Before long, every business will be a digital business. CEOs must make explicit choices about their strategy to win in a digital economy.
For most organizations, the shock and disruption of the COVID-19 pandemic revealed vulnerabilities that leaders had never identified before. Yet many of these organizations rose to the challenge, with digital capabilities playing a critical role in their resilience. Etsy saw its traffic double as brick-and-mortar stores shuttered and shoppers rushed online; cloud computing helped the online retailer handle the surge. As call centers experienced overwhelming volumes, organizations like Bank of America and Comcast answered customer queries with the help of digital assistants.
COVID-19 was only the latest in a series of episodes that have illustrated just how much uncertainty our society, our leaders, and our organizations must contend with. But while leaders may not be able to control the pace of change dictated by external events, they can develop their organizations’ capacity to navigate that change effectively, to defend against threats and take advantage of new opportunities.
In thriving amid disruption, digital enterprises have an edge over less digitally mature competitors. Our 2021 Deloitte Digital Transformation Executive Survey provides fresh evidence that more digitally mature companies are more resilient and better able to navigate rapid change, and they do significantly better financially as a result. In this year’s survey, higher-maturity companies were about twice as likely as lower-maturity ones to report net profit margins and annual revenue growth significantly above their industry average. Digitally mature organizations are also much more likely to approach digital transformation strategically and place digital transformation at the center of their strategy. In fact, the more digitally mature companies in our study were nearly twice as likely to say that digital transformation was the central pillar of their strategy than companies of lower digital maturity.
For every organization, therefore, a strategic approach to digital transformation is crucial. Digital possibilities must shape strategy. And strategy must shape digital priorities.
The shift from digital as an enabler of strategy to digital as the lynchpin of competitive strategy comes at a time when the mere possession of advanced digital technology is becoming table stakes. Before long, most organizations will have extensive digital capabilities. Nearly two-thirds of commercial respondents to our survey believed that organizations that don’t digitize in the next five years will be “doomed.” Companies will need to be digital to play—but they will need the right strategy to win.
Consider the early days of the commercial internet. In the late 1990s, companies scrambled to launch websites, believing that having an online presence would differentiate them and hoping to achieve a first-mover advantage. But eventually, every company had a website. And companies competed, as they always do, on the strength of their broader strategies. We will see the same as companies embrace the digital pivots that support digital enterprises.4 Cloud computing, automation, and artificial intelligence will not provide meaningful differentiation in themselves. Instead, they will be the new platform on which companies will compete.
We see two major ways that digitally driven strategies offer organizations the opportunity to succeed in the long term. The first is by enabling resilience: the ability to thrive amid uncertainty and change. The second is by driving differentiation: the ability to deliver value that cannot be found anywhere else. We explore each of these aspects below.
Digital helps organizations thrive amid uncertainty and change
To survive and thrive in an uncertain and rapidly changing world, organizations will need to innovate at speed, keep pace with technological and industry change, and cultivate greater resilience. These are among the leading reasons, particularly in the private sector, that leaders are investing in digital transformation.
By Ragu Gurumurthy, Rich Nanda & David Schatsky
Read the full article here.
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