Digital transformation will reach a turning point in 2019, as companies across the globe turn up investments in digital and decide what to do with those investments, according to a recent survey conducted by The Economist Intelligence Unit (EIU).
By large majorities, companies report that digital transformation is required for them to compete and succeed. Of more than 600 senior executives at large global companies who participated in the survey, 83 percent say they expect to increase investment in digital technologies in the next 12 months. Most respondents directly link digital strategy to profits, as 68 percent say their digital strategy has helped them increase profitability over the past 3 years, and 74 percent expect their digital strategy will improve profits during the next 3 years.
While the numbers show that companies recognize the value of digital transformation, many are still in the early stages. Nearly 60 percent of survey respondents say their transformation strategy has been in place for 2 years or less. Just over half of responding companies (52%) have enabled three of 10 key organizational functions.
“We were a bit surprised, given how positive the results were, by how little progress companies have made in digitizing different parts of their organizations, but they seem to want to accomplish a lot in the next few years,” says Gilda Stahl, managing editor of thought leadership at the EIU.
Companies are just starting to make progress because there’s simply a lot to unwind, says Richard Davies, managing director of the Leading Edge Forum, a global research and thought leadership program and cosponsor of the survey with DXC Technology.
“Traditional companies have built up a legacy of systems and operations. You’re having to pull apart what you’ve put together over the past 70 years,” he says. “And the transformation issues you face are not just technology challenges. You have cultural and organizational challenges to overcome. I think we see that reflected in the results.”
But it’s not just about unwinding the old, says Davies. “It’s about building new business platforms at the same time, to take advantage of new technologies such as automation and AI. This is complex and takes time, which is also reflected in the survey.”
More highlights from the survey:
- Digital transformation is a competitive game changer; 75 percent expect digital strategies to make their enterprise more agile, and 76 percent say that a modern digital IT infrastructure better positions their company to produce value for stakeholders.
- Companies will need to address cultural and organizational issues. Seventy-two percent say that culture change is necessary to digitally transform, and almost half (48%) say it is essential to explicitly define digital strategy and explain it clearly to the organization.
- Differences between industries are highlighted by the digital strategies they plan to pursue over the next 3 years. Financial services companies are more likely to stress artificial intelligence/machine learning (57%) and blockchain (51%), while for manufacturing companies, cloud computing (50%) and IoT (48%) are especially important.
One finding from the report should put established companies in developed nations on notice. Stahl says that companies in the developing world, especially in Asia-Pacific, are moving faster with digital transformation in many areas than those in the developed world. “That suggests to us that digital capabilities are a way of leapfrogging past more established competitors,” says Stahl. “Digital transformation could have a strong impact on the competitive balance globally.”
The 37-page report contains detailed analyses of survey results and interviews with leading industry executives. Download “2019: The year of digital decisions.”
For more EIU insights, also be sure to check out The EIU Digital Economy podcast here on THRIVE. Sponsored by DXC, the podcast aims to help business leaders understand how the digital technology affects their companies, their teams and their careers.