnected from their day-to-day business operations. 

6.  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. 

7.  Cultural change

Cultural change is even more crucial than structural change. “Most companies were not born digital. This is a reality, and in order to survive they must continue executing their current operations, while exploring new models”, says Prof. Zamora. 

8.  Experimentation practices

One of the most common methodologies in successful digital strategies is tapping customers, employees and suppliers as a source of new insights and value creationSuccessful companies are twice as likely to use A/B tests, hackathons and other testing practices. 

 

If you seek new insights to drive a digital agenda in your firm, learn more about IESE’s Digital Transformation program. Delivered in a convenient blended format, it will help you develop a robust action plan for your company’s digital transformation.   

 

Related Posts