Forrester’s Laura Koetzle and Nigel Fenwick discuss how the pandemic has prompted organisations to double down on digital transformation.
Forrester’s latest research on digital business maturity shows that business leaders now consider accelerating the shift to digital business to be the most critical priority in 2021.
It’s easy to see that Covid-19 has widened the digital business gap, separating digitally advanced firms that could adapt to the pandemic quickly from those that had to play catch-up.
Differences between how advanced businesses operate compared with their less advanced counterparts are less obvious. It’s clear from our research that advanced firms are more future fit, which means they use their digital capabilities to help their businesses be adaptable, creative and resilient.
Our maturity research divides companies into three categories of digital business maturity: beginner, intermediate and advanced. Historically, advanced firms make up less than 20pc of all organisations and the same holds true in our latest data. This means that, despite an increased focus on digital transformation in the past 12 months, beginner and intermediate firms have been unable to gain ground on digitally advanced firms.
Advanced firms double down on digital business
Forrester’s data shows that advanced firms are much more likely to be increasing their investments in digital transformation than beginner firms are. These investments help advanced firms build and maintain a lead in the technology race that is digital business.
Our data also shows that 37pc of advanced firms have relied more on services partners during the pandemic compared with just 19pc of beginner firms. Thus, advanced firms were more likely to have taken advantage of service partners’ services to help employees adapt to remote work and to accelerate adoption of digitally enabled distribution models.
This type of collaboration with services partners is a key driver of a future-fit technology strategy because it helps firms adapt, stay creative and be resilient in challenging conditions.
Revenue growth versus cost reduction
We found that while beginners are likely to use digital transformation to reduce costs, advanced firms focus their digital efforts on driving revenue growth. This is an important shift, as leading companies focus more on effectiveness and outcomes instead of efficiency and outputs.
We also found that advanced firms are pouring more resources into technology capabilities that promote agility and innovation than beginners are. This reflects the increasing importance of fixing underlying operational systems to get to the next level of digital business transformation.
How to survive and thrive in the digital economy
Firms find it hardest to break free from legacy (non-digital) strategic mindsets when their businesses are successful – after all, why change what appears to be working?
Digital leaders help to shift the leadership team to think about the business opportunities from a technology perspective and explore how they can use technology to create new sources of customer value.
As businesses learn to use software and technology as a competitive differentiator, new challenges will surface. There will be questions to answer and decisions to make, such as where to fit digital products into the organisational structure.
Thus, the survival of each organisation will increasingly depend upon how well it learns to create value for customers through software. This is what it means to become a truly digital business.
Laura Koetzle is VP and group director of European research at Forrester. Nigel Fenwick is VP and principal analyst of digital transformation and business strategy at Forrester.