The State of Digital Transformation 2019

Methods and approaches to digital transformation are becoming solidified, and a couple of studies^{1 2} released in 2019 highlight the motions that have taken place and show emerging patterns for digital transformation in large organizations. We’ve put together the main takeaways from these overlapping studies, both of which focused on digital transformation and innovation initiatives and processes in larger companies. The general gist is that digital transformation and innovation initiatives are a big priority – but there are still many gaps in the process and hurdles to organization-wide adoption, and in many ways things are very IT-driven. Read on for the details.

Leadership Moving Across the Organization

CIOs are still by and large leading transformation efforts (28%²), but it is increasingly coming from CEOs (23%²), as well as the board of directors (14%²). Another interesting trend we are seeing is a growth in the number of Chief Innovation Officers and Chief Digital Officers who are empowered to drive transformation initiatives throughout the organization.

Additionally, organizations are forming cross-disciplinary formal working groups (51%²), as well as informal ones (47%²). These groups focus on discovering potential initiatives that can drive innovation; increasing efficiencies through cloud, automation and emerging technologies; as well as planning and executing on these directives. Keep in mind, these groups are relatively small today, ranging from 2 to 8 people².

But…Transformation and Innovation Initiatives are Still Mainly IT Driven

While digital transformation is a process that brings IT and design to the fore, it is a process that should involve the entire organization. However, a whopping 62%² of digital transformation and innovation initiatives are still driven by the IT department. This is followed by customer service and support (34%²) and then by operations and innovation, both around 30%.

And, when you look at the makeup of these transformation working groups, IT has the majority of seats at these tables, with 76%² representation, followed by customer service and support (39%²) and marketing (37%²). Marketing had a bigger seat at the table at 51% just a year ago. On the plus side, product groups, sales and human resources have taken a more substantial role, representing between 25% and 32%² of the people in these groups. What this seems to indicate is that IT is still the driving force behind digital transformation, while the rest of the organization is still not fully participating in the process.

Growing Budgets

Most large companies now have budgets that are directly allocated to digital innovation and transformation and vary from $500K to $50M. See the following chart for a breakdown.

Key Drivers

There are a number of reasons why companies are investing in digital transformation initiatives in organizations — growth and new opportunities presented as the largest at 51%², but other key drivers were competitive pressure (41%²) and security and privacy (38%²) likely driven by high profile data breaches and GDPR initiatives.

There are a number of different priorities — long and short term — that include omnichannel customer engagement (top priority), modernizing infrastructure, and better commerce systems.

Success Derived from Innovation

One of the most hopeful takeaways from this data was that 89% of IT decision makers perceived their digital innovation initiatives as having been moderately or very successful¹, by which they mean they have improved the bottom line (financial benefit through revenue or cost reductions) or bettered their standing in the market.

One thing to keep in mind is that a lot of the initiatives, as found in this study, are around privacy and employee experience (EX). One of the things that is most interesting about this high success perception is that it is indicative of a broadly shifting perspective in how “success” is defined for digital innovation initiatives. For example, there may be a feeling that through EX and privacy initiatives they have gotten better recruiting results and better customer satisfaction.

Culture of Innovation

Innovation initiatives continue to be on the rise, with nearly half of respondents saying they were building a culture of innovation using various methods, including the development of innovation teams. The types of innovation initiatives varied:

Source: Altimeter, A Prophet Company¹

Experience Is at the Heart of Transformation

CX, EX and UX were a key part of transformation initiatives, with customer experience topping the list. 42% of IT professionals¹ aimed to invest more in automation and self-help initiatives for end-users and customers to make their experience easier and more seamless. According to one report, the majority — 54%² — of transformation initiatives focused on modernizing customer touchpoints.

And customer experience is turning inward, with 77%¹ of IT decision-makers believing it is “very or extremely important” for corporate IT to provide experiences for their own people that are as good as the experience they are aiming to provide their customers.

The prospect of EX has become another key driver: 84% of IT decision-makers¹ say their organizations have created processes and tools to enable their workforce to be productive from anywhere (i.e. remote work) so that they can attract better talent.

But Oftentimes Without Research…

However, with all the emphasis on experience — whether of end users or employees — 41% of companies² are investing in transformation initiatives without doing any user research. This likely means large dollars are being put at risk on initiatives that are based on assumptions or speculation as to the opportunity, solution and outcome and is most certainly an area for improvement.

Cloud Initiatives are Working

52% of organizations¹ have moved services and processes to the cloud. They often invest in cloud services that provide shortcuts to in-house development solutions.

Identity and access management is a growing segment of cloud migration, with 45% of IT professionals¹ planning to switch over this year.

But Managing Cloud Expenses is Now a Thing

Many companies struggle with knowing what the best cloud service is to perform a specific task (50%¹), have difficulty planning budgets for cloud usage (42%¹), and are confused about having visibility into cloud costs (40%¹) and pricing models (32%¹).

2019 Technologies

When it comes to investing in technologies, there are a few key ones that are being capitalized upon to enable digital innovation and transformation initiatives. They are as follows:

• Cloud: 62%¹
• Intelligent analytics and big data: 50%¹
• Mobile: 44%¹
• IoT: 34%¹
• Collaborative technologies: 33%¹

Success With Caveats

Ultimately, 66% of IT decision-makers¹ believe their organizations have been “very or extremely effective” using technology to improve operations, and have achieved even greater success — 72% — improving customer experience.

That all said, digital transformation is still riddled with blockers:

• Lack of data to prove ROI (29%²)
• Perceived as a cost center (28%²)
• Resistance to change (26%²)
• Legal and compliance (26%²)
• And more…

And many companies need a better handle on user research, innovation strategies and digital transformation execution — and many even admit it. Almost a quarter¹ of IT decision makers admit they need a partner that can help them with their digital innovation and transformation initiatives.

Even with these obstacles, digital transformation and innovation are working their way into enterprises. Enterprises are adapting new technologies, methodologies and patterns to overcome obstacles and make their companies stronger, bring on better people and become more disruptive forces in their industries.

¹ Report from Altimeter, a Prophet Company
² Insight report on Digital innovation