Achieving digital maturity Adapting your company to a changing world

 

 

In this changing digital world, are companies culturally distinct enough to be called digitally mature? Are they treating digital as core to their strategy, encouraging their staff to think digitally, and developing their people? Anh Phillips and Jerry Kane give us a sense of digital maturity.

You might say: That digital transformation stuff, that’s for those technology guys and that’s for the start-ups; we’re 50 years old or 100 years old and we don’t do that kind of thing. That doesn’t apply to us or it would be too hard for us to change. Well, there are big companies out there that aren’t technology companies that are making the change and making that commitment.

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TRANSCRIPT

TANYA OTT: I’m Tanya Ott. This is the Deloitte University Press’s podcast, and that woman you just heard? She’s got a lot to say about not just embracing digital, but absorbing it deep down into your pores.

ANH PHILLIPS: Hi, I’m Anh Phillips. I’m a senior manager in Deloitte’s Center for Integrated Research [in Deloitte Services LP] and I lead our research around digital business. I actually have an interdisciplinary liberal arts degree. My degree is in humanities and I went to graduate school for comparative literature.

TANYA OTT: Wow, I don’t hear that very [often]. Especially for someone who has done a lot of technology implementations. How did that come about? How did you get from comparative literature to technology?

ANH PHILLIPS: The interesting thing is I’ve always been quite interested in technology. I actually started off as a physics major with a math minor. I was always straddling both sides of the academic curriculum. One thing that interested me when I was studying comparative literature was the role of technology and culture and how it impacts people. So it’s kind of ironic that I’ve ended up where I am today researching these topics.

TANYA OTT: That’s really wild. Do you sometimes feel like a fish out of water? I ask that because I might be one of the only journalism majors ever that minored in math and took engineering calculus. I love how some people look at me like I have three heads when I tell them that.

ANH PHILLIPS: Yes! I used to feel like a fish out of water. But I find that these days I feel like I can connect to people on different levels because of my mixed background.

TANYA OTT: Anh and her research partner, Boston College professor of information systems Jerry Kane, use a mixed-methods approach in their latest research on just how digitally mature companies are. Jerry says calling it “digital maturity” is important.

JERRY KANE: Everybody throws around the word[s] digital transformation. Our survey basically shows that everybody knows digital technologies are changing the way business is done. Yet, a huge percentage of those people are also saying, “Our company is not doing enough about it.”

It tends to be [an] all talk, no action sort of thing. So what we decided to do was shift terminologies. What I like about “maturity” is transformation is something a company does to itself. We’ve got tools and we need to change ourselves. Maturity suggests digital is changing the way the world works. It is changing the competitive environment and it’s just about you adapting your company to the new reality.

ANH PHILLIPS: It’s true. In fact, I think that people have this knee-jerk reaction to digital transformation or digital disruption. We’ve heard in a lot of our interviews with companies that sometimes they feel like they have to trick their clients or trick their employees into buying in on a digital initiative by not using the word “digital.” So if they take out the word “digital,” they get more buy-in, and if they figure out how to really frame it in a way that resonates with their employees, they find that their adoption rates are much higher.

For example, if I frame something in a way that’s not about, “I’m going to change just digitally,” but instead, “We’re going to put in place some new initiatives that will actually help us better engage with our customers,” or “We’ll create a better customer experience,” that seems to resonate with people more. Once you throw in the term “digital” or “digital transformation” or “digital disruption,” people kind of roll their eyes.

TANYA OTT: You do a global survey of more than 3,500 managers and executives. You do one-on-one interviews with more than a dozen or so executives and thought leaders. You’re talking with them about three groupings that you have, which are early, developing, [and] maturing digital companies. You allude to the fact that many of them aren’t really very satisfied or don’t think they’re as far down the path as they think they should be toward maturing. Talk to me a little bit about the results that you saw.

ANH PHILLIPS: It was across the board. I would say that most organizations are not happy with where their companies are at. You would expect that from what we classify as early and developing organizations. They’re feeling like their companies aren’t doing enough. That they’re not investing enough and in some cases that it’s all lip service and they’re not actually doing enough. They’re not committed enough to really transforming the organization. We had a large number of people who say that they feel that their industries are going to be disrupted, but they don’t feel like their companies are reacting the right way.

TANYA OTT: What do you think is behind that dissatisfaction? Is it simply because they feel like they’re always trying to catch up or is it because they can’t get buy-in from employees?

ANH PHILLIPS: I think that there are a few things going on. One is that they understand that they have to change their organizations, but they’re not quite sure in what way and how. So you’re in this position of, “I don’t know what to do.” Other companies have started trying to do things and what we’ve seen is that the success rate of digital initiatives varies based on a number of different factors, including whether or not they’re training and developing their people. Whether or not they are investing enough in digital initiatives. I think that a lot of times when they try something and they’re not quite going about it the right way, then they’re not sure what else to do. So there’s also this perception of not understanding what they should be doing and not having a vision for what technology can do to their organization.

I think that’s ultimately the key when you think about this. We have all these technologies out there and the things that brought disruption are not necessarily new technologies that never existed before, but someone taking a look at the technology and figuring out a new way to use it, and a new way to create a new customer experience or a new way to offer customers a new product or a new service. It’s that vision that I think oftentimes is missing from the organization and from the leadership.

TANYA OTT: I was at a radio conference two years ago. One of the speakers, who is considered a leader in the industry, asked the crowd to raise their hands if they were working on a podcast strategy, which of course is the big digital disruptor in the industry that I work in. Lots of folks raised their hands and then he quickly advised them they should stop worrying about distribution platforms and have more concern for the listener experience. His point being that good storytelling is good storytelling. There’s no way with digital platforms evolving as quickly as they are that you’re going to know what the hot platform or technology is in five or ten years. But you guys write that one of the hallmarks of a digitally maturing company is that they play the long game.

JERRY KANE: Yes. What we actually advocate is both a short-term and a long-term strategy or, what they call in Silicon Valley, zoom in–zoom out. Long game does not imply that you ignore the short term. You gotta think on a 12- to 18-month time frame to be practical. At the same time, if you only look at a 12- to 18-month time frame, there’s a good chance you’re going to optimize your company on technology that’s going out of date, or you’re going to focus on a particular platform that’s here and now that’s not going to be around in the future. What the best companies are doing are they’re thinking at a 10-year time frame. How do we possibly think about a 10-year time frame? Well, the odds are pretty good that certain technologies are going to be far more mature in 10 years.

ANH PHILLIPS: When you think about the technologies that are out there and all the emerging technologies like virtual reality and analytics and AI, [and] cognitive intelligence, we don’t know how things are going to evolve, but there are certain guesses that we can make. For example, we know that self-driving cars are around the corner. In 20 years, there are going to be self-driving cars. If I’m an insurance provider, what does that mean for me and how should I think about my business? If I know that AI is developing rapidly, how does that change the way I look at the data that I have in my organization? It’s really about committing to those kinds of things and not just jumping on the bandwagon of whatever technology is the new and shiny thing just for fun.

JERRY KANE: If companies aren’t thinking about how those technologies are going to change the way business is done in their industry, there’s a chance they’ll do really great in the next 12 to 18 months—but that will actually be in the wrong direction for that 10-year time frame. We actually advocate sort of moving back and forth between the short and long term to make sure you got your stuff handled now—we don’t want to give up on podcasts, because podcasts are great right now—but we also don’t want to become so wedded to podcasts that we think they’re going to be around forever and miss the next thing that’s coming.

ANH PHILLIPS: This is really about creating an organization that will actually prepare you for the future. We know that change is coming. What better way to face that change than by creating an organization that is collaborative, flexible, agile, bold, willing to take risk and, above all, experimental, and focused on continually learning and growing. To do something like that, you have to play the long game. You have to think about, “I want to prepare my organization, I want to create an organization that’s ready for the future, and [one] that will continue to evolve and continue to learn.”

TANYA OTT: We hear the phrase “fail fast and fail forward,” right? But is that maybe something that a few companies are really good at and the rest are afraid of?

ANH PHILLIPS: This speaks to culture and we didn’t talk about it a lot this year in the research, but it was something that we found in last year’s research. Digitally maturing organizations are culturally distinct. They have certain markers. They take more risks. They see experiments as being a part of who they are. They’re not afraid of failure. They encourage that kind of experimentation. They encourage continual learning. They’re less hierarchal. They’re much more collaborative. They’re much more nimble. And these cultures are prevalent consistently in digitally maturing organizations. Without that culture, it makes it difficult to implement any kind of digital initiative.

When you’re talking about failing fast and failing forward, it may be that other organizations are conducting these experiments, but then they don’t know what to do with them. They remain in the isolated small parts of the organization and they don’t know how to change that learning and harness it and turn it into something that will impact the entire organization enterprise wide.

TANYA OTT: It sounds to me like this almost aligns with the idea of the difference between a developing and a maturing company, because the developing company could get really wedded to a specific platform or a specific technology and feel like they’re being digital-forward or whatever; but they’re really not setting their company up or their teams up in a way that ensures that they’re actually going to be maturing.

JERRY KANE: Exactly. One of the things that came out in our data this year was that developing companies tended to look at digital as discrete independent efforts like, “Okay, we are implementing a platform or we are doing this digital initiative,” whereas maturing companies tended to regard digital as the core of their business. They’re not thinking about this digital initiative or that digital initiative. It’s: How are we a digital company? How do we need to change as a company in a digital world? And then the platform questions come next. The maturing companies really rethink their fundamental DNA as a result of the changing digital world, whereas the developing are just doing sort of one-off efforts and not thinking about how it’s going to change the fundamental nature of their business.

What really has been remarkable to me this year are the companies that are really taking it seriously. They’re not companies you might think of. Our lead example this year is Wal-Mart. This is the biggest company in the world recognizing, “We have a problem and we need to be more digital.” They’re beginning to think about it as not just how do we implement a new app, but how do we rethink Wal-Mart as a result of these technologies? I’d argue if Wal-Mart’s doing it, [it] means everybody should be doing it.

TANYA OTT: Wal-Mart’s a great example. I was going to ask you about that because when you think of tech and digital, you [may not think of] Wal-Mart. Wal-Mart is that big box that’s in my neighborhood or down the road. For folks who aren’t familiar with what they’re doing digitally, give us a sense of what you see in that case study that you think is so intriguing or inspiring.

JERRY KANE: We want to give Wal-Mart credit where credit is due. Part of their success actually stems from being a digital company in the 1990s—developing efficient supply chains and using technology to route products in a very efficient way. We only see the front end of the big-box store, but back then, they were pretty sophisticated in the day. But the technologies have changed. Supply chain is no longer sufficient to maintain competitive advantage and they needed to rethink who they are. One was a $3 billion acquisition of Jet.com, which is a major e-commerce platform to really rethink how they were doing things and really bringing those ideas into the company. They’re starting to think about: How do we use our existing advantages, which is the network of warehouses, to compete and provide services in ways that may not beat Amazon, but at least becomes a significant player in relation to Amazon?

What was most remarkable to me was they were asking the questions: How do we get our employees—and we are talking about line-associates—to be thinking more digitally? How do we get them to develop the skills so when a customer comes in with a Wal-Mart app that allows them to pay or allows them to shop that they’re savvy enough to help them with that? Pushing that digital awareness, pushing that digital intelligence and savviness down to the very line-level employees is a pretty good way to look at things.

They don’t say, “We just need to buy a new company,” or “We just need to implement a new technology.” They’re actively thinking about, “How do we rethink Wal-Mart in a digital age? How do we use the resources that we have, that we’ve built over the past decades, as advantages to really change the way we do business going forward?” It’s a major initiative. They’re putting a lot of time, energy, and money into it. They’re making digital a part of their executive responsibilities and they are evaluated on these things. They’re really putting their money where their mouth is. 

That was a third thing that came out of our research this year. A lot of this isn’t rocket science. Those who were more successful and more mature are spending more money, the executives are supporting these initiatives more, and they’re really just investing time, energy, and money to make it happen. Whereas a lot of those that are early are doing a lot of talking about it—they’re talking about being digital, they’re talking about being agile—but they’re actually not doing much about it.

TANYA OTT: Going back to Wal-Mart, I guess this is the point where we both pause and recognize or don’t recognize that to be competitive with Amazon or whatever, they’re asking their employees to drop things off on their way home. I mean, one of those things where they’ve got a lot of pushback.

JERRY KANE: Sure. But I see it as an experiment. Are they going to roll that out across the whole organization? Probably not. But are they going to learn some valuable things from that? Probably. One thing they may learn is that people want this delivery service and if it works with employees dropping things off on the way home, then maybe we do have employees whose job it is to do that. Or maybe we get drones or, whatever the future is going to be. Those experiments are really important because it helps you understand what works and what’s not going to work.

That’s the distinction that the maturing companies are really doing that the others aren’t. They’re finding ways to take the successes from those small experiments and make them enterprise-wide business, needle-moving initiatives. That’s the distinction—how do you succeed well?

TANYA OTT: What are some of the other hallmarks of the more digitally mature or maturing organizations?

JERRY KANE: We see a trend, a progression: Early-stage companies tend to talk; developing companies tend to do initiatives, but not have them be core; whereas [in] the maturing companies, it’s really a core part of their strategy. Another thing we noticed was that there are organizational differences. We saw a surprising correlation that more mature companies tended to be organized around cross-functional teams and then reported that the organization structure was less likely to be a barrier to being digital. There’s this progress toward cross-functional teaming in digitally mature organizations.

I asked a number of our respondents about that and got several different types of responses. Some people said: Digital touches everything, so we can’t be thinking of it in silos. Another said: Our customers are looking at us as an integrated organization and the digital platforms are letting them engage with us across multiple different silos, so it doesn’t make sense anymore to organize this way. A third quite simply said: If we’re going to think differently, we’ve got to organize differently. We’ve got to shake things up, we’ve got to do things differently, and this is a way to do that.

ANH PHILLIPS: One of the big ones that we see, in addition [to] having a distinct kind of culture, is their emphasis on developing their own people. In last year’s research, we found that the No.1 thing that really was correlated to people’s desire to leave an organization or stay at the organization had to do with how much they thought they were getting opportunities to develop and grow and prepare themselves for a digital economy. We found that [people at] VP levels, for example this year, were 15 times more likely to want to leave an organization if they weren’t getting those opportunities to grow. So what we’re hearing from people is we need new talent, we need new people in order to compete in this world. But the same people who are complaining that they don’t have the talent aren’t focused on developing their own talent.

TANYA OTT: That’s a big issue.

ANH PHILLIPS: That’s ultimately the key to tomorrow. Where do all the good ideas come from? They come from your people.

JERRY KANE: What we found this year was that it’s not necessarily that early-stage companies don’t have the necessary talent inside their organization. They’re not using it as well as they might. There was a real paradox in that early-stage companies said, “We don’t have the talent we need to compete in the digital world,” and also saying, “We really don’t make good use of the talent we do have.” There were some really interesting ways that companies are starting to think about how to use employees in different ways and develop that talent in different ways.

TANYA OTT: What do you mean?

JERRY KANE: In relation to tech skills, you had some companies that are actually encouraging their employees to spend part of their workday working for [the] open-source software community. We’re paying them to do work…

TANYA OTT: That’s distributed for free.

JERRY KANE: Yes. What they find is that what happens is not only are those employees more willing to stay—because these are opportunities to continue develop their digital chops because they can choose what they work on—the other thing is they’re finding that these employees then bring more knowledge back into the company because they learn things when they’re out doing this free work. By getting their employees out into the marketplace more generally, they can get more knowledge and bring it back into the company. That was a very forward-looking way to think about things.

Another company, they have an HR strategy where they do employee reimbursement. That’s pretty typical where we will pay our employees to go back and get degrees…

TANYA OTT: Lots of companies do that.

JERRY KANE: What this company did was sat down and figured out what skill sets were going to be most valuable in the coming 10 to 15 years for the company, what’s going to be most critical for them, and they will reimburse those employees at triple the rate if they go get a degree in the skills that they deem most in demand, like data science.

TANYA OTT: Wow.

JERRY KANE: I mean, in one sense that’s a no brainer. Why haven’t companies thought of this before? Do a strategic talent analysis and encourage your existing employees to go develop the skills you need. It was one of those fabulous ideas that made you think, “Why hasn’t anybody done this before?” And [the company] did an analysis, which [showed] the ROI from these initiatives range from like 130 percent to 145 percent. They were getting their money back and more because employees were staying longer, they were developing better skills, they were promoted more effectively, et cetera. They were quantifying the benefits fairly significantly.

TANYA OTT: It’s not only a retention issue, but it’s also an issue of how you can attract new talent. 

ANH PHILLIPS: That’s absolutely correct. Digitally maturing organizations, because of their reputation and their brand for being more digitally advanced, have an ability to attract more people. We all want to learn, right? Psychology has shown that people want to grow. But what better way to do that than to be in a place where you can do new, exciting, interesting things, and to be given that opportunity to learn those things?

TANYA OTT: If you had a business executive that is in a company that he or she feels is either early or mid-stage in developing their digital maturity, what sorts of things should they be thinking about? What kind of advice might you have for them?

ANH PHILLIPS: I would start with making sure that they’re committed. To say, “Okay, if you are committed, you have to put your money where your mouth is and to make the appropriate investments.” Secondly, I would think about the people that they have and the leadership they have, and what kind of vision they want to create for their company for the future. Start there with the strategy, then make sure they have the right people to support that. Then [make sure you have] the right culture to enable it, because one of the things that we hear a lot is, “We didn’t realize that one of the things that was holding us back is that we didn’t have the right kind of culture in our organization in order to make these things work. Our people weren’t thinking a certain way, they weren’t behaving a certain way that would help us move our digital initiatives forward.”

TANYA OTT: Culture change is really tough. It’s hard.

ANH PHILLIPS: Right! Well, that’s the thing about this. People tend to gravitate toward the easier things or the things that are a little bit more tangible like the technology. They have a tendency to focus on the technology and forget about the people and the culture. But what we’re finding in our research is that those are two critical components of making all of this work.

JERRY KANE: One of the paradoxes of that we’ve seen in our data of maturing companies is the more they do this, it creates this virtuous cycle: The more they want to be doing, the more they begin to adapt themselves to a digital world, the more they try to do more about it, and accelerate that transformation. I do fear that there’s going to be this growing gap between the “haves” and the “have nots” or the early and late, and I actually fear that the gap is really between the developing and the maturing. It’s not with the early stuff. It’s those middle folks [that] are not going to adapt fast enough and they’re going to get left in the dust.

TANYA OTT: You don’t want to be left in the dust, right? Jerry Kane and Anh Phillips have more ideas for your company in their report, Achieving digital maturity: Adapting your company to a changing world. It’s a collaboration [with] MIT’s Sloan Management Review and you can read the full report at dupress.deloitte.com.

While you’re there, check out our podcast archive. There’s a lot of cool stuff, including my chat with Bill Briggs about some big tech trends that are headed our way.  

BILL BRIGGS: I get it. Potential. Great. A lot of things business would love. How do we make that real? How do we shift that from irresponsible white boarding, pass the hookah moment of what would be possible, to what’s the actual road map and things we need?

TANYA OTT: We’d love to hear from you. Tweet us @du_press, leave us a comment on our website, or a review on the podcast. I’m Tanya Ott for the Press Room. Thanks for listening and have a great day.

This podcast is provided by Deloitte and is intended to provide general information only. This podcast is not intended to constitute advice or services of any kind. For additional information about Deloitte, go to Deloitte.com/about.