New Everest Group report finds enterprises are adopting digital and seeing initial success, but struggles come in scaling and sustaining the transformation effort.
As many as 78 percent of enterprises today fail to scale their digital transformation initiative and achieve the desired return on their digital investments. Despite increasing digital adoption by enterprises and reports of initial successes, enterprises are struggling to scale and sustain their transformation efforts. According to Everest Group, a misalignment between an enterprise’s digital strategy and its “old school” operating model is often to blame.
“In recent years, enterprises increasingly have been undertaking digital transformation initiatives, leveraging digital tools to improve revenue, reduce costs and enhance customer experience,” said Yugal Joshi, vice president, Information Technology Services, at Everest Group. “Enterprises are typically quite encouraged by initial successes, but the majority don’t actualize the return on investment they envisioned in the long term. The struggle comes when enterprises try to scale and sustain their transformation initiatives. Typically, one of the biggest problems lies in ‘old school’ forms of operating models. If the enterprise’s operating model is not modernized and aligned with the digital strategy, the desired returns from a transformation initiative simply cannot be achieved.”
The following findings are also symptomatic of the all-too-common misalignment of operating model to digital strategy:
- 73 percent of enterprises failed to realize sustained returns on their digital investments.
- 69 percent of enterprises consider organization structure as a barrier while scaling up their digital initiatives. A complex organizational structure reduces transparency and creates silos, making it difficult for organizations to sustain their digital initiatives.
- 82 percent of enterprises do not have a culture of collaboration and innovation. Lack of 360-degree communication channels and innovation culture leads to poor adoption of any change as the organization battles fear of uncertainty.
- 87 percent fail to implement their change management plan for digital transformation.
- 89 percent have a narrow scope of technology investments limited to particular products or functions. This impedes the organization-wide, long-term view required for digital transformation.
Everest Group has assessed the digital transformation success and failure cases of more than 328 enterprises to arrive at the best practices that enterprises need to adopt to transform their operating model into a digital operating model. The findings and recommendations are shared in the newly released report, “Digital Services – Annual Report 2018: Future Operating Model to Scale Digital.”
In this report, Everest Group introduces a simple “FIRE” framework that describes four key characteristics of the type of operating model needed to support digital transformation:
- F: Fluid organizational structure—the enterprise should aim to create a self-organizing, ownership-driven and skill-centric organizational structure.
- I: Innovative systems and culture—the enterprise should enable experiments, leverage technology, crowdsource ideas, and value the taking of measured risk as an asset
- R: Responsive-by-design workplace—the enterprise must improve communication and collaboration and digitize internal processes
- E: Experience-centric focus—the enterprise must move beyond siloed technology investments and identify areas across the value chain where end-to-end digital transformation efforts are required.
The report also describes in detail an approach and roadmap enterprises may use to transition to a digital operation model.