Digital Leaders Blog

Digital Performance (9)

Following our recent post Charting the Digital Transformation Genome, a HBR paper examines the reasons why some high profile digital transformation programmes fail based on the experiences of compaies such as GE, Lego, Nike, Procter & Gamble, Burberry, Ford and others. All case examples of heavy commitments to digital capability development which failed to meeet basic financial performance objectives.

The authors present four main reasons for failure:

First, there are a very wide range of factors that impact on a company's performance as much or even more than digital. Managers, therefore, should not view digital as a panacea.

Second, digital is not just about technology. Successful digital transformation is an ongoing process of changing the way you do business. It requires investment in new skills, people, projects, infrastructure as well as IT systems. It involves the integration of people, technology and business processes, combined with digital leadership, continuous monitoring and intervention from the top.

Third, digital investments need to be calibrated to the readiness of your industry, both customers and competitors, have a clear strategic fit with overall corporate objectives and hardwired to value.

Finally, companies should be careful that the investment in digital does not destroy traditional sources of comptitive advantage. The prospect of launching a sexy technology-based business can be tantalizing but can result in executives paying too much attention to the new and not enough to the old.

You can access the full article here - Why So Many High Profile Transformations Fail.

 Take care.

Jim H

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According to Anthony Abbatiello, principal, Deloitte Consulting and global leader of Deloitte Leadership, $400 billion is wasted every year in failed digital transformations. Even though many companies profess to have digital strategies, they don’t fully understand what it’s actually going to take or haven’t pinpointed what they want the business to look like.

There’s also an element of “executive tourism” as senior managers see things they like in Silicon Valley and seek to cut-and-paste them into their own organizations.

So, they embark on “random acts of digital” rather than create a cohesive strategy. They invest in digital technology and are disappointed when the expected massive change (and returns) don’t appear.

Despite such failure rates, digital transformation can be successful. But, it’s going to take a mind-set metamorphosis to put digital DNA at the organization’s core. HR has a critical role to play.

Read the full article here.

Jim H

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Further evidence of the strong positive correlation that exists between digital maturity and companies' financial performance has been provided in a recent study by Accenture.

Through the more efficient use of new technology, the 900 large companies surveyed could increase their market capitalisation by an average US$6 billion. 

A lack of digital skills, however, is holding back their ability to realise these benefits.

With only 13 percent of executives claiming tangible business benefits being derived from their investments in digital technologies, major scope for improvement exists in leveraging the full potential of emerging technologies such as 3D printing, artificial intelligence (AI), augmented and virtual reality (AR/VR), autonomous robots, autonomous vehicles, big data analytics, blockchain, digital twin, machine learning and mobile computing.

Companies in the industrial-equipment sector, for instance, could realise additional cost savings of more than $43,000 per employee if they combined robotics, AI, blockchain, big data and 3D-printing technologies. Energy companies could gain more than $16 billion in market capitalisation if they combined technologies such as virtual reality, big data and AI.

To realise these benefits, digital transformation is no longer enough. Companies must completely reinvent their operating models, production and value chains to create more value with digital.

Accenture uses the term Industry X.0 to describe the type of reinvention required, with businesses using advanced digital technologies to transform core operations, worker and customer experiences and underlying business models.

Emerging technologies are used to achieve new levels of efficiency in core R&D, engineering, production, manufacturing and support activities through integrated systems, processes, sensors and data driven intelligence.

Worker and customer experiences are reimagined and redesigned through advances such as immersive, augmented and virtual reality.

New business models and revenue streams are unlocked by smart, connected products, services and plants enabled by new ecosystems.

You can read more here - Companies That Harness Digital Technologies to Boost Efficiency and Grow Their Business Could Raise Their Market Capitalisation by $6 Billion on Average, Accenture Finds.

Please see here for previous Future Digital Leaders blog posts on the link between digital transformation and business performance.

Please click on image to enlarge.

Take care.

Jim H

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Interesting from the Harvard Business Review.

"Across industries and across countries, a small number of superstar firms are pulling away from the competition. They’re more productive, more profitable, more innovative, and they pay better.

But why are these companies doing so well? Are they out-competing their rivals, or are they using their size and influence to avoid competition altogether?

One answer to that first question shows up in study after study: superstar firms are succeeding in large part due to information technology."

Read more here.

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Digital Scotland: Hype or Reality

Sometimes it can be useful to talk things up. A feel-good factor can help to motivate, persuading others to follow a similar path to reach an agreed goal.

Talking things up too much, however, can lead to hubris - an exaggerated feeling of self-importance, a position of dangerous overconfidence totally divorced from reality.

In terms of Digital Scotland, it really is time to distinguish between hype and reality.

Over the last week or so, we have been exposed to a series of headlines which would appear to indicate that we do indeed live in a world class digital nation. Apparently, the North East is pushing to become a global digital leader; we are on the verge of building an IoT nation for all; our digital sector is ready to take on the world by going global; Scotland is leading the way in narrowing the digital divide; and Glasgow is set to become tech’s ‘living lab’.

Hype or reality?

Digital Glasgow Roadmap 2014

As always, it is useful to take a step back before looking forward.

In January 2014, I was invited to deliver the keynote address at the launch of ‘Digital Glasgow’ – a high profile strategy to establish Glasgow as a world leading digital city by 2017. The launch coincided with the city being awarded £24m of funding from the Technology Strategy Board (TSB) to develop its Future City demonstrator project.

The Foreword to the Digital Glasgow Roadmap document read as follows:

“Glasgow is on a journey - it is an ambitious city with a proud history of embracing challenge, delivering change and capitalising on opportunities. Glasgow continues to demonstrate strong leadership in charting a way towards new growth, economic recovery, and providing opportunities for all its citizens.

The Digital Glasgow roadmap is about helping the city to achieve its key outcomes, economic growth, becoming a world class city, a sustainable city, a learning city, and a city which looks after its vulnerable people. It is about ensuring we have a world class digital infrastructure in place but also supporting the development of services in the city which maximise the benefits of these investments.

Effective use of digital services by citizens, businesses and the 3rd sector has the potential to transform the way the city works: boost productivity, drive economic growth, provide jobs, connect individuals and revitalise the way services are delivered. We must build a shift in mind set, putting citizens at the heart of how we design and deliver public services.

Glasgow will be a world leading digital city by 2017 securing and growing the competitive advantage of the city and providing opportunities for residents and businesses to embrace the benefits of the digital age.”

As we move towards the end of 2017, it is a legitimate question to ask whether this ‘will be’ objective has been achieved, and if not, why not?

KPIs are for measurement not spin

Fortunately, the document listed a series of goals, objectives and clearly defined KPIs under six main workstreams - Broadband Infrastructure; Urban Wireless; Digital Participation; Digital Public Services; Training, Skills and Employment; Digital Business (SMEs/eCommerce).

In the interests of transparency, I have listed below the stated objectives and agreed KPIs under each major workstream.

All we need now is someone from the Digital Glasgow Board and/or stakeholder groups to produce evidence showing whether these lofty ambitions have been taken forward as promised, “making a real difference to the city.”

Hype or reality?

Broadband Infrastructure

“Glasgow’s broadband infrastructure is an enabler for growth across all economic sectors and increasingly relevant to inward investment decisions. The aim is to ensure the city has a globally competitive and modern communications infrastructure by 2017”

To monitor progress we will compare the following measures on an annual basis as part of programme monitoring of this roadmap:

  • % of premises with access to superfast broadband.
  • % of premises receiving a service < 2Mbit/s.
  • Average downlink speed of a broadband connection.
  • Comparison to UK Capital and Core Cities.

Urban Wireless

“Glasgow will have world class wireless capabilities and a free wifi service across the city supporting digital participation, providing a platform for new approaches to delivering services, helping promote the city and attract investment.”

To monitor progress we will compare the following measures on an annual basis as part of programme monitoring of this roadmap:

  • % of city with coverage from a free ’wifi’ service.
  • % of properties within 500m of a free ‘wifi’ service.
  • Service usage measures - unique visitors/ sessions.
  • % availability of service.

Digital Participation

“All citizens of Glasgow will be confident to choose how, when and where they can go online and be supported as they need it. They will be able to safely communicate, browse and transact online. They will be able to participate as citizens online and influence decisions in their communities as part of a world class digital city.”

To monitor progress we will compare the following measures on an annual basis as part of programme monitoring of this roadmap:

  • % of residents accessing the internet, both at home and on the move.
  • % of residents transacting online.
  • % of residents accessing public services.
  • Increase in no’s registered for formal learning courses.
  • Track the no. of Glasgow partners who sign up to the Digital Participation Charter.
  • Track the no. of digital access points.

Digital Public Services

“Glasgow citizens will be able to access more services through digital channels. We aim to provide a wider range of improved online services, giving our customers more choice in how they engage, interact, source information and transact with us.”

To monitor progress we will compare the following measures on an annual basis as part of programme monitoring of this roadmap:

  • Number of available and improved online services.
  • Customer use of online.
  • % of citizens who engage with council through web/mobile channel.

Training, Skills and Employment

“Glasgow citizens will have the digital skills to not only consume services but to be the producers of new goods and services, harnessing the potential of digital technologies to drive growth, stimulate innovation and improve productivity.”

To monitor progress we will compare the following measures on an annual basis as part of programme monitoring of this roadmap:

  • % increase in number of IT graduates.
  • Greater online presence of SMEs.
  • % increase in the number of digital commonwealth apprenticeship places.
  • % increase in under represented groups in IT particularly women.

Digital Business (SMEs/eCommerce)

“Glasgow businesses will be able to compete with the best nationally and internationally through the use of digital tools, technologies and ecommerce. They will have access to integrated business support and advice which helps them each step of the way in developing their effective use of digital technologies to increase their competitiveness. Glasgow will also have a thriving digital sector.”

To monitor progress we will compare the following measures on an annual basis as part of programme monitoring of this roadmap:

  • Increase the number of SMEs trading online to 60%.
  • Increase the GVA in Glasgow from ecommerce by 15%.
  • Increase new jobs by participation in ecommerce by 2,800.
  • Increase the number of digitally sophisticated Glasgow companies by 20%.
  • Grow Glasgow’s Digital sector.
  • Increase in the number of digital SMEs procuring with Glasgow City Council.

By 2017, has Glasgow become a world leading digital city?

As always, comment and feedback are very welcome.

Ps while preparing this article I received an e-mail invite from Glasgow City Council to attend the 20th State of the City Economy Conference taking place on 24th November. More hubris or a reality check?

Jim H

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The Case for Digital Reinvention

A new report from McKinsey provides further evidence of a strong positive correlation between digital maturity and subsequent financial performance.

In an era of rapid digital change and digital disruption, the report concludes that “bold, tightly integrated digital strategies will be the biggest differentiator between companies that win and companies that don’t”. The biggest payouts will go to companies that initiate digital disruptions.

Fast-followers with operational excellence and superior organisational health won’t be far behind.

Based on detailed research, the report lists the distinguishing characteristics of ‘digital winners’.

Please visit the Bridgeall blog for a more detailed summary of the main research findings together with links to the full report.

As always, comment and feedback are most welcome.

Jim H

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Evidence is emerging of a growing digital divide between organisations who ‘get IT’ and those who don’t; between those using digital technology to successfully transform their business and those still stuck on the starting blocks.

A new report from Harvard Business School provides evidence that this digital divide is already having a major impact on subsequent financial performance.

Based on detailed research covering 344 large US based enterprises, the Harvard study concludes that ‘digital leaders’ (enterprises who are transforming digitally) outperform ‘digital laggards’ across a range of financial measures.

Organisations that sit in the top quartile of Harvard’s Digital Transformation Index achieve significantly better gross margins, earnings and net income than organisations in the bottom digital quartile. A similar disparity is evident across other financial and operating indicators 

A more detailed summary of the report can be found on the Bridgeall blog here.

As always, comment and feedback are very welcome.

Jim H

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According to Didier Bonnet, one of the main authors of the highly acclaimed 'Leading Digital' book published two years ago, most large companies are struggling to successfully implement digital transformation with the majority of boards having a long way to go before they are mastering the digital challenge .

In a recent interview, Bonnet made the following observations covering the two year period since publication of the book:

  • CEOs and their teams are now much more aware of the impact of digital technology on their businesses. Many are investing heavily in digital capabilities, hiring new digital talent, such as Chief Digital Officers, to lead digital transformation.
  • While CDOs can be a useful catalyst and accelerator of digital transformation, they are not a sure recipe for success. It is critical to have a strong transformational leader at the top of the organisation to drive digital change.
  • Board evolution for the digital era has been very slow. Almost 80 per cent of company directors state that they are not satisfied that their boards have the sufficient digital proficiency to anticipate the competitive technological threats and opportunities for their firms. Less than 20 per cent of Fortune 500 companies feel fully equipped to deal with the technological challenge. Boards require 'transformational digital talent' - people who fully understand the power of new technologies but also the complexity of using these technologies for business impact in large complex organisations.
  • The challenge for many large firms is not so much where to put the investment (The What) but more on how they adapt their organisations to gain competitive positions (The How). 
  • Asked what had surprised him most over the last two years since publication of the book, Bonnet answered the lack of urgency around investing in digital skills. A 2013 study on ‘The Digital Talent Gap’ showed that over 90 per cent of companies lacked major digital skills to successfully execute their digital strategies. It is doubtful if this figure has moved by more than a few percentage points in the last two years. Everyone is aware of the problem, but very few are tackling it in any meaningful way.

“I firmly believe that, with the increasing digital divide happening within firms, the threat of technological unemployment becoming more and more visible and the competitive pressures to accelerate digital transformation, this is an under-resourced area and it’s moving too slowly.”

The full interview can be accessed here.

As always, comment and feedback are very welcome.

Jim H

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In our last post (Which Countries are Leading Digital), we highlighted evidence from several studies showing that the UK was falling behind many of our international competitors in a number of key measures of digital readiness.

One of these studies was the 2016 Digital Economy and Society Index (DESI) published by the EU. While the UK remained above the EU average in key measures such as connectivity, digital skills and the integration of digital technology, we were growing at a slower rate than the average. The Nordic countries of Denmark, Sweden and Finland, together with the Netherlands were leading the way, while Estonia, Germany, the Netherlands, Malta, Austria and Portugal were the fastest growing.

DESI 2017, published last week, confirms this deteriorating position.

While the UK continued to improve its digital performance across most key indicators, its relative position has declined from an overall ranking of 6th position in 2016 to 7th position currently.

The decline was accounted for by two main indicators – ‘Integration of Digital Technology’, a drop in the UK’s ranking from 14th to 15th position; and ‘Digital Public Services', where the UK experienced a substantial decline from 15th to 18th position.

Contrary to much public sector spin, the UK is not a world leading digital nation. We are very much positioned in the ‘Lagging Ahead’ category – a group of countries with good digital performance but whose current rate of development is now slow. As such, we are lagging in comparison to the progress of the EU as a whole.

Denmark, Finland, Sweden and the Netherlands have the most advanced digital economies in the EU followed by Luxembourg, Belgium, the UK and Ireland. Romania, Bulgaria, Greece and Italy have the lowest scores on the DESI.

As we become preoccupied with BITs (Brexit, Immigration and Trump), rather than BYTES, i would fully expect a further decline in our DESI ranking in 2018.

As always, comment and feedback are very welcome.

Jim H

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