Since IDC conducted its first digital transformation (DX) benchmark in March 2015, we have seen progress in the number of organizations that have digitally transformed. Yet, despite this progress, we find most organizations are at an impasse. Fifty-nine percent of organizations worldwide are running digital projects and making progress, but they are not transforming the overall organization.
From the beginning, there have been numerous obstacles impeding digital transformation, including legacy culture, process and financial incentives. Now, a new set of challenges has cropped up that only manifest themselves after an organization begins its digital journey, and grow on the underbelly of a DX initiative, creating a drag on an organization’s transformation. They are: outdated KPIs, siloed organizational structures, tactical digital plans, silos of innovation and limited expertise.
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If any of this sound familiar to you, read on as we explore why they are a drag on progress and how to overcome them.
New KPIs for the new digital enterprise
The tools an organization uses to communicate its digital success to employees, investors and the board of directors do not necessarily reflect the way in which a digital enterprise operates. Organizations need KPIs that can communicate the real-time nature of the future enterprise. As long as organizations use traditional KPIs to measure new digital businesses, their investors will penalize them.
To effectively and successfully communicate to employees, investors and partners, a new set of KPIs that capture the capabilities of a digital enterprise are in order. The new digital KPIs need to include financial, business and operational KPIs. And they need to be developed for each part of your new digital business. Categories of KPIs need to include:
- Leadership represented by KPIs associated with innovation rates
- Customer Engagement represented by KPIs focused on customer advocacy
- Information Monetization represented by KPIs focused on data capitalization
- Operating Model represented by KPIs focused on business operations
- WorkSource Transformation represented by KPIs focused on the workforce.
Digital is business as usual
One of the fundamental challenges of digital transformation is the need to change legacy culture and processes, which is embedded in the organizational structure. Organizations are experimenting with a multitude of structures. A recent study by IDC reveals that digital organizational structures need to evolve to keep transforming the organization. We categorize DX organizational structures into the following archetypes.
- Digital Special Projects Team. For those organizations that are just beginning their digital journey, this team is a central group that typically reports to the CEO and is exploring digital for the company in a structured and formal way.
- The Office of Digital Transformation. For those organizations that are ready to move their digital strategy to the next phase, they put together a more formal centralized group that typically reports to the CEO and is focused on providing governance around the digital strategy.
- The Embedded Digital Business. This archetype embeds digital resources into the various lines of business that are digitally transforming. There typically is still a central “digital” group that orchestrates digital for the company and provides common core platforms and digital expertise.
Ultimately, enterprises need to evolve to the embedded digital business model. This model moves an organization to the state where digital is “business as usual”. The embedding of digital capabilities into the lines of business, gives the business a greater sense of ownership around the digital strategy.
If you are wondering where the separate digital business unit is, we do have an archetype for that as well. However, it only occurs in less than 10 percent of organizations and is focused on creating disruptive and innovative offerings as opposed to transforming the organization.
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