Topics:   Risk Management,Strategy,Technology

Topics:   Risk Management,Strategy,Technology

September 5, 2019

How Does Your Company Measure Up Against Digital Leaders?

September 5, 2019

Is your organization managing to keep up with emerging technology? Is its business model at risk of digital disruption? Is the company a disrupter or facing the threat of becoming the disrupted? If your board isn’t sure, it’s time to ask management to assess enterprise-wide digital readiness.

The northbound train that is the digital revolution is transforming our world at such a breathtaking pace that many directors and executives are concerned their organizations will be left at the station. Innovations in robotics, artificial intelligence (AI), machine learning, wearables, drones, autonomous vehicles, and nanotech are just a few examples of the drivers of change now and over the next several years.

Most organizations recognize that digitization simultaneously is one of the biggest opportunities and risks they will face in the near future. However, many do not fully grasp that time is of the essence. The question facing boards is deceptively simple: Are we capable of thinking like a born-digital company and do we have the competencies that we need to compete? This means the company must take stock of its digital readiness, make the necessary improvements to acquire and develop the competencies and talent to position itself to act digitally, and break down the barriers to change along the way. And this must be done sooner rather than later if the company is to embrace the latest technology and maximize its innovative potential.  

Years of research have resulted in Protiviti identifying 36 competencies at which organizations must excel to compete effectively with born-digital companies. These competencies are arrayed along six broad categories: vision, mission, and strategy; management and employee culture; organization, structure, and processes; communication, marketing, and sales; technology innovation and development; and big data, analytics, and automation.

We encourage companies to assess their digital readiness by using a suitable framework. Our online, proprietary digital assessment tool is available at no cost for companies to benchmark themselves to ascertain where they fit within five levels of digital maturity:

  • Digital Skeptic. At the scale’s low end, these companies are laggards reacting to innovations happening around them. They know they need to match the capabilities their digital competitors are offering the market, but they have not grasped that how they take advantage of the latest technologies can be a significant differentiator. They are risk-averse, letting others make mistakes and believing that they can play catch-up later on. This may work sometimes, but it can be dangerous when the pace of change is so fast and customer loyalty can be fleeting.
  • Digital Beginner. These companies embrace the need to change and to succeed in implementing new technologies, resulting in a collection of point solutions. They understand that the way they use technology can be a differentiator; therefore, they experience initial successes working with the latest tools. However, they lack a coherent, end-to-end strategy. Their efforts amount to a collection of initiatives which may be valuable but are not the result of a strategy that addresses how the organization will compete in the digital age.
  • Digital Follower. Followers have a clear digital strategy. They make quick decisions in response to innovations and focus attention where change is needed. While they know where they are going, they still have a lot to do to execute their strategy and become digitally advanced. Agile followers can compete effectively in the market.
  • Digitally Advanced. These companies have progressed their digital transformation efforts by embracing and experimenting with technologies to achieve high levels of automation, a low-cost base, and hyperscale business models that are less dependent on humans in ramping up or down to meet demand. They have a digital mindset at their core, focusing on their culture and people but thinking and acting digitally in everything they do.
  • Digital Leader. The distinction between companies that are advanced and those that are leaders lies in the proven ability to disrupt industries and traditional ways of thinking. Advanced companies have digitized and are using the latest technology everywhere—but leaders also disrupt. Tesla, Uber Technologies, Airbnb, and have all completely changed their respective industries.

Despite years of dialogue about digital transformation, most companies are still in the beginning stages of digital maturity. They aspire to be, but do not today have, a digital mindset at the core of the business. As companies invest in technology, embrace the cloud, replace legacy applications with next-generation software, build customer-facing websites, and emphasize digital channels, their efforts often result in a digital veneer but do not alter the way the organization thinks and acts.

True digitization occurs at the core, transforming the organization from the inside out to maximize efficiency and resiliency. If a company has a digital mindset, it is going to embrace next-generation digital tools in its strategic thinking and operational execution, and ultimately organize its business model for speed. The digitally-minded company also is more likely to attract the talent it needs to achieve its goals faster than those who give digital transformation mere lip service.

As companies shape and implement their digital strategies, they must recognize that a narrow view of digital transformation puts them at risk of missing out on important market opportunities. The board needs to be proactive in asking the tough questions around whether management is doing the right things, doing enough, and adapting and adjusting to new market realities. A fact-based understanding of where a company is positioned on the digital maturity continuum can lead to dialogue in the C-suite and in the boardroom on exploiting identified strengths and addressing potential weaknesses to drive needed change.

Jim DeLoach is managing director at Protiviti.