Harvard Business School (HBS) has published research into why some companies are struggling to reap the benefits of investing in digital transformation, while other companies are enjoying huge gains. So what do the latter do differently?
HBS looked at 150 companies in the fields of manufacturing, healthcare, consumer products, financial services, aviation and pharmaceutical/biotechnology, including a representative sample of the largest companies in each sector. It found that some had failed to make any significant improvements, while others had made dramatic progress.
The research revealed that successful digital transformation requires managers and front-line employees to work closely together in order to examine how every aspect of the business should operate, and that in order to achieve large-scale digital transformation, companies must create synergies in three key areas:
- Digital skills for all
For any transition to succeed, companies must develop the digital skills of employees who work outside of traditional technology roles. Organizations must also invest in developing a culture that encourages extensive and frequent experimentation. A company must ensure that any technology implemented is easy to use and accessible to non-technical employees who participate in innovation projects.
- Architecture that enables people and technology to work together
Investment in organizational and technical architecture is necessary to ensure skill resources and technology work together to drive innovation. It requires an architecture that supports the sharing, integration and normalization of data over traditionally isolated silos. Many large companies are making progress in each of these areas. But even leading companies tend to underestimate the importance of encouraging employees to personally commit to transformation in their roles and work rather than have central technology groups and consultants driving digital transformations.
- Technical intensity produces superior performances
The research addressed how capacity, technology and architecture work together to build something called ‘technical intensity’, which refers to the extent to which employees use technology to drive digital innovation and achieve business results. The report found that companies that made shrewd investments in technology and provided tools to a broad group of computer and technology-savvy employees achieved a higher level of technical intensity and superior performance. Conversely, companies that failed to develop the technical and data-related capabilities of their employees and offered limited access to technology were left standing still.
Simply put, digital transformation pays off. Harvard studied 150 companies in a range of industries and found that revenue growth and compound annual growth rates among the leaders in technical intensity were more than twice as high as those that lagged behind. Those companies skilled at digital transformation increased their income more than twice as fast as those who lacked the same ability.
The analysis confirmed that merely investing in technology does not necessarily result in greater growth or better performances. Indeed in some cases it can actually harm a business if it accentuates divisions and inconsistencies between colleagues. Instead, it is the architectural, managerial and organizational approach to transformation that best explains the significant and lasting differences between companies that succeed or fail in their digital transformations.