Love it or hate it, digital transformation isn’t going away any time soon. As a buzzword, it’s attained eyeroll status. As a movement in business modernization however, I’ve learned to respect it. For five years, my team at Altimeter has studied “The State of Digital Transformation.” In our latest report, we see this movement only becoming more significant. The “digital” in digital transformation is now less about IT-led efforts to implement the latest and emerging technologies and more about digital become the catalyst and muse for complete business renovation and innovation. In 2019, strategic digital transformation is only becoming more pervasive moving beyond IT to impact competitiveness throughout the organization.

As digital transformation evolves into total business transformation, so does how we define it. Based on extensive interviews and our annual market survey, this year we’ve updated the definition of digital transformation to acknowledge its holistic goals:

“Digital transformation is the evolving pursuit of innovative and agile business and operational models — fueled by evolving technologies, processes, analytics, and talent capabilities — to create new value and experiences for customers, employees, and stakeholders.”

2018-2019 Report Highlights

It’s becoming clearer that digital transformation is maturing into an enterprise-wide movement. Among the more advanced organizations, it is modernizing how companies work and compete and helping them effectively adapt and grow in an evolving digital economy.

What’s also evident is that there is still much work to do as companies are, by and large, prioritizing technology over grasping the disruptive trends that are influencing markets and, more specifically, customer and employee behaviors and expectations.

A successful digital transformation is an enterprise-wide effort that is best served by a leader with broad organizational purview. For the second year in a row, CIOs are reported as most often owning or sponsoring digital transformation initiatives (28 percent), with CEOs increasingly playing a leadership role (23 percent).

Market pressures are the leading drivers of digital transformation as most efforts are spurred by growth opportunities (51 percent) and increased competitive pressure (41 percent). With high-profile data breach scandals making daily headlines, new regulatory standards like GDPR are also providing impetus for organizations to transform (38 percent).

While there is a growing acknowledgment of the importance of human factors in digital transformation – like employee experience and organizational culture – most transformation efforts continue to focus on modernizing customer touchpoints (54 percent) and enabling infrastructure (45 percent). But many organizations are not doing their due diligence when it comes to understanding their customers, with 41 percent of companies making investments in digital transformation without the guidance of thorough customer research.

Organizational buy-in remains a top challenge for those leading digital transformation. The companies we studied report digital transformation is still often perceived as a cost center (28 percent), and data to prove ROI is hard to come by (29 percent). Cultural issues also pose notable difficulty, with entrenched viewpoints, resistance to change (26 percent), and legal and compliance concerns (26 percent) stymieing progress.

Innovation is staking its claim within the organization. Nearly half of respondents report that they are building a culture of innovation, with in-house innovation teams becoming the norm.

Seven Priorities To Accelerate Digital Transformation Maturity and Success

This year, “The State of Digital Transformation” highlights the importance of enterprise-wide, cross-functional collaboration to modernize businesses. In our research, we found seven common imperatives among the most progressive companies that make digital transformation buzz worthy. More so, these initiatives are guiding technology investments with purpose and unifying organizations around meaningful intent and outcomes.

1) Audit the State of Digital Transformation Across “The Six Stages”

Most companies think they’re further along in their digital transformation journey than they really are. In order to offer a benchmark tool that companies can use to compare their internal perception of where they are against those of their peers, we’ve analyzed years of digital transformation progress among companies and documented key milestones in the advancement of digital transformation. Undergoing an audit — not just once, but at strategic intervals — will allow you to track your organization’s progress and align your roadmap with those of best-in-class organizations.

2) Study the Digital Customer Journey and Organize Efforts Around Insights and Opportunities

Many organizations are prioritizing CX initiatives without studying digital (and more specifically, mobile) customer experiences routinely. Understanding how customers’ intents, behaviors, and preferences are evolving gives purpose to CX strategies. These insights also inform cross-functional digital transformation initiatives that directly touch and affect the customer. For CX to be its most effective at unifying any enterprise-wide digital effort, gathering these customer insights should be a priority of a cross-functional group. Communicating these insights to the digital transformation steering committee helps to ensure consistency, keep the C-Suite informed, and ultimately earn top-down support.

3) Study the Employee Journey to Improve Employee Experience (EX)

The old adage of “happy employees make happy customers” applies to digital transformation, too. In our research, we’ve also learned that employee engagement means more than just “happy employees”. Helping employees develop critical digital literacy — and training, retraining, and engaging them around a digital transformation vision — empowers them and turns them into capable allies in your transformation and innovation efforts. To understand the state of your employees’ competence, motivation and overall engagement, you must study the employee experience and journey continuously. As with CX, EX too will benefit from connecting insights to initiatives.

4) Make Data the Center of Decision-Making

It’s no secret that today, data is fragmented, incomplete, and siloed. Leading organizations are building centralized data infrastructures to better inform and support cross-functional efforts. Doing so promotes collaboration and integration, unifying digital transformation around data-supported, meaningful efforts. Advanced, agile organizations are also investing in data science and expertise, and in AI and machine learning, to support real-time and even predictive data analytics. These investments create incredible competitive advantages by providing advanced CX, EX, and operational insights that strategically inform digital transformation roadmaps and innovation efforts.

5) Align Digital Transformation Investments with Business Objectives

This year, the rising role of CEOs overseeing digital transformation is encouraging. At the same time, many digital transformation and innovation efforts are still often viewed as cost centers. The need to substantiate investments is more important than ever. To shift the perception of digital transformation from cost to investment strategy, you need ROI metrics. Successful digital change agents4 and steering committees make the case for their initiatives not by emphasizing the need of a company to simply get on a technology trend bandwagon, but by tying transformation efforts to expected business outcomes. To do that, they’re prioritizing metrics that link digital transformation and innovation to business objectives, ROI, and growth. This helps them make the case for funding broader and bolder investments.

6) Consider Carefully How Technology Trends Factor into Digital Transformation Roadmaps

The war on who owns digital transformation is coming to an end. Now, CIOs and specialized IT organizations are forming business partnerships with key strategic groups within the enterprise to explore how technology can help meet business goals. Digital transformers are tracking emerging technology trends and assessing where those technologies can have the greatest impact and ROI. From its seat on the steering committee, IT can help connect emerging technology trends to overall enterprise and corporate innovation objectives.

7) Prioritize a Culture of Transformation and Innovation

When we first researched digital transformation in 2014, we found that the companies that were furthest along the six stages of digital transformation were those that emphasized the human-side of digital and change rather than technology-first approaches. We also found that culture was consistently cited among the organizations we studied as the leading challenge to digital transformation and innovation. This year, it’s evident that progressive companies are prioritizing investments in organizational culture to be more iterative, adaptive, and innovative. Follow their lead and focus on creating an organizational culture of innovation, and introduce EX programs that empower your employees, that modernize employee engagement, and cultivate a more digitally capable workforce.