Has the flurry of pandemic-fuelled IT spending translated into faster, deeper digital transformation (DX)?
Not necessarily, according to new data from Tata. (Yes, I have absolutely been waiting years to write a sentence that kind of, sort of rhymes like that.) After surveying 750 enterprises in 11 countries, Tata concluded that due to COVID-19, “many businesses (have) raced to establish a digital-first operating model.” Despite those efforts, Tata reports that:
- only 10% of the surveyed companies are “digital trailblazers” with “the most advanced digital operating models”
- more than one-third of companies (38%) are still “digital aspirants … at a nascent stage of digitalizing their business (who) have been unable to achieve growth due to lack of digital maturity”
On top of that, Tata reveals that even after making significant investments in technology during the pandemic, “half of the executives in the survey do not have full confidence in their organization’s strategy to deliver a digital-first business.”
One thing’s for sure: the surprising lack of progress on digital transformation can’t be blamed on a lack of IT spending during this pandemic.
Sped-up DX spending
COVID caused enterprises around the world to open their coffers and acquire more technology. Based on global figures and projections from Deloitte:
- 2020: enterprises spent an average of 4.25% of their revenue on technology (up from 3.64% in 2018)
- by 2022: tech spending is expected to rise, yet again, to 5.11% of revenue
Over at McKinsey, researchers suggest increased IT investment during the pandemic has indeed had an impact on the digital transformation front.
“Companies digitized many activities 20 to 25 times faster during COVID-19,” was the headline on a McKinsey study released in October 2020. The report (released about nine months into the pandemic) found that, due to COVID, enterprises around the world:
- accelerated their digitization of customer interactions by an average of three years
- accelerated their adoption of digitized products and services by an average of seven years
Moreover, COVID is fundamentally shifting the way CEOs think about DX. In McKinsey’s 2017 survey, 48 per cent cited cost cutting as their main motivation for pursuing DX. In the October 2020 survey, however, only 10 per cent said saving money was the primary goal of their DX strategy.
Although McKinsey’s study is now almost a year old, the recent Tata survey (released about 18 months into the pandemic) shows companies still aren’t as far along in the DX journey as you might expect after such a big spike in IT spending.
The question is, why?
Just like the Wi-Fi signal in your WFH office (your kitchen, bedroom, rec room, etc.), there are weak spots in many DX strategies.
One glaring weakness identified by Tata is connectivity itself: 45 per cent of the firms it polled said “employee productivity has been adversely affected as a result of unstable or weak connectivity platforms in their business.”
This means almost half of companies can’t deliver on one of the three tenets in Tata’s model of a digital-first organization: a hyperconnected ecosystem.
Tata says this ecosystem entails:
- “connecting people, data and assets anywhere, anytime”
- “mov(ing) away from legacy processes”
- evolving beyond “a patchwork of different digital strategies and processes across their organizations”
According to Tata, a digital-first enterprise also embraces its second tenet: a commitment to a digital-first operating system.
To demonstrate this commitment, Tata says businesses must:
- “go beyond shifting some business processes online”
- create “a coherent digital operating model that, over time, reimagines every core channel, process and service offering to maximize the digital opportunity”
Again, as with connectivity, this step was problematic for the surveyed companies; according to Tata’s findings:
- 44% of organizations have not fully committed to a digital-first operating system
- 91% say they’re not able to provide high-quality digital experiences for their customers, employees and business partners
That brings us to the third tenet of Tata’s digital-first model: security and trust. To be a digital-first organization, Tata says a company must “stay vigilant and invest proactively to safeguard all stakeholders.”
Yet less than half (48 per cent) of the surveyed companies say there has been “sufficient investment in cybersecurity” at their organizations.
So digital-first requires hyperconnectivity beyond video calls. And a digital approach that goes deeper than e-commerce. With trust and security baked into … well, everything.
Even after investing more money in technology over the past year, many organizations are far from attaining that model, as summarized by authors of the Tata study.
“There is a big difference between shifting a few traditional processes online and redesigning the entire operating model to be digital-first,” they wrote. “A lot of organizations start by trying to replicate legacy processes, and it is a piecemeal approach. Many of these companies are still running their core businesses on pre-digital policies and the old ways of working.”
Money can buy you a lot of technology. IT spending on its own, however, can’t buy you digital transformation.