“Technological competitiveness means we can think about our IT, business and data architecture in more interesting ways,” says Zaka Mian, group director of transformation at Lloyds Banking Group. “If this is what we’re trying to do strategically with our customers, then how does our architecture, in all its guises, mesh with that?”
Digital transformation entails bringing information into the fabric of every transaction with a client, partner, employee or process. To do so, digital enterprises should deploy new tools, communities, ecosystems and a technology platform that enables rapid information sharing.
To explore how companies are achieving digital transformation and what strategies they hope will help them attain it, The Economist Intelligence Unit conducted a global survey of more than 600 board and C-suite members and other top executives at companies with annual global revenue of US$500m and above.
Our survey findings highlight digital transformation as perhaps the most rapid, dramatic and sophisticated effort at reinvention that major businesses have attempted in many decades, and their strong commitment to making it happen.
Sixty-eight percent of respondents say their organization’s annual profitability has increased over the past three years thanks to its digital strategy and 74% say they expect it to rise over the next three years.
“We strongly believe that we can make the customer experience easier and simpler while leading to better outcomes through digital technology, and that will continue to drive our market share,” says Neesha Hathi, executive vice president and chief digital officer at Charles Schwab. “Digital transformation also helps us scale our services while driving down costs for our clients.”
The vast majority of companies plan to increase their investment in digital technologies in the coming year: 83% of respondents expect their organization to do so, with 41% looking at an increase of 11% or more. What they plan to do with that investment represents perhaps the most dramatic finding of our study, however.
At present, 52% of respondents have digitally enabled three key organizational functions, according to the research. But within the next three years, companies across industries, geographies and size groups intend to greatly ramp up their efforts, with the result that at least six of the ten functions asked about in the survey will be digitally enabled at well over half of all companies. Business units, management, strategy and R&D/Innovation are the areas that will see the greatest progress.
Accompanying this vast change is a parallel—and rapid—drive to harness more sophisticated technologies. Thirty-six percent of survey respondents say that artificial intelligence (AI) and machine learning (ML) have played a significant role in their organization’s digital strategy and 45% say it will do so over the next three years (see sidebar, page 11). Meanwhile, companies are assigning less importance in their future plans to more familiar digital tools and processes, such as the Internet of Things (IoT), social media and collaborative tools, many of which are already fully integrated into their business strategy.
What do companies aim to achieve by digitally remaking themselves—functionally and business-wise—and by racing to up their analytic game virtually simultaneously? To find out, our survey took a closer look at their goals, the deficiencies they still have to overcome and the cultural changes they need to implement.