Global technology consultancy Thoughtworks describes organizations that can respond to market changes with continuous adaptation as “scalable organizations.” He argues that instead of focusing solely on technological change, organizations should focus on building capabilities that support continuous reinvention. While many organizations recognize the benefit of adopting agile approaches in their technology capabilities and architectures, they have not extended these structures and ways of thinking across the entire operating model, which would allow their impact to grow. expand beyond that of a single transformation project.
Global spending on digital transformation is growing at a steady rate: 16.4% per year according to IDC. The company’s 2021 “Worldwide Digital Transformation Spending Guide” projects that annual transformation spending will reach $2.8 trillion in 2025, more than double spending in 2020.1 Meanwhile, Boston Consulting Group research shows that 7 out of 10 digital transformation initiatives fail their goals. However, successful organizations achieve almost double the growth in earnings of those that fail and more than double the growth in the total value of their businesses.2 Understanding how to make these transitions successful should therefore be of major interest to all. business leaders. .
This MIT Technology Review Insights report is based on a survey of 275 business leaders, supplemented by interviews with seven digital transformation experts. Its key findings include the following:
• Digital transformation is not just about technology. Adopting new technology for its own sake does not allow the organization to continue adapting to changing circumstances. Among survey respondents, however, transformation is still synonymous with technology, with 70% planning to adopt new technology within the next year, but only 41% pursuing changes in their business model.
• The business environment is changing faster than many organizations realize. Most survey respondents (81%) believe their organization is more adaptable than average and almost all (89%) say they keep up with or outpace their competitors, suggesting a big gap between the changing reality speed and executives’ perceptions of their readiness.
• All organizations need to develop capabilities for continuous reinvention. The only way to keep up is that organizations are constantly changing and evolving, but most traditional businesses lack the strategic flexibility to do so. Nearly half of business leaders outside of the C-suite (44%), for example, say organizational structure, silos or hierarchy are the biggest barrier to transforming their business.
• Focusing on customer value and empowering employees are keys to organizational evolution. The most successful transformations prioritize creating customer value and improving the customer and employee experience. Responding to changing customer needs is the constant source of value in a world where everything is changing, but many traditional organizations do not take this long-term view, with only 15% of respondents most concerned about not responding. customer expectations if they fail to transform.
• Rapid experimentation requires the ability to fail and recover quickly. Organizations agree that iterative and experimental processes are key to finding the right solutions, with 81% saying they have adopted agile practices. However, they are less confident in their ability to execute decisions quickly (76%) or shut down initiatives that aren’t working (60%).