A global survey of executive and managers reveals that many companies are ill prepared for the disruption that digital trends will bring to their organizations and industries. A minority of ‘digitally matured’ companies, however, are making the required cultural, talent management and strategic changes.
In the annual global MIT/Deloitte survey of executives and managers, 90% of respondents recognized that digital trends would disrupt their industries. Only 44%, however, believed their organizations were prepared for the disruption.
Parsing the data in the survey returns, the MIT/Deloitte team were able to divide the companies of respondents into three categories: early-stage, developing, and digitally maturing. Companies in the ‘early-stage’ category were the least prepared for a digital future; at the other end of the scale, companies in the ‘digitally maturing’ category had taken steps to put their organizations in the best position to take advantage of the digital trends that would continue to change the landscape in which they operated. Developing companies were somewhat in the middle.
One of the advantages of the digitally maturing category companies was not only recognizing the opportunities of a digital future, but also fully appreciating the threats. The respondents identified a number of threats to their organizations as a result of digital trends. These included: internal issues, such as complacency; market disruptions, such as products becoming obsolete; competitive pressures from faster or new competitors; and other concerns such as security breaches, lack of resources or too much data.
One revelation of the survey was a threat few respondents even noticed: talent flight. Only 6% of respondents declared the recruitment of digitally savvy talent as a top concern, yet more than 50% of employees said they planned to leave their company within 3 years — with 20% saying they were leaving within a year. For employees in digitally mature companies, those figures plunge to 25% and 4% respectfully. The reason digitally mature companies develop existing talent and hire new talent to meet the requirements of a digital future; less developed companies, on the other hand, are more likely to rely on contractors and consultants.
In the area of strategy, the survey confirmed that digital strategies differ based on company and industry. Analytics and mobile technologies are particularly relevant to banking, for instance, while retail industries focus on social media, and IT companies focus on the cloud. While the specifics strategies may change, digitally mature companies share many of the same characteristics regardless of industry. For example, 88% of respondents from digitally maturing companies believe their companies are successfully integrating the company’s digital strategy into its overall strategy, compared to just 38% of early-stage company respondents and 64% of developing company respondents. A focus on the long term is another characteristic of digitally mature companies: just one-third of early-stage companies create strategies that look ahead more than 2 years, compared to 50% of digitally maturing companies, according to the survey results.
Another differentiating factor for digitally mature companies related to culture. Digitally matured companies valued experimentation and speed, were less risk averse, encouraged leadership at all levels of the organization, and fostered collaboration as well as data-driven decision making. By comparison, early-stage companies avoided risk and had traditional organizational structures in place that included hierarchy-based leadership and silos hindering cross-functional collaboration. Decisions in these companies were based more on instinct than data. The category of developing companies lingered somewhere in between the early-stage and digitally maturing companies.
The survey drew responses from more than 3,700 business executives, managers and analysts from 131 countries and 27 industries.
How can companies best prepare to meet the digital age? According to the researchers conducting the MIT/Deloitte survey, the answer lies in the concept of congruence: aligning the essential elements of a business, notably its culture, people, structure and tasks.
Specifically, digital congruence includes:
Strategy: incorporating digital strategy into corporate strategy, and building strategies with long-term vision and short-term imperatives
Tasks: breaking down functional silos and working with partners
Culture: tolerating risk and failure and launching pilot projects before large-scale initiatives
People: developing the digital talent of employees and experimenting with new working models that enable individual growth
Structure: breaking down leadership hierarchies and creating horizontal organizations that foster collaboration and agility
Alignment is key. When the elements are not aligned — the company recruits entrepreneurial talent but keeps its hierarchical structure, for example, or flattens its hierarchy but keeps its culture of risk aversion — the end result is failure.
To win the digital future, companies must appreciate the opportunities, recognize the threats, and pursue organizational congruence.
Aligning the Organization for Its Digital Future. Gerald C. Kane, Doug Palmer, Anh Nguyen Phillips, David Kiron, Natasha Buckley. MIT Sloan Management Review Research Paper (July 26, 2016).
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