Digital business reached a tipping point in 2018 as organizations scaled their digital capabilities. Eighty-seven percent of senior business leaders say that digitalization is now a priority and in many cases is a do-or-die imperative.

In our surveys, more than 66% of CEOs said they expect their companies to change their business model in the next three years, with 62% reporting they have management initiatives or transformation programs underway to make their business more digital.

Clearly these leaders believe that digitalization offers exciting new, technology-enabled ways for organizations to engage with stakeholders, deliver a superior experience across the life cycle of their business, manage costs, and improve productivity.

Yet 72% of corporate strategists in a recent survey said their company’s digital efforts are missing revenue expectations.

Why are companies seeing this gap between expectation and results in digital business, which Gartner defines as the creation of new business designs that blur the boundary between the digital and physical worlds?

Our research shows that a company’s ability to gain strategic clarity on its path to business model transformation is crucial to its success.

Some organizations see digital business as an opportunity to totally reinvent themselves and their business models. Other enterprises and their functions are looking to leverage technology to optimize and augment existing operations.

But whatever the extent of an organization’s digital ambition, our research shows most corporate strategists tend to play it safe, favoring incremental investments. But in some companies, strategists are bolder. They test entirely new business models while also finding ways to reduce the associated risks. These progressive strategists take specific steps to identify future differentiators and engage the whole organization in a better, faster way to clarify their path to business model transformation. Without that clarity, returns from digital initiatives suffer.

Ultimately, every organizational function is having to manage the pressure of change in digital transformation, business models, and other areas.

The pressure is real, but market intelligence from across Gartner’s research and advisory teams shows progressive functional organizations are proactively realigning or reinventing themselves to respond, at the requisite speed, to enable their enterprise to capture the opportunities presented both by digitalization and today’s buoyant economic conditions.

Aligned Organizational Culture and Capabilities

Digital business also is creating new challenges for information and technology (I&T). In what Gartner calls a third era of enterprise IT, existing investments must be rebalanced and combined with new, disruptive technologies.

Organization-wide disruption also is causing dramatic shifts in culture and capabilities. New skills are emerging, and existing skills are evolving and expiring. Employees are concerned about their skills becoming irrelevant: better upskilling is their top concern.

Strategic workforce planning, and talent management and reskilling initiatives, are already top of mind for many in HR and among functional leaders. But on a macro level, there is near-universal demand for digital dexterity — a set of beliefs, mindsets, and behaviors that help employees deliver faster and more valuable outcomes from digital initiatives.
Just as digital technology is now fully within the purview of all organizational leaders, so is the question of digital-ready talent.

But disruption also breeds cultural tensions — as the digital ambitions of the enterprise conflict with longtime operating objectives and create competing priorities that employees don’t know how to balance. Especially without strategic clarity, employees are unsure if they should focus on speed or quality, efficiency or innovation, for example. The more tension employees feel, the more stressed they are and the worse their performance becomes.

In progressive companies, business leaders work proactively to surface these tensions, acknowledge tough trade-offs, and help leaders set and articulate priorities. The result is more effective culture-informed judgment by employees — and better performance.

Customer-Centricity at the Forefront

Digitalization is also characterized by transformative shifts in customer needs, which are compounded in today’s buoyant global economic conditions. In this environment, every functional leader has a role to play in translating digital ambition into commercial success.

Leading supply chain organizations, for example, are embedding agility and responsiveness into their DNA to catalyze the digital supply chain into action.

On the sales and service fronts, leaders are increasingly focused on positioning employees to be more effective and productive in the new paradigms they face.

In B2B sales, reps are confronted with buyers who spend more time researching in digital channels and exchanging information within buyer groups than they do engaging directly with sales reps. Progressive sales leaders position reps to help buyer groups navigate this complex purchase process, an approach we call “buyer enablement.” Proactive service leaders have turned their attention to improving the experience of their reps at work — which, in turn, benefits customers — rather than simply arming service reps with more and more tools meant to directly improve service.

High-performing marketing organizations have developed a more agile style of working to keep their brands competitive amid rapid marketplace shifts. Their leaders are building a diverse, adaptable range of team capabilities — allocating people and resources based on the work that needs to be done, regardless of where resources sit in the organizational structure.

Drive Digitalization — Or At Least Don’t Be a Drag
The digital era also demands that consumers and organizations be secure. In most organizations, the CIO remains accountable for cybersecurity, but information and technology (I&T) top performers are more likely to report that their boards are ultimately accountable for cybersecurity. All CIOs need to educate their boards and the C-suite on how to think about and take more responsibility for cybersecurity risk.

This new operating reality of multiple stakeholders and rewired accountabilities is playing out in all enterprise functions, challenging them to meet their core responsibilities and manage new risks at the speed of digital business as evolving business models change the value proposition, customer base, profit model, and/or business capabilities.

Progressive procurement departments deliver a feeling of certitude to business partners that lessens their anxiety, uncertainty, and exasperation during purchasing and thus alleviates the kind of pressure that can force procurement to make bad and costly trade-offs just to speed up buys.

In functions where governance is a key responsibility — from risk and audit to finance and legal and compliance — leaders are identifying effective ways to inject their expertise and guardrails into business strategy and operations even when decision making is highly distributed.

Transform Your Digital Future with Gartner’s Top C-Suite Insights for 2018-19.

 

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