Strategy, not technology, drives digital transformation Becoming a digitally mature enterprise

 

What's the most important driver of organizational digital maturity—social, mobile, analytics, or cloud? None of the above, according to the latest MIT Sloan Management Review and Deloitte digital business study.

What’s the most important driver of organizational digital maturity—social, mobile, analytics, or cloud? None of the above, according to the latest MIT Sloan Management Review and Deloitte digital business study.

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TANYA OTT: This is The PressRoom, Deloitte University Press’s podcast on the issues and ideas that matter to your business today. I’m Tanya Ott.

TANYA OTT: Let me guess one your biggest pain points at work. Too many emails! The come in day and night and you feel tied to your devices. Plus, important stuff you need to know gets buried under “Reply Alls” about the company picnic or random solicitations from other businesses. Am I right? What if I told you there are ways to cut down on all that email clutter? Okay, I’m not going to tell you… I’m going to let this guy tell you.

GERALD KANE: “Often times when I sell social media to companies, when I talk to executives about it, where I start is ‘what if I told you I could cut your email use by 50%?” and that gets people’s attention.”

TANYA OTT: Got your attention? Great! Because today we’re talking digital transformation.

For the last four years, researchers at MIT’s Sloan Management Review have collaborated with Deloitte LLP to study how companies use digital technologies — everything from cloud computing to mobile apps to social media. That guy who just said he could tell you how to cut email by half – that’s Gerald Kane. He’s a professor of information Systems at Boston College and guest editor for social and digital business at MIT. For this year’s study, he and his colleagues surveyed about 5,000 executives globally. They asked them how digital is going in their companies. They also interviewed nearly two dozen business leaders who are in charge of digital initiatives at their companies. They wanted to know how digital technologies are changing the way business is done – and changing how work is happening for the average employee.

GERALD KANE: “Basically, we asked respondents to imagine a company that is ideally transformed by digital tools for collaboration, for work, and ask them compare the state of their current company to that ideal.”

TANYA OTT: Kane and his team call that digital maturity. They asked respondents to rate their company on a scale of 1 to 10.

GERALD KANE: About 50% put themselves right in the middle, somewhere between 4 and 7. About 25% put them on the low end of the scale and about 25% put themselves on the high end of the scale.

TANYA OTT: So it’s almost like the traditional bell curve.

GERALD KANE: Yeah, I was actually surprised that that’s how it turned out.

TANYA OTT: So, what separates a more digitally mature company from one in the early stages of figuring out this digital world? Kane says early stage companies often don’t have an overarching vision for what they want to do.

GERALD KANE: In the early stage companies, we see them really focusing on productivity driven applications of IT – so helping focus on the customer experience or efficiency. Their culture tends to be a little more siloed. They tend not to be as collaborative as some of the more mature companies. Their employees tend to be lacking in digital skills and they don’t really provide the resources for their employees to obtain those skills. So that was one of the big differentiators from low to high majority companies… was not that they necessarily had the skills in house but that they were committed to helping their employees get those skills. And lastly, the employees had very little confidence in their leader’s ability to manage digital trends. It was only something like 15% of respondents in the early stage said that their company’s leadership had the sufficient to manage in a digital age.

TANYA OTT: What about the companies that are more digitally mature – what do they look like?

GERALD KANE: The most mature companies are looking towards using these technologies to transform their business. And so approximately 90% of their respondents in the maturing category say their main goal of digital implementation was to change the way their company does business. They tend to be more integrated and innovative. They work together. The employees collaborate better. It’s [a] really interesting development as we go from early to developing to mature companies. This lack of strategy is really the hallmark of the early stage companies – lack of strategy and lack of management understanding. What’s really interesting, as you move up, as companies mature, it then becomes too many competing priorities as the major barrier. So it’s not that we don’t know what we need to do, but how to do we manage what we need to do amidst everything else that’s going on in our company? It’s often been said that digital transformation is a lot like trying to change the parts on an airplane while it’s still in flight. And that’s what a lot of these middle range companies are dealing with. It’s how do we manage digital transformation and still keep the plane flying? Then the most mature companies, they really start running into barriers with security concerns… that they say, goodness, we are becoming more digital and this is making us vulnerable in very particular ways and how do we protect and guard against that vulnerability that this increased digitization brings?

TANYA OTT: The digital world is changing very fast. If you think back just five years ago, the iPhone was still in its infancy. We couldn’t connect and collaborate 24-7. Now we can… whether that’s good or bad is up to you!

GERALD KANE: I’m not sure it’s a bad thing to revisit your digital strategy every year or every 18 months because it is changing so quickly and it does need to keep being revised in the face of these trends. I mean two years ago big data and so-called analytics was just coming on the forefront and now you know it’s almost indispensable. And so I don’t’ think it’s a bad thing to keep updating your strategy. But how do managers do that and still keep up with their day job?

TANYA OTT: You touched on the idea of competing priorities earlier and if you just sub-slice this into social, for instance, (yep) the evolution in social has been dramatic. Obviously, the biggest bang for the buck is still Facebook and Twitter on social, (yep) but you have Instagram and Vine and SnapChat and all different kinds of applications. I know from my perspective working in the social world, there’s this, like, oh, do we try to be everywhere? Or how do we do that resource deployment?

GERALD KANE: We were able to interview one of the director of global partnerships at Facebook – and it’s now becoming less where do you want to be and more what kind of data are they providing you to be able to do your business better? Because Facebook is extremely sophisticated from a data and analytics perspective and are able to provide companies with remarkable insight. He provided an example where they can actually take advertising ROI down to the individual customer level. Facebook can actually tell you, if you show this ad to this person did they then go to Target to buy your product and have they bought it before? I mean a remarkable level of transparency. So not only are new players coming into the game but the tools are evolving much sophisticated and a much bigger source of business intelligence. It’s really been an exciting time from my perspective as a college professor who teaches this. As someone who researches this for MIT Sloan Management Review, it’s all I can do to keep up with it … it’s my full-time job. Its’ really hard for business executives who do have other responsibilities to stay on the forefront and keep their organizations focused on where the future is going. And that’s really one of the purposes of this report – to provide a summary so that companies can start thinking about what is our place in this digital transformation and digital revolution and what do we need to be doing now to prepare ourselves for a digital future.

TANYA OTT: As you say there’s so much analytics out there, so much data available to companies, do you have a sense of in your research how many companies really have employees that are focused on data and understand how to use that analytics?

GERALD KANE: Not enough. And that’s a combination of a lack of talent availability as well as an increased need for that talent. So supply is low, demand is high, how do you make sense of that? And what inevitably happens in those situations is you have people who really don’t know what they’re doing trying to do it. And business analytics, using this big data, is actually fairly hard. It’s not hard to do analysis. That’s easy, interpreting analysis and knowing what the business lessons and takeaways are is a far more challenging thing. So it’s not just doing the analytics but it’s doing it well. And then from a management perspective, how can I be a good consumer of this analytics. How do I know when people are snake oil salesmen versus the real deal? And that’s really hard to tell the difference and the same thing applies to social as well. You know one of the most common LinkedIn skills is someone who’s the social media expert. But I can tell you as someone who teaches it and who has talked to a lot of social media experts, many of the experts are not as expert as they make themselves out to be.

TANYA OTT: Ahhh, no… c’mon!

GERALD KANE: I know it’s hard to believe, but anybody can hang out a shingle and the same things [are] true of analytics. Without a clear definition of what analytics is or a clear understanding anybody can say they’re doing analytics, and the question is are they providing reliable business insights?

TANYA OTT: You work in an academic setting, have university programs kept up with this demand for people who can work in analytics?

GERALD KANE: Schools around the country are ramping things up very quickly. In fact, in our department of 8 people we just hired two new people specifically focused on analytics. We have the same problem, however, you know – it’s a quickly emerging field. You need to train people to become experts in it. It takes longer to train them than it does for new innovations to happen in the field. And so we’re having much of the same problem as business in that in-house we lack the talent. But I think universities across the country are recognizing the gap and ramping things up. And in a relatively short order I think you’re going to see people with digital sophistication coming into the business world being of much high quality. In fact, in our MBA program at Boston College we are now integrating analytics courses into the core curriculum because we recognize that analytics is going to be the cost of doing business in the future and the average manager might not be doing the analysis, but needs to be a savvy consumer of analytics so they can know what people to pay attention to and what people not to pay attention to.

TANYA OTT: Let’s talk for a minute about the talent within companies because there’s a stereotype that younger people are looking for companies that push the digital envelope and older employees are resistant to new technology or digital thinking? What did you find in your research?

GERALD KANE: We actually found that that was absolutely not true. We asked the question of “how important it for you to work for a digitally mature company? “ And the results were pretty striking. Of course you expect it, I think it was about 85% of people 22 to 28 – I don’t remember the exact numbers but in the 85% range of people in the new graduate age said it’s important for me to work for a digitally mature company. But about 75% of people above 55 also reported it was important for me to work for a digitally mature company. So it’s a bit of a red herring to say that this is a millennial issue, this is a young person’s issue. I think you have people all across the organization at multiple age levels saying, ‘look, this is the future. I want to work for a company that will prepare me for that future and that’s going to be successful going into that future. And so we were very surprised to find such high levels of workers, that it was important to work for digitally mature companies. And one of the points we make in the report is at that point, if employees are looking to work for digitally mature companies, digital maturity then becomes a talent retention issue because we argued amongst ourselves ‘are people going to quit because they don’t work for a digitally mature company?’ No. But given the opportunity to go to a company that’s more mature, they might. Or forced to choose between one that’s more mature or less mature they will choose the one that’s more mature. And so as recruitment of quality talent becomes more important in this knowledge-based economy having a mature digital infrastructure is really important for attracting and retaining the right people. And why is this? Well, people want to be productive at work and if they’re in an environment where the IT infrastructure doesn’t allow them to live up to their potential as employees, by all means they’re going to go elsewhere because it can be a long-term career killer if I can’t be as productive as I want to be.”

TANYA OTT: One of the other things you looked at was culture and its tie to digital maturity. And part of that is a culture of risk taking. And that can be a scary proposition for a lot of companies. Not only for managers that might be risk adverse, but also for employees. They have to know that there’s the expectation that you might fail at some level.

GERALD KANE: Yes. The fear is at both levels. There may be the misperception that, well, management is risk-adverse but the employees are not. So if you ask the employees to work in a different way you have to give them the permission and you have to give them the cover to step out and take risks because adopting new tools and figuring out new ways to work is highly risky. Nobody is going to be fired for not using social media in their job, but they could be fired if they make the wrong mistake. So we interviewed the chief marketing officer, early in our research, the chief marketing officer of a company which had empowered its employees to get in social. And he basically said, use your best judgment as you’re on social media and as long as you’re making good decisions for good reasons I’ll take the heat for it. I will protect you. And it empowered employees to start using social and to start taking risks in their job. As well as what they did was not just tell them what not to do, at least with respect to social, they actually provided for their employees sample tweets on all their memos. They said if you want to tweet about these things we’re doing as a company here’s how you do it. So they were actually not just saying don’t do certain things. They were actually modeling successful behavior so that their employees knew how to behave. Because ultimately these tools enable you do to business in different ways. Some of these ways will be better. Some of those ways will be worse. And unless you actually get out there and do it you’re not going to know which is which. So there is this necessary experimentation both at the management level to say ‘look…we’re going to have to experiment with these things because otherwise we’re going to be stuck in 1995 and we’re not going to be able to compete.’ And for the employees, ‘okay employees, we need you to, it’s an imperative that you get out and do this. That we give you the time. That we give you the flexibility. That we give you the freedom to experiment with these tools and learn new things and when you do let’s publicize those successes and move on quickly from those failures.

TANYA OTT: One of the challenges, particularly in social, is there’s a very fine line between being engaging and witty and offending.

GERALD KANE: Yes! And we see that all the time. Companies that I think are out there a little more and they’re a little more risky are often given the benefit of the doubt. Or, when they screw up, they apply that same sort of humor, riskiness, self-deprecation to their failures. You know, ‘gosh, we tried. We failed. We’re sorry. Let’s move on.” And we see companies responding in very constructive ways to their screw-ups and their failures and very unproductive ways. And there are case studies out there of companies that are doing it well and doing it poorly. But one thing I want to highlight is that we showed in our report, at least in last year’s report on these issues, is the importance that social technologies are not just about reaching out to customers. They really can be a powerful tool for enabling collaboration within the enterprise and allowing employees to work together more efficiently. One thing I always say in defining social media is the first social feature in technology was the Reply All button in email. And so that’s a tool that allowed us to communicate and collaborate in groups. And so that means social has much longer history than just Facebook, Twitter, LinkedIn. And we have to recognize that if we’re using email we’re using social media too. The question is are we using social as effectively? And in fact we talked to the company BASF. They started using an internal collaboration tool and had to ban email to get people to adopt that tool. But when they did so they found that their employees, that the project groups that did, actually had a 25% efficiency increase. A lot of it was due to the fact that when employees turned over and left the team, new employees had access to all of the same information. It wasn’t locked up in email. It was all available on these collaboration platforms so they could see the entire history of what went on. And so often times when I sell social media to companies, when I talk to executives about it, where I start is ‘what if I told you I could cut your email use by 50%?” and that gets people’s attention.

TANYA OTT: One of the things that you talk about in the report is what you’re calling “irrational exuberance.” Tell me about that.

GERALD KANE: Yeah. This is actually a fascinating outcome. We asked all respondents, “to what extent does your organization view digital technologies as a threat? To what extent does your organization see it as an opportunity?” And we saw a very strong correlation between maturity and opportunity. So the more mature companies began to see it as an increasing opportunity to do business differently, to do business better. What we didn’t see if that maturity had any bearing on the degree to which companies saw it as a threat. So low maturity companies and high maturity companies, about 25% of them across the board said that their companies see technology as a threat. The truth is that these technologies are changing businesses sooner rather than later, faster rather than slower and a lot of these companies that have their head in the sand about the threat that these technologies, these tools represent are fooling themselves and may not be around for much longer because we see companies and entire industries being disrupted by technology. Just look at Uber, just look at Airbnb and the effect they’re having on entire industries.

TANYA OTT: You can read more about Gerald Kane and his collaborators research in their article at www.dupress.com. And here’s something really cool… especially for you data wonks. They’re making their full data set from those 5,000 survey responses available to the public, so you can slice and dice the number any way you want – by respondent job title, by industry, by size of company. You can do your analysis. We’ll have a link for you at the DU Press website.

TANYA OTT: I’m Tanya Ott for The PressRoom, a production of Deloitte University Press. Be sure to subscribe so you don’t miss an episode. You can also go back and listen to past episodes including one about whether you’re at risk of losing your job to a robot. Let us know what you think. Do you like the issues we’re covering? Anything special you want us to look into? Leave us a comment on the podcast page, email us at podcasts@dupress.com or tweet us @du_press.

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