Strategy, not Technology, Drives Digital Transformation

Becoming a Digitally Mature Enterprise

by: Gerald C. Kane, Doug Palmer, Anh Nguyen Phillips, David Kiron and Natasha Buckley
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MIT Sloan Management Review and Deloitte’s1 2015 global study of digital business found that maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how their businesses work. Less-mature digital businesses are focused on solving discrete business problems with individual digital technologies.

The ability to digitally reimagine the business is determined in large part by a clear digital strategy supported by leaders who foster a culture able to change and invent the new. While these insights are consistent with prior technology evolutions, what is unique to digital transformation is that risk taking is becoming a cultural norm as more digitally advanced companies seek new levels of competitive advantage. Equally important, employees across all age groups want to work for businesses that are deeply committed to digital progress. Company leaders need to bear this in mind in order to attract and retain the best talent.

The following are highlights of our findings:

Digital strategy drives digital maturity. Only 15% of respondents from companies at the early stages of what we call digital maturity — an organization where digital has transformed processes, talent engagement and business models — say that their organizations have a clear and coherent digital strategy. Among the digitally maturing, more than 80% do.

The power of a digital transformation strategy lies in its scope and objectives. Less digitally mature organizations tend to focus on individual technologies and have strategies that are decidedly operational in focus. Digital strategies in the most mature organizations are developed with an eye on transforming the business.

Maturing digital organizations build skills to realize the strategy. Digitally maturing organizations are four times more likely to provide employees with needed skills than are organizations at lower ends of the spectrum. Consistent with our overall findings, the ability to conceptualize how digital technologies can impact the business is a skill lacking in many companies at the early stages of digital maturity.

Employees want to work for digital leaders. Across age groups from 22 to 60, the vast majority of respondents want to work for digitally enabled organizations.

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References

1. As used in this document, “Deloitte” means Deloitte Consulting LLP and Deloitte Services LP, which are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

2. G.C. Kane, D. Kiron, D. Palmer, A.N. Phillips and N. Buckley, “Moving Beyond Marketing: Generating Social Business Value Across the Enterprise,” July 15, 2014, https://sloanreview.mit.edu.

3. N.G. Carr, “IT Doesn’t Matter,” Harvard Business Review 5 (May 2003).

4. K.S. Nash, “Tech Spin-off From Spice Maker McCormick Puts CIO in the CEO Seat,” April 1, 2015, www.blogs.wsj.com.

5. J. Chambers, “Cisco’s CEO on Staying Ahead of Technology Shifts,” Harvard Business Review 5 (May 2015): 35-38.

6. G.C. Kane, D. Palmer, A.N. Phillips and D. Kiron, “Is Your Business Ready for a Digital Future?” MIT Sloan Management Review 56, no. 4 (summer 2015): 37-44.

7. R. Berkman, “Turning a ‘No Comment’ Company Into a Social Media Advocate,” August 6, 2013, https://sloanreview.mit.edu.

8. D. Kiron, “The Unexpected Payoffs of Employee ‘Eavesdropping,’” November 6, 2014, https://sloanreview.mit.edu.

9. G.C. Kane et al. , “Moving Beyond Marketing.”

10. Chambers, “Cisco’s CEO on Staying Ahead of Technology Shifts.”

i. R. Nieva, “‘Shine Up the Arches:’ McDonald’s and the Quest to Go Digital,” March 20, 2015, www.cnet.com.

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Comments (9)
Mikhail Gerasimov
PETE RANDALL, paradoxically as it may sound, straight-through technologies and digital transformation implementation will not only NOT replace "human activity", it will take it to a wholly new level. The paradigm shift has nothing to do with AI and Automata subjugating or replacing people. It is in the way we, humans, think, acquire and process knowledge and information, and of course, in what and how we work with data and knowledge. Methodologies of thinking and knowledge acquisition become the New Educational Content, enabling human beings to focus on what is essential human activities - reflection, education, strategic planning, creativity, personal and collective growth - and not on routine, monotonous and repeated operations and hard physical labour. Technology fosters further Human Evolution (through both Culture and Nature) not hinders it!
ravi shankar
A good article. To achieve anything worthwhile, it begins with a mindset. It’s unfortunate that some organizations have leaders who are so fearful or averse to risk-taking.
KAISER NASEEM
Excellent insight into why it is important to strategize before embarking on digitization of an institution. Having the right strategy, implementation road-map and culture are essential to becoming digitally enabled.
pete randall
It’s a big mistake, a very big mistake to think that Automation technology will, in the future, totally replace Human activity. Physically, human productivity is limited, but it’s the smart people, with lively minds, understanding, expectation and judgement that will hold a pivotal role in this Digital Economy, enhanced by smart connected technologies.
Francis Oguaju
A good article. To achieve anything worthwhile, it begins with a mindset. It's unfortunate that some organizations have leaders who are so fearful or averse to risk taking. To them, whatever they don't understand shouldn't even be contemplated.
Beny Rubinstein
Well structured article. The underlying foundation here is that organizations - specially enterprises - need to further develop entrepreneurial capabilities and be more customer-centric.  It would all be easier if it was all about technology - it is well called out here that the secret sauce relies on cultural shift (and processes to support it).
Norberto Francisco González Hidalgo
Thanks you. 

It is interesting, I would like to highligh and add the following:

Technology should be just the way to reach added value for costumers therefore  a way to improve the company. Failure is the way to learn and evolve and Minimum Viable Product is the best way to reduce risks. The point is how to achieve evolution without falling into the trap of doing what we are supposed to do by following the trends and without any sense.
Knowledge Elisha
Thank you very much, this research has pointed out some things that are taken for granted in this fast changing and volatile environment. The great challenge that is mostly faced with business leaders especially here in the developing world is taking an intergrated approach in the digital transformation which is beyond just technological shift but a philosophical transformation that disrupt business processes and organisational culture which narrows down to individual members of the organisation. If these leaders do not find a better way of overcoming this challenge they abandon the digitalisation process or opt to hire constultants to do the job at a high cost.
PETE DELISI
I liked the report, but once again it highlights such a poor understanding of both business strategy and organizational culture and how they impact the success of digital efforts. Digitalization is not new. For some 60 years, we have evolved IT's capabilities to impact organizations and its people. Two of the stumbling blocks in this evolution have been a clear and focused business strategy that IT might contribute to, and an organizational culture that unleashes the creative talents of the people in the organization. Contemporary digital efforts will not be as successful as they could be until we get beyond the superficial hype that technology is the driver of change, rather than, a contributor to the changes that business strategy and organizational culture must lead.

Pete DeLisi