Digital disconnect: the hidden barrier to genuine transformation

“No one expects all board directors to be data scientists or coders. But they should be able to ask the right questions about technology transformation and its implications for their company, colleagues and customers.” Outgoing Salesforce president Gavin Patterson’s recent comments highlight an emerging digital literacy crisis within the boardrooms of UK companies, as senior leaders pay lip service to the need for digitalisation without understanding how to implement it within their business. 

A new study by Elsewhen, in partnership with market research company Vanson Bourne, casts light on this digital disconnect and its impact on a range of leading UK industries. Tasked with charting UK companies’ progress towards becoming digital-first, the survey canvassed 200 senior decision-makers across FMCG, retail and financial services sectors. 

These respondents are overwhelmingly influential players with sizeable budgets. Most (86%) of them work at businesses generating over £1bn p/a, and 37% work with yearly IT budgets exceeding £10 million. Yet, nearly all those interviewed (96%) have encountered problems with digital projects. While more than half are “extremely proud” of their organisation’s approach to digital transformation,  two-thirds of the study interviewees (64%) report a yawning gap between strategy and what could be achieved in their company’s digitalisation efforts.

This failure to bridge the gap between strategy and execution comes with serious costs; companies report negative impacts of failed digital projects ranging from lower-than-expected annual revenue (42% report this) to delayed product launches (36% cite this) and IT security risks (35% mention this). While there’s no simple off the shelf answer to the digital disconnect UK companies are experiencing, here are three learnings from the survey findings: 

  1. Digital is not an optional extra

A clear insight from the survey data set is a lack of commitment and perspective in acknowledging digital problems at a senior level. Nearly a fifth of decision-makers surveyed had a digital project plan that could not be implemented, while 96% had faced at least one significant obstacle.

These include challenges such as removing internal productivity blockers (88%), migration to the cloud (84%) and unlocking the hidden value of their data (84%). The fact that well-resourced businesses are wrestling with these digital transformation basics suggests an issue higher up the chain.

Confirming this, 31% of decision-makers reported a lack of commitment from their organisation to necessary digital changes. Among IT teams, this figure rises to 38% even though 89% of respondents worked with an annual IT budget of £1m+.

By sector, financial services are experiencing the biggest resistance to change, with almost half of respondents reporting that their company has digital commitment issues. This fits a pattern, with many mainstream banks struggling to improve basic metrics such as account uptake, loan approval, customer retention and fraud control through digital transformation. New research by IBM underlines the fact that the difference between success and failure in this sector often comes down to a holistic operational commitment to digital transformation.

While most companies acknowledge the importance of digitalisation, the overall picture is that many are failing to place digital at the core of their business model and operational architecture. One mindset that is still very prevalent is that digital can be bolted on top of a legacy business model, almost as an optional extra. The reality is that digital transformation should create value for the consumer from the ground up; it should be leading the agenda and driving radical change at every step of the customer journey. 

  1. Strategy is not a destination.

Part of the reason why digital transformation projects often fail to deliver is a tendency to disconnect strategy from implementation. This can take the shape of poor understanding of what it actually takes to deliver on a vision or how to design something customers want as well as a failure to anticipate obstacles. A digital vision which fails to clearly define attainable goals makes for a redundant strategy. It’s also important not to confuse a business strategy with a digital strategy. Digital strategies contain specific elements crucial to the success of digital projects, including a digital vision, a digital operating model, a prioritised list of initiatives, a roadmap and a service blueprint. 

Interestingly, our survey found that while 64% of companies say they have a fully implemented digital strategy, one-fifth of these (21%)  have neither a digital vision nor a digital operating model. What’s more, under half (39%) have a prioritised list of initiatives. So perhaps unsurprisingly, 85% agree that their organisation needed guidance in measuring how well their digital transformation projects were going – and what else could be possible. Retail organisations, in particular, appear to lack a roadmap and are unlikely to include a definition of their digital vision in their digital strategy (31% of retail businesses have a definition of a digital vision compared to 52% of companies surveyed overall). 

While many brands feel a sense of achievement in having a digital strategy, the absence of clear goals and priorities invariably hampers implementation, with critical projects becoming backlogged, counterproductive, going over budget or being scrapped altogether. 

There’s a question about self-awareness and openness here, too. To deliver true digital transformation, organisations must be transparent about their capability to plan and run a digital project end-to-end. If senior leadership can understand where the weaknesses are, they will have already made progress towards plugging knowledge gaps as and when they occur. Different departments will be able to support one another more fluidly, too. 

  1. Put tech talent in leadership positions.

Digital advocates often discuss the importance of inverted hierarchies or embracing learnings from the edge. But when it comes to digital transformation, companies are being hindered by leaders who are ill-equipped to tackle or even acknowledge the challenges at hand. 

Many of the organisations that participated in the survey use emerging tech in their digital projects, with lead elements including AI, AR, machine learning and automation. Yet, six in ten respondents (60%) claim that their organisation’s senior leadership team does not understand how to deploy this tech to drive growth and transformation. A third of respondents also highlight a lack of digital product experience among leadership teams. 

In this fiercely competitive, constantly evolving digital age, It’s no longer enough for senior management to exist in silos as overseers to other specialists. Instead, companies need smart technologists in leadership positions. They need to be specialists, product experts, designers and engineers who can connect the dots and make change happen. Talented technologists should be immersed in big conversations regarding digital innovation and growth. It’s only by moving these people to the highest levels of leadership that a robust digital strategy – one that carries through to implementation – can be shaped. It’s no coincidence that successful digital-first brands, including Facebook, Google and Amazon, are led by engineers and product people.

Of course, appointing technologists to leadership positions is made more challenging while there continues to be a chronic shortage in both current and next-gen tech leadership. Seventy-one per cent of participants in the study agree that poor staff skill sets limit their organisation’s ability to maximise the impact of digital transformation projects. This in turn drives a need for third-party support in areas ranging from digital product design (48%) to product strategy (43%), software engineering (36%) and solution integration (35%). 

Consultancies, then, have a critical role and can also clarify what is possible in digital transformation (further bridging the gap between strategy and implementation).

With the right mindset and talent in place, there is no reason why UK companies shouldn’t be justifiably optimistic about their digital capabilities. Many have the budget, tech prowess and ambition required to make digitisation their superpower. But true transformation also requires unwavering commitment, executional capabilities and tech-savvy leadership to become a reality.

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Leon Gauhman is co-founder and chief product & strategy officer at digital product consultancy Elsewhen. Elsewhen’s clients include companies like Spotify, Google, Microsoft and Mastercard. The company’s mission is to empower leaders to harness a cutting edge approach to design and technology to deliver positive impact for their organisations. Leon writes for publications including Sifted, Venturebeat, City AM and Fintech Futures. He loves using his experience in engineering and product to invest in promising early stage founders.

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