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Digital transformation: mind the gap

Technology

Digital transformation: how to bridge the gap between knowledge and action

Published 29 April 2021 in Technology • 4 min read

There is no hiding from digital disruption, and the pandemic definitely accelerated the process for many organizations. But while companies know they need to transform, they are really struggling with how to do it. This gap between knowing and doing started before the pandemic but it has been amplified with the rapid transformation brought on by COVID. 

IMD’s 2021 Digital Vortex Report reveals that companies are looking for answers and not getting them, and the problem is actually getting worse. Even with widespread digital adoption, organizations are not learning as you would expect. Instead, more and more say they are responding to digital transformation and are investing heavily in digital tools and technologies, but they aren’t getting results. 

Although 90% of executives say they are concerned about digital disruption, 39% also stated that their organizations were not responding appropriately. Furthermore, the percentage of respondents who reported having a fragmented digital strategy actually rose from 53% in 2019 to 61% in 2021. At the highest levels, companies across all sectors are formulating strategies to adapt and utilize the advantages of digital tools, however it is evident that things quickly break down after that. Effectively executing a cohesive digital strategy appears to be a pervasive problem facing organizations now, but there are things they can do to help. 

Stop and do a critical analysis first

One of the observations that we have made at the Global Center for Digital Transformation is some companies jump right to execution mode without first examining why they need to undertake transformation and what their goals are for digital technology. It is important before enlisting any new strategy, whether it is digital-centered or not,  to first analyze what you have in terms of resources, talent and what you aim to achieve when adopting the new plan. Instead of just asking how to do it, remember to examine why you are doing it. 

Make sure your goals are realistic

We have all heard stories of the unicorns that have had spectacular results when they moved to a digital format, but it is important to understand that digital tools are not magic wands. Spectacular results are often the result of a combination of careful planning and strategy, strong execution, learning from failure and of course a little bit of luck. You can’t expect that simply investing in digital will miraculously turn your company around. There are digital tools that can enhance performance, but they need to work together with the rest of your organization. 

Our research has indicated 87% of digital transformation programs fail to meet objectives. There are varied reasons behind this, but it is critical before getting started to ensure that objectives are precise, measurable, and that technology isn’t being substituted for organizational changes that need to be made. Everyone in the company must be included within the plan so there aren’t several different initiatives working separately. Companies often start in a haphazard manner and then have to go back and regroup. This can be avoided with better planning and communication early on in the process. 

Close the gaps in communication

In addition to the knowing-doing gap, there is a perception gap in terms of how members of an organization perceive their company’s digital strategy. CxO level executives were much more likely to report that they were responding well to digital disruption than lower-level executives with that gap getting wider between 2019 and 2021. This may be a key indicator that the higher levels of the company are not listening to those on the “shop floor”. 

Leaders need to have consistent communication across all levels of the organization. Often as the CEO talks to CxO level executives and they talk to leaders beneath them and so on, information starts to disappear. This could explain why the Digital Vortex Report has indicated that the larger the company, the more fragmented the digital strategy appears to become. 

Organizations need to ensure that there is consistent communication between different layers of management. It is important to maintain clear communications both up and down the levels of management. Always listen to those on the first level, because these workers often have the best information about the customers and how changes are going to ultimately affect the bottom line. Information must be captured from these first-tier employees and conveyed up the chain of command as well. 

Introduce an experimental culture

Many organizations tend to take a “wait and see” approach to transformation. They worry too much about failure. While organizational change in general is hard, digital transformation is proving for many to be even harder. It is important to expect mistakes. Organizations have to adapt a culture where mistakes are tolerated as long as you can learn something from them. When you are doing something, whether it is wrong or right, you learn something simply by doing. Sometimes the fastest way to close the gap is by simply trying. There needs to be a risk-taking approach to digital transformation.  

Chances are your organization is already in the process of its digital transformation. If you are in the large group of companies struggling with a fragmented process, step back and see what you can learn from what you have tried already. Then regroup and make sure there are clear objectives, goals, and benchmarks in place and that these are clearly communicated across all levels of the organization. Hopefully, the knowing-doing gap will then look much smaller as you step across it. 

Authors

Michael Wade - IMD Professor

Michael R. Wade

Professor of Innovation and Strategy at IMD

Michael holds the Cisco Chair in Digital Business Transformation, he is the Director of the Global Center for Digital Business Transformation. and he is Co-Director of the Leading Digital Business Transformation program. His areas of expertise relate to strategy, innovation, and digital transformation. He obtained Honours BA, MBA and PhD degrees from the Richard Ivey School of Business, University of Western Ontario, Canada. Previously, he was the Academic Director of the Kellogg-Schulich Executive MBA Program. Michael has been nominated for teaching awards in the MBA, International MBA, and Executive MBA programs.

Jialu Shan

Research fellow at the Global Center for digital business transformation

Jialu Shan is a research fellow at the Global Center for digital business transformation at IMD Business School. Her research areas include digital business transformation, business model innovation and new practices, and corporate governance practices. She is particularly interested in Asian market. Jialu obtained her PhD degree in Economics (management) from the Faculty of Business and Economics at the University of Lausanne (HEC, Lausanne) in 2012. Before joining IMD she worked as a lecturer at the International Hotel School of César Ritz Colleges in Brig, Switzerland.

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