All companies are vulnerable to the threat of a competitor’s ability to create new value for customers. That’s why most companies today are considering the opportunities for creating new competitive advantage through digital transformation and virtually all CIOs view digital transformation as a top priority. However, Everest Group’s Pinnacle Model research of more than 200 leading companies finds that only 10 percent of CIOs and their IT organizations are in a state of readiness for digital transformation initiatives.
Through our investigation into these companies’ digital journeys, we identified Pinnacle Enterprises – those that were best prepared for digital change and achieved superior business outcomes because of their advanced capabilities. The outcomes are compelling. Consider these examples:
- In 86 percent of the Pinnacle Enterprises, the IT organization enabled the enterprise to serve a new market or new customer segment, versus 43 percent of the “unready” enterprises.
- In 95 percent of the Pinnacle Enterprises, employee productivity increased between 10-30 percent, versus 54 percent of the other enterprises we studied.
- Of the enterprises implementing Robotic Process Automation (RPA), the Pinnacle Enterprises achieved 4X more ROI (100 percent) than the other enterprises (40 percent) and achieved implementation 3X faster.
Our research also identified the enablers and capabilities of Pinnacle Enterprises to achieve desired outcomes and accelerate timeframes. A notable enabler: We found 95 percent of Pinnacle Enterprises (vs. 58 percent of the other enterprises we studied) built a culture that is effective in collaborating across functions in an organization.
[ Want to do better? See our related story: Digital transformation: 5 tips to take it to the next level. ]
In digital technologies (especially RPA), the scale, scope, and speed of adoption is critical to derive maximum impact. A siloed implementation approach will not succeed. Enterprises must drive cross-BU collaboration through formal constructs.
Thus, the ability to ensure cross-functional collaboration is one of the most important aspects of driving a digital transformation initiative. It is also one of the most challenging aspects, as this is a non-traditional skill for CIOs. CIOs succeeding with digital transformation have the following skills:
Beating cultural resistance to change
Cross-functional collaboration is a proven success factor dealing with cultural resistance to change. Consider the example of a mortgage company. One of its initial concerns was the fear that employees who had worked there for decades would resist the significant changes necessary to switch to digital operations and decide to exit the firm. That would have crippled the business. So, the company decided against a big-bang implementation approach and included a construct for transitioning from the old way to the new way of doing things.
The CIO established a DevOps team. This cross-functional group included business stakeholders as well as IT employees. They first tackled only a small component of the process – the mortgage application tasks. They worked collaboratively to prove that the concept would work across the board and end to end. The business folks and technologists sat side by side and cranked out iterations of the concept, adjusting along the way when they ran into issues.
The CIO explained to me his strategy for the cross-functional collaboration was to change the culture up front. As people saw that it worked successfully, they would be willing to embrace a collaborative culture and digital technologies going forward.
[ See our expert resource: The Open Organization Guide to IT Culture Change. ]
Questioning existing assumptions
Implementing digital technologies and digital business models to create new value and achieve higher performance levels involves challenging existing assumptions and status quo operations. The U.S. Social Security Administration underwent digital transformation to move the citizen retirement process online, from field offices throughout the nation. At first, the agency’s culture did not accept the digital transition.
Then the agency changed the approach. The agency recognized it couldn’t achieve its desired outcomes unless it involved employees in the design-thinking process. If the transition were to succeed, it had to work from a technology perspective, but it also had to be supported by the employees – and the retirees. The agency established a cross-functional design team to ensure they developed a business model that would satisfy each set of stakeholders’ interests.
Ensuring common objectives
In assisting several multinational enterprises as they began their digital transformation journey, I observed a phenomenon around process ownership. They struggled and made little progress in achieving their intended business outcomes because their business process owners and IT teams were not aligned regarding the objectives.
In contrast, a pharmaceutical company resolved its issues around whether a digital process owner should be from the business or from IT. The company opted for a complete shift in strategy and established cross-functional, collaborative IT teams that would focus on the value outcomes rather than functional or process outcomes. With this approach, they drove a perspective on what really mattered to the business.
Often, companies focus on the process or the technology and lose sight of the business outcomes they want to achieve through digital transformation. CIOs and other executives driving transformation initiatives can eliminate this pitfall by ensuring a cross-functional, collaborative approach to implementing digital operations.
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