One of the most important things that companies need to understand about digital transformation is that it is not an outcome or an end-goal. Rather, the journey to digital maturity is a complex and enriching process in which the end state continues to evolve in response to changing goals and market influences; in other words, digital transformation is something that companies experience instead of something they achieve.
While every company’s pursuit of digital transformation is different—depending on a wide variety of factors, including size, industry, business model, and appetite for risk—there are a number of distinct, identifiable stages that virtually all companies pass through on the road to digital maturity. Breaking down and analyzing these stages, as a recent whitepaper from technology research firm Altimeter does, can help provide a useful baseline of a digital transformation journey that companies can use to chart their path toward pivotal milestones and to benchmark their progress against others who are further ahead on the transformation trajectory.
As outlined by Altimeter, the six stages of digital transformation maturity are as follows:
Business as usual
As the name suggests, companies in the “business as usual” stage are simply continuing down the business course that was set long before digital disruption entered the scene. The risks and opportunities associated with disruption are largely ignored, and there is little understanding of the potential impact of digital technologies on customers, employees, and markets. A lack of any sense of urgency and a risk-averse attitude combine to create an organizational culture that is extremely resistant to change. New technologies are not completely overlooked, but they are used primarily to optimize operational scale and efficiency rather than as a fundamental driver of true business model shifts. The customer experience, and data associated with it, is siloed and segregated; the company’s overall approach is fragmented rather than cohesive.
Test and learn
This phase involves a growing recognition within the company that “business as usual” is no longer working out as well as it once was; often, catalysts for this phase are employees or managers who see other businesses experimenting with new things and want to implement those lessons within their own companies. At this point, there is a great deal of experimentation with digital, mobile, and social technologies, both internally and externally, but very little of this action is organized or centralized. However, with the support of digital champions—the change agents who helped kick off the digital journey in the first place—companies gradually gain a better understanding of what is possible with digital and where particular investments will pay off. Work and teams are still largely siloed, but they are increasingly effective at experimenting and tracking results.
Systemize and strategize
By this stage, companies are smarter; they have developed an awareness of the bigger picture and are taking steps toward achieving that vision. Formal action is now the name of the game. Strategic investments in people, processes, and technology are made, and working alliances are formed between IT and marketing in order to create an infrastructure that will properly support transformation. Programs connected to digital become more intentional, and greater focus is placed on increasing the digital literacy of key stakeholders. Executive education plays a very important role in this stage, as executives will need to use their developing digital knowledge and expertise to gain buy-in for transformation efforts across and beyond the company. It’s also at this stage that the digital customer experience becomes the primary focal point for companies’ digital transformation goals.
Adapt or die
The quest for digital has built up considerable momentum by this stage, and the entire organization is now recognizing and appreciating it. There is a greater sense of resiliency in companies that have made it to this stage; infrastructure investments have helped support the achievement of both long- and short-term goals and outcomes, and further transformation efforts are highly formalized and more ambitious than ever. Digital, mobile, and social technologies now lead business strategy rather than being viewed as optional add-ons. The digital customer experience continues to be a main driver for change, with special attention now being paid to omni-channel and automated efforts. Customer data now figures more prominently. Consequently, privacy and security are paramount issues.
Transformed and transforming
Digital transformation is now comprehensively woven into the very fabric of the company. The digital transformation efforts of previous stages have led to new business models and operating standards, and the operation of the entire organization is more unified and cohesive. Every business unit and function within the company is managing key aspects of digital transformation, and a variety of new roles, such as chief digital officer or chief experience officer, have emerged to optimize resources and scale transformation.
Innovate, innovate, innovate
The dominant culture with the company is now one of innovation; the focus that was once placed on transformation and technology now shifts towards identifying new and unconventional growth opportunities. The traditional business hierarchy has been replaced by a flatter management and decision-making model that recognizes that ideas and knowledge acquisition are everyone’s job. In addition, the company is well-placed and eager to further innovation within the wider community by hosting hackathons, startup showcases, or conference-style talks and programs. The level of digital maturity present within companies at this stage means that digital lessons learned are applied in real time, and are used to boost internal and external operations and to improve market strategies.