The context for digital transformation

The context for
digital transformation
Neil Perkin, Consultant

2As leaders in digital insight, Econsultancy has produced a series of research reports relating to the topic of digital transformation. This presentation is an overview of the insights gained through the research and the issues that senior digital leaders told us were most important to them.

The context for
3This research looks at the average company life span of an S&P 500 company, which is changing drammatically. Thomson Reuters reported only around 63% of the S&P 500 companies a decade ago are still in the index today.
Professor Richard Foster’s prediction is by 2027 three quarters of the companies in that index are not going to be around. This says a lot to the challenge that many organisations face in the rapidly shifting environment and markets in which we are in.

The context for
4Digital transformation can be a huge undertaking and there is often a risk of your digital transformation programme becoming directionless. This is a key piece of long term research from Cap Gemini, that surveyed 400 companies. Digital intensity is a company’s propensity to invest in
digital technologies and transformation management intensity are all the things that surround the technology including behaviours, skills, culture and leadership. The study found that the ‘Digirati’ (top right), the companies that invested in technology, behaviours, skills and leadership were on average
26% more profitable. ‘Fashionistas’(top left) suggests that the companies that invested heavily in technology but not in the leadership and culture had actually damaged their businesses and were on average 11% less profitable. This speaks for the need of a very broad based transformation.

The context for
61
Barriers to agility and progress
5There are plenty of potential blockers in the process of digital transformation. In the research Econsultancy has carried out, ‘Legacy systems and processes’ consistently came up as the number 1
barrier to change. Then followed by ‘Digital skills’ which has become less over time and ‘Difficulty in joining up data’ across the business. Another barrier was a focus on ‘short term revenue targets’
meaning that long term change may be difficult to achieve when resources are being continually pulled back into short term revenue generation.

The context for
Barriers to agility and progress
6
Our Securing Board buy-in report suggests, as far as the board and senior managers are concerned, there is still a way to go to get a good grasp of the potential of the digital for the organisation.
Only 31% in the survey agreed that their board/ senior managers had a strong grasp of the potential of digital channels.

Digital transformation
structures
7Econsultancy econsultancy.com/transformation

Digital transformation structures
The evolution of team/organisational structures
Across both instances of our research into organisational structures, this evolution model still holds true. It begins with companies organically recruiting digital expertise in a disbursed way, often in response to local needs. Generally dictated by
a step change in the strategic importance of digital in the business, companies pull that digital expertise together into a centre of excellence. As companies mature they still need to have all the benefits of a centre of excellence structure but
they also start distributing the expertise, knowledge and capability wider through the organisation, forming a hub-and-spoke model. You may have multiple hub-and-spokes within regions or by discreet audiences or markets within big global
organisations. None of the businesses we have spoken to have reached the fully integrated stage, but most mature businesses have multiple hub-and-spoke models.

Lack of learning outside of Centre of
Excellence
Lack of focus on smaller business units
03
Through our research and consultancy we have identified a number of advantages and disadvantages with the centre of excellence model. The biggest advantages with a centre of excellence model are shared learning, the ability to share best practice and the consistency and control that that
brings, which can be very meaningful in terms of standardizing processes and consistency in measuring success. The downsides of this model are that there is a lack of focus on the smaller business units who are struggling to get to the top of a companywide priority list and too much focus on
learning being held within the centre of excellence, it becomes a hindrance to integration.
The continuing importance of centres of excellence

Hub as strategy, spoke as execution
The desire for greater integration and
potential devolvement of expertise
Looking at the more mature hub-and-spoke model, many respondents and clients are using the ‘hub’ to house strategy, best practice, capability and the drive to push the business forward through efficiency. The spokes then focus more on the actual marketing and sales execution.

There are some interesting
precedents that have been
set amongst digitally native
companies. There are
companies that have grown
up digital and take a
different view on how they
structure their organisation.
An example is ‘Two Pizza
teams’ at Amazon which are
teams of 8 -10 people that
are focused on a particular
task and work to a single
KPI. This is a very innovative
way of structuring and
scaling structural agility.

skills

skills
What does transformation mean in terms of skills? This IBM CMO study suggests that marketers are expecting their roles to change rapidly, to re-invent what marketing is all about. 64% agree that their role is going to change in the next 12 months and 81% agree their role is going to change over
the next 3 years. 40% of marketers want to re-invent their roles and only 14% of them know how to do this. So, there is some confusion and lack of direction about what re-invention really means in terms of skills and where marketing is going.

The need for marketers to shift and manage a broad range of technology is becoming much more prevalent. This graph taken from Scott Brinker, shows 3 different types of technology marketers
need to become far more adept at handling: internal technology, product technology and external technology. This is a key shift in the skills required of the modern digital marketer.
Digital transformation skills
The rise of the marketing technologist

The rise in soft skills
Our Skills of the Modern Marketer report found that soft skills, such as the ability to embrace change, spot opportunities and adapt to strategies quickly and passionate and hungry to learn are very important.

A check-list for soft skills
Through a series of interviews for the Skills of the Modern Marketer report, we determined the top 11 soft skills employers wanted from their digital staff. Many interviewees talked about the value of articulation and presentation – the ability to articulate complex digital projects or ideas
to non-digital people and senior decision makers. People with these attributes are really valuable to businesses because they can marshal people, convince them of an idea and take them with them aligned to that vision so that ultimately change can happen.

Digital tools to enable your people
It’s not just employers who are realising the importance of effective collaboration, there are new technologies coming in to support the shift to a more collaborative work environment. Slack is a collaboration tool you can use to get away from email to message each
other in very agile ways. Facebook has also launched their new product for collaboration at work. Notice the big players but also the new and well talked about players coming in to this space potentially powering teams to work together in different ways.

‘T-shaped people’ continues to be of real importancein marketingand across organisations. Within digital marketingteams this becomes really importantas you are able to position the importanceof what you’re doing verticallywithin the objectives and goals of your team but you can also understand the impact of what you’re doing on the wider business.
Eric Schmidt’s concept of a smart creative, in his latest book ‘How Google works’ is very similar idea to T-shaped people. Smart creatives have 3 core elements; they are adept at technology, good at strategy and creativity. Smart creatives or t-shaped people are enablers of transformation.

Recruitment challenges
The chart on the left shows the skills areas which are growing in significance for marketers. The chart on the right shows the areas of digital which are becoming increasingly difficult to recruit for. This suggests that there’s a looming ticking time bomb in recruiting people in areas such as analytics/data and social.

board buy-in

Board buy-in
Levels of buy-in
Through our research on securing board buy-in for digital transformation programmes we developed this maturity model for board buy-in.

Insourcing, outsourcing

insourcing, outsourcing
A trend towards insourcing?
Our research indicates that companies want to bring more digital resourcing in-house over the next year.
Which areas of requirement for digital resourcing / upskilling do
you anticipate will grow most over the coming year?

insourcing, outsourcing
A trend towards insourcing?
Further research shows there are several areas where expertise is more often brought in-house, noticeably in content marketing. As companies become more digitally mature, the way they insource and outsource changes and becomes more sophisticated. Some elements of social media activity,
content marketing or specialist elements are still outsourced. For data, there are specific jobs that an external supplier is doing but they can be imported in to the business whilst other parts of analytics and data are being kept close within the organisations to aid agility.

agility

Digital transformation agility
Digital maturity model
This is Econsultancy’s digital maturity model, which has three stages of maturity: emergent, managed, optimised. Digital maturity is centred on four different aspects: strategy/KPIs, data and technology, people teams and culture and processes and tools. It’s important to have good technology
but having the right people in place is equally important, as these two worktogether to create greater capability, more fluid knowledge sharing and a collaborative culture.

Top down, bottom up approach to
achieve maturity
It’s natural to look at your progression along this maturitychart as left to right, but you can also look at this from a top down, bottom up approach. Top down is looking at the need for senior management to have a good, strong, digitalvision that binds, supports and communicates the vision in powerful ways. The behaviour of senior management needs to echo what they’re talking about so that people prioritise properly and
know that they are in line with the broader strategic vision. Bottom up is making sure everyone in the organisation is helping drive the change, which is reflected in what’s coming down from the top, the way the team is working and how they feel when they come into the office.

Defining digital culture
EcCulture has significant impact on how agile a company can be and also, ultimately on how they are able to digitally transform. This slide shows what people describe as digital culture. Empowered frontline staff are able to make a difference and change. To develop learning culture you need to
become continuously better at what you do using soft skills (passion, learning and curiosity).
onsultancy

GOV.UK case study
The UK government is in the process of digital transforming some of their services. The difference in their old process and new process is very radical for a government organisation but highlights how important putting your users’ needs at the heart of your transformation is.
Gov.uk/digitaltransformation has open information about the approaches, processes and strategy they’ve deployed in the service of agility.

Spin-offs Labs Organisational change
Approaches to agile
The transition from old processes to new processes to achieve innovationis difficult.There are many approaches to agile innovation. Large organisations are developing spin-offs so they can bring innovation to the entire marketingwithout disrupting the organisation from within. The mother organisation is able to learn from what the spin-off is doing. Labs are a more traditionalskunkworks approach. WalmartLabs was set up out of an
acquisition of a start-up retail technology company, but rather than subsume them into Walmart they are kept separate to protect the innovation culture. Organisationalchange requires significantinvestment over time and a buy-in from everyone in the business.

70-20-10 approach to innovation –
The Intuit model
The structural models for innovation and agility that we just discussed are well known, but in practice how do you embed innovation. This is a model taken from Intuit, the financial software organisation who like to call themselves a 30 year old start-up. 70% of their budget goes towards their core products,
while 10% of their budget goes towards new initiatives. This is a way of imbedding innovation and agility into the organisation continuously rather than episodically.

The key elements of change
Throughout this presentation we’ve talked about different elements that support the digital transformation process. This shows what can happen when one element is missing from the process.

Building blocks for leading change
1.
2.
3.
4.
5.
6.
8.
CREATE URGENCY
FORM A POWERFUL COALITION
CREATE A VISION FOR CHANGE
COMMUNICATE THE VISION
EMPOWER ACTION
CREATE QUICK WINS
BUILD ON THE CHANGE
One of the questions we receive the most at Econsultancy is ‘Where do I start?!’ There isn’t a one size fits all answer here, but we really like the model that John Kotter has come up with on leading change.
Kotter International, John Kotter

Thank you
34
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Econsultancy econsultancy.com/transformation

The context for digital transformation

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