Without management’s support, your company’s digital transformation will fail. How dare I make such a bold claim? Not only is it based on my own experience, but this conclusion is supported by a study published in MIT’s Sloan Management Review in conjunction with Capgemini Consulting. The study entitled, “The Digital Advantage: how digital leaders outperform their peers in every industry,” found that the HOW is management support and involvement in the digital transformation. Yes, that is right: The success of a digital transformation rises and falls on the shoulders of management and this in every industry.
Let’s dissect this conclusion to see how it applies to you and your business. First off, the study measured the intensity of two levels of commitment: digital and management. Digital Intensity refers to the use of technology to reach customers (ex. marketing) and do internal operations (ex. KPI monitoring). Management Intensity refers to the level of support provided by management to carry out a digital transformation.
After studying four hundred companies, the researchers then plotted the levels of commitment on a graph: Digital Intensity on the y-axis and Management Intensity on the x-axis.
They then divided the graph into 4 sections, based on the levels of the companies’ digital intensity and management intensity. This led them to identifying 4 groups of businesses: Beginners, Fashionistas, Conservatives and Digirati. This following chart summarizes each group’s status.
Now the analysis can begin. The researchers compared the businesses in each group according to three results: revenue growth, profit margins, and market value.
Let’s start with revenue growth.
Beginners actually lost revenue growth (-4%), assumedly because their competition is taking up their market share since their digital transformation lacks both digital and management skills.
Conservatives also have negative growth (-10%) most likely due to their slow adoption of technology.
Fashionistas, on the other hand, had a +6% growth, due to their experience in digital marketing.
The winner, though, is the Digirati with a +9% in revenue growth. The combination of both digital innovation and management support is clearly superior to having neither or just one of the two.
Now on to profit margins. As you can see from the results indicated in the following chart, management intensity was more indicative than digital intensity when determining profits.
So, yes, fashionistas are making positive revenue, but where it really counts, in profits, they are losing out. This is most likely due to their tech spending not being tied to business objectives. And the opposite is true for conservatives. Although this group is in negative territory as to revenue, their conservative spending gives them a +9% profit margin. And here is where digirati really shine with a +26% profit. See how my opening claim holds true? Without management involvement and support, a digital transformation is sure to fail.
Want even more proof? When analyzing market value, digirati came out on top once again.
And once again, as in the case of profit margins, management intensity was much more decisive than digital intensity as for a company’s success with a digital transformation. For, even conservatives who invest less in tech outdo fashionistas who invest more. The difference is to apply technology to reaching clear business objectives and not the other way around.
For an overview of the three aspects that were studied, here is a summary graph:
Based on these findings, how then can management support a digital transformation? The study identified four ways.
- Transformative Vision: have a strong vision for your company’s future as to how to face upcoming threats.
- Digital Governance: make sure decisions related to adopting digital tools always stem from company business objectives.
- Engagement: the benefits of a digital transformation must be communicated clearly to employees to ensure their buy-in.
- IT-Business Relationships: there must be a shared understanding between the IT team and the business executives.
Before embarking on a digital transformation journey, be sure management is 100% behind the project, willing to invest time and money into the transformation. Become digirati and reap the benefits of a successful digital transformation.