What should businesses do to accelerate their digital transformation journey?
According to the white paper titled Infosys Digital Acceleration Study: Australia and New Zealand Report published by global technology services & consulting firm Infosys, barely one in five large Australian and New Zealand (ANZ) organisations are digitally prepared to build disruptive business models on a large scale. The Digital Innovation report published by AlphaBeta and Data61 further identified that Australia has captured less value than its global peers with digital innovation totalling only 7.4% of its GDP as opposed to other countries with equally advanced economies at 11.2% of GDP. However, the report also recognised that digital innovation in Australia has the capacity to deliver $315 billion in gross economic value over the next 10 years – thereby making a significant contribution to Australia’s ongoing economic prosperity.
Amongst the high potential opportunities found in digital innovation are cyber-physical security, legal informatics and precision healthcare. However, to take advantage of these opportunities, more Australian organisations need to embrace digital transformation to be able to increase revenue whilst reducing costs.
What are the three clusters of digital transformation?
Digital transformation refers to the integration of digital technology across all areas of business. It fundamentally creates new processes and practices for businesses to achieve operational efficiencies and maximise the value add to customers.
But digital transformation also brings along its own set of challenges such as the constant challenge of status quo and the implementation of innovative business strategies to remain competitive in an increasingly digital world. The constant state of digital transformation is fluid and the Infosys report findings stated that Australian organisations can be divided into three groups depending on the digital maturity of the business, that is, their extent of digital transformation:
• Visionaries – Businesses who have implemented holistic digital strategies in all areas of the business and have adopted an innovative culture;
• Explorers – Businesses who differentiate themselves by increasing their brand value and implementing digital programs to enhance customer experience; and
• Watchers – Businesses who largely focus on efficiency-driven outcomes of digital adoption and have yet to dive into digital transformation.
How does ANZ fare compare to its global counterparts?
Approximately 17% of ANZ business leaders have identified themselves as Visionaries in contrast with the rest of the world at 22%. This means that fewer ANZ leaders consider digital transformation as a central part of their business strategy compared to global companies.
However, more than half of ANZ leaders identify with the Explorers category at 55%, compared to other businesses outside the ANZ region at 50%. This infers that more Australian companies capitalise on their digital transformation strategy to differentiate themselves in their delivery of a seamless customer experience or uplift in brand value.
In terms of the Watchers category, both ANZ and its global counterparts make up for more than a quarter of all respondents at 28%. This could mean that company leaders have partially deployed digital initiatives in their respective businesses but are focused on efficiency-driven outcomes of digital adoption, rather than digital for differentiation like the Explorers do.
Is a disruptive business model necessary?
Large organisations often need to adopt a disruptive business model to find new ways to provide services and products that satisfy the evolving wants and needs of their customers. Many organisations today are employing innovative strategies and disruptive business models to create new markets and increase their customer base.
Based on the research conducted by Infosys, the consumerisation of IT and the consumer-driven industries such as financial, healthcare and the manufacturing sectors are amongst the most innovative – and hence the most likely to be disruptive. Such industries are highly competitive and they therefore have to constantly disrupt their business and re-invent their business model to remain relevant. Whilst the telecommunications and utilities sector are slightly more stable with only 29% citing high digital disruption, about 34-40% of respondents from the financial and healthcare sectors report high digital disruption with the manufacturing sector experiencing the highest at 54%. About 60% of businesses surveyed have reported that emerging technologies are influencing this disruption with affected departments in their R&D divisions, CRMs as well as MIS at 58%, 50% and 53% respectively.
How can Visionaries set an example when it comes to digital transformation?
Visionaries in particular, recognise the constant need to reinvent themselves to stay relevant to their customers. The Infosys report surveyed large enterprises and public sector leaders in ANZ and has identified that many businesses are encumbered with inflexible IT systems, insufficient digital skills and a culture that limits the ability to evolve the current ways of working at the micro level, while leaders drive change to adapt to large-scale disruptions.
The study identified that a portion of visionary organisations led the way by re-energising their core IT systems with artificial intelligence (AI) and automation. They are also re-skilling their people to support new ways of working, including new processes, digital technology, team structure, reporting hierarchy and new KPIs that reward the right agile behaviours. Based on the study, the following were identified as key organisational drivers behind their business transformation decisions:
- 85% of business leaders have identified business agility;
- 82% have mentioned to enhance their digital culture; and
- 78% are focused on delivering seamless customer experience
How digitally mature are organisations in Australia?
When assessing how close organisations are to full business transformation, half of the public services organisations felt that their digital maturity was behind global companies and only 7% felt they were ahead. Other sectors have assessed their levels of digital maturity below:
- Manufacturing companies rank highest in terms of digital maturity with 93% on par with the rest of the world or even ahead of global peers;
- Logistics companies reported that 80% of respondents claimed digital maturity was on par with global standards or even ahead;
- Healthcare and telecommunications companies estimate they are approximately 20% ahead of global competitors;
- Retail companies were more polarised with 30% feeling their digital maturity is lagging behind and another 47% feeling ahead of global companies; and
- Only 25% of financial services felt behind.
What challenges are holding Australian businesses back from embracing digital transformation?
Research has shown that a lack of change management was a common hindrance amongst Visionaries. In comparison, a legacy of organisational silos was the problem to Explorers while Watches predominantly felt that a lack of senior leadership’s commitment to the business becoming more digitally transformed was a challenge.
Other hindrances within the company itself relate to various factors such as failure in ensuring a collaborative plan in 55% of financial services or a lack of innovation and inflexible organisational processes due to cultural challenges. On a global scale, the recent2017 skills for Digital Transformation Report showed that 64% of companies surveyed did not have the personnel with the right set of skills to drive digital transformation in their organisations. This shows that a digital skills gap is therefore one of the high barriers for successful implementation of digital transformation.
What are companies doing to overcome key challenges in their journey to digital transformation?
Australian businesses are employing various strategies to overcome key challenges on their journey to digital transformation. For example, 55% of companies are building in-house capabilities, 54% are organising level transformation and 51% engage with transformational partners. Organisations must also be highly agile within their transformation strategies to adapt easily to new technologies and innovative processes. Across all three stages of maturity, cybersecurity, real-time interaction management and enterprise cloud formed a major part of the region’s short term focus, whilst insight platforms, DevOps and agile systems, ERP, enterprise applications and intelligent agents leading medium term strategies. Long term adoption in comparison includes 3D printing, drones as well as AR and VR.
However, in order for business transformation to be successful, the following criteria is ranked:
- Senior leadership commitment (52%)
- Change management (45%); and
- Organisational agility (45%)
Recommendations for enabling disruptive business models
When it comes to enabling disruptive business models, identifying and reskilling talent is of pivotal value – especially in a time where jobs needs to be reinvented or made obsolete. However, with a digital mindset and a nurtured culture of learning, the workforce can enable the organisation’s ability to innovate. The Infosys report further suggests investing in core IT systems where AI and automation can better equip the business to become more agile and achieve more customer-focused business outcomes. Last but not least, innovating all areas of the business requires the organisation to be agile and this in turn requires proper leadership. As such, engaging strong partners not only need to enable change but also manage the transition to facilitate the digital transformation process.
Recent examples of companies going for a digital transformation strategy
The following companies have recently implemented digital transformation strategies to establish a strong global ecosystem within cloud services and infrastructure and also implement a program designed to improve people’s Science, Technology, Engineering and Mathematics (STEM) skills respectively:
- KPMG International and Alibaba Cloud have recently partnered and formed a global alliance to provide digital transformation to businesses across multiple industries initially in Asia-Pacific and Europe.
- Siemens, Swinburne University of Technology and Ai Group have established a pilot program to improve STEM skills. The program includes Industry 4.0 and the Internet of Things (IoT).
Looking for digital transformation talent?
Should you wish to discuss how digital transformation can change your business or are looking for digital transformation experts to join your organisation, please feel free to contact us at +61 04 2413 5452 or visit our LinkedIn to learn more about what we do and how we can help.