Rob Mettler and Anita Chandraker
25 March 2014
Twenty five years since the birth of the internet, organisations are still struggling to adapt to the digital agenda.
PA Consulting Group’s new Digital Barometer has collated views from more than 200 senior IT managers, chief information officers, technology officers and chief executives across a range of sectors worldwide. More than 60 per cent of these say they have further to go to turn their organisation into a digital business, one better suited to meet the demands of their customers, keep ahead of the competition and seize new opportunities. Yet only 17 per cent of respondents have restructured their businesses in line with their digital ambitions.
Our analysis shows that it is critical for organisations to look at digital not just in terms of what they deliver to external customers and stakeholders but also how they are set up internally. They need to avoid focusing just on the technology and look at the wider business changes necessary for digital success. They must also create the culture, leadership and mindset that will enable them to undertake the appropriate disruption to their current business models and then create new models for the future.
Much has been said about the changing expectations and behaviour of consumers both in their working and personal lives, and meeting those expectations requires organisations to be correctly configured on the inside; going digital cannot just be window dressing.
Providing the desired user experience requires not just the right technology but also the right operating model, supported by the processes and policies to match. For example, having a global social media team who respond to tweets only between 9am and 5pm does not work when your social web of customers are active at all hours across multiple time zones.
That means change must extend beyond the traditional customer-facing functions to include departments such as operations and HR. This is not yet happening. Nearly four out of five respondents report that their organisations have not yet configured their processes for self-service, while just 16 per cent agree that their companies’ governance models are suitable for these changing demands. Addressing these shortfalls will not be easy because only 20 per cent of respondents believe their organisations have the right skills needed to succeed.
One of the lessons we can learn from those that have struggled to succeed with digital is the need to focus on creating a digital world for tomorrow, not simply digitising today’s propositions. Too often the question asked is how we put online what we do today without considering what tomorrow’s competitive landscape, or consumer needs, might be.
However, some organisations have responded to these changes. Take, for example, the recent shifts in publishing, where the Financial Times has seen revenue for content outstrip that for advertising for the first time in 125 years, and at a higher profit margin. In the public services, online services such as NHS Choices provide health information through a complex network of partners, which means they can reach more than 1m citizens a day at the fraction of the cost of an ill-targeted piece of direct mail or an unnecessary GP visit.
But this is only the start. The increasing automatic interconnection of data and devices – the “internet of things” – will open up a whole range of new opportunities. While 45 per cent consider the internet of things important for the future, just 11 per cent of respondents currently make use of interconnected devices. Those who succeed in this context will not just keep on top of the latest trends and competition, but proactively respond with compelling customer propositions.
It is clear that success comes from senior people leading top down change. The leadership of Andy Street at John Lewis helped them secure £1bn of revenue from online sales last year, well ahead of target. It was one of the few retail success stories coming out of the Christmas period and developing a customer-oriented omni-channel shopping experience has clearly paid off.
Fashion brand Burberry, led by Angela Ahrendts who is due to join Apple shortly, introduced interactive, multimedia technology in its flagship Regent Street store, triggered by RFID sensors woven into garments. Mirrors turn into screens sharing digital content as customers approach with particular garments. The lesson from these chief executives and their companies is that they have not been afraid to disrupt their business models and industries. They have recognised the clear imperative for change and invested heavily not just to survive, but to seize the advantages of the hyperconnected world of tomorrow.
In contrast just 24 per cent of participants in PA’s Digital Barometer feel that their leadership understands digital and only 25 per cent of respondents feel they have the right mindset to survive and thrive in the digital age. Just over one in five chief executives are seen as leading the digital agenda within their organisations, despite the importance of this to future success.
The findings of PA’s Digital Barometer show that those who succeed in reaching Destination Digital will have revised what they sell and how they sell it, will have disrupted and reconfigured their organisations and, crucially, will have had the top down drive to make that happen.
Rob Mettler is a digital business expert at PA Consulting Group and Anita Chandraker is head of PA Consulting Group’s IT delivery practice