Digital transformation is a nearly universal imperative for enterprises today as they seek to apply new technology to processes organization-wide, affecting how they enable employees, enable customers, react to disruptive market forces and introduce disruptive innovations to the market themselves. Our surveys routinely find the state of an organization's digital transformation efforts to be a defining trait, outlining the shape and character of its engagement with technology. The impact of the COVID-19 pandemic, the definition of a disruptive market force, is similarly colored by an organization's digital transformation status, further illustrating the effectiveness of transformation as an effective lens through which to view an organization.
The 451 Take
Digital transformation remains important, as a principle and as an IT initiative, to a majority of the businesses surveyed by 451 Research. It encompasses a variety of steps, new technologies, cultural shifts and other changes, and promises a range of potential business outcomes. Organizations at the early stages may have only a partial understanding of the extent to which large-scale transformation efforts can influence the character and shape of their relationship with technology. The impact of transformation is broad, affecting how businesses serve customers and enable employees, employ and develop technology, respond to disruptive market forces and create disruption of their own. Businesses succeeding in transformation frequently have different perspectives on technology adoption, business objectives and other traits compared with those in earlier stages.
451 Research's Voice of the Enterprise surveys regularly include questions on digital transformation and treat the state of an organization's transformation efforts as a means of meaningful segmentation. Responses specifically surrounding COVID-19 are an effective illustration of some of the advantages that might be held by organizations actively and effectively executing on strategies for digital transformation.
Digital transformation is a universal imperative
In most of our Voice of the Enterprise studies, we ask respondents about the state of their digital transformation and where they are with respect to that journey. We use that information to identify digital transformation 'leaders,' which are organizations actively executing on a strategy for digital transformation. This often leads to insights gained by comparing the preferences and choices of leaders to those of 'laggards' via the answers to other questions presented on a given survey.
In our Voice of the Enterprise: Digital Pulse, Coronavirus Flash Survey, October 2020, nearly half (48%) of respondents identified themselves as being at the execution phase of digital transformation (see figure 1), putting them in the leaders category. This was compared with 15% at the evaluation and development, or 'learners,' stage, and 37% without a strategy, identified as the laggards category.
Figure 1: State of Digital Transformation Effort
While only half were at the execution phase, 84% were at least considering the development of a strategy, highlighting the importance of digital transformation as an imperative.
Leaders, laggards were affected similarly, responded differently
The effects of the pandemic felt by businesses and the role of those effects as drivers of organizational change did not vary significantly with the organization's status as a digital transformation leader or laggard. However, leaders expressed important differences in their ability to respond with agility to the demands of the pandemic.
In the first two installments of our Coronavirus Flash Survey, we tracked a list of impacts, asking whether businesses were experiencing, had experienced or were expecting to experience those. The combined 'total impact' effect of these (see figure 2) saw reduced access to clients and prospects (77%), increased strain on IT resources (68%) and loss or reduction of customer demand (64%) cited by the largest portions of respondents.
Figure 2: COVID-19 Impacts and Drivers of Change
In our October survey, we also asked which of these effects were serving as either moderate or significant drivers of change to organizations' operations due to the pandemic (see figure 2). The order of popularity here matched almost exactly the extent to which organizations were feeling the effects, with the most commonly cited factors being reduced access to clients or prospects (51%), increased strain on IT resources (50%) and reduced customer demand (45%).
In general, response to these questions about the effects of the pandemic were one of a few areas in which an organization's position relative to digital transformation had a minimal impact on its response. Organizations are mostly experiencing the same effects. However, they did express differences in how able they felt to respond.
Asked whether they agreed with the premise 'technology investments made prior to the pandemic equipped us to be more agile in our response to the requirements imposed by COVID-19' (see figure 3), leaders were far more likely (93%) to agree than laggards (65%), suggesting that digital transformation efforts had directly affected organizations' ability to respond with agility to disruptive events such as the pandemic.
Figure 3: Leaders Felt More Equipped to Be Agile in Response
The effects of feeling more 'agile' in the face of a pandemic are likely to vary between organizations. Agility could lead to greater ease of implementing new practices, shifting technology platforms, adopting new modes of delivering services or introducing new types of services altogether.
There are multiple examples from the survey of areas in which differences in organizations' responses, particularly the comparison between digital leaders and laggards, can be connected logically to this greater sense of business agility.
Permanent change brought about by COVID-19
Throughout our survey work on COVID-19, businesses have reported reacting to the pandemic with new policies, including expanded work-from-home strategies, new approaches to meetings and restrictions on travel. Some of these policies have been identified as likely to stay in place long-term or permanently.
In our October survey, we asked more pointedly where businesses felt they had changed permanently because of the pandemic. Response from digital leaders here was notably different from the response offered by laggards (see figure 4).
The most common permanent change cited was a significant increase in remote working, cited by 80% of digital leaders and just 38% of laggards. Leaders were also significantly more likely to cite reduction in office footprint (39% to 18%), increased reliance on cloud-based services (36% to 11%) and increased automation of manual processes (29% to 10%). More than 90% of digital leaders cited at least one permanent change, compared with just over 60% of laggards.
Figure 4: Leaders More Likely to Make Permanent Changes
Although the survey directly measured cause and effect in this case, the ability to quickly and definitively implement permanent changes to how an organization operates (for example, embracing working from home or implementing widespread automation) can certainly be understood as reflections of a greater sense of agility brought about by having already made key investments in new technology and shifts away from older ways of operating.
Leaders able to look past the immediate requirements of the pandemic
Survey results also suggest the effects of transformation-driven agility may have enabled organizations to look beyond the immediate requirements of the pandemic as they evolved their business and strategic objectives in non-technology directions during 2020.
The survey asked respondents which budgetary or strategic concerns had become greater priorities compared with a year ago. While cost, revenue and employee productivity topped this list overall, several priorities cited by digital leaders in greater proportion than laggards begin to illustrate the opportunities for companies that consider themselves able to respond with agility (see figure 5). In particular, digital leaders were far more likely than laggards to cite social responsibility (30% to 13%) and environmental sustainability (17% to 6%) as having become greater priorities for their organizations in the past year.
Figure 5: Digital Leaders Favor Non-Technology Priorities
This is another instance where the survey did not explicitly establish a cause-and-effect relationship between active digital transformation efforts and an increased focus on social responsibility. However, it is a fairly simple matter of extrapolation to suggest that a segment of businesses experiencing greater agility in the face of the pandemic were able to look beyond the immediate technical and operational demands of the circumstances on their organizations, allowing them to advance their positions on social and environmental responsibility.
Digital transformation continues to be an imperative for a large majority of the organizations we survey, potentially delivering a wide array of organizational outcomes. The disruptive impact of the pandemic offers a unique illustration of one of those intended outcomes, business agility, in practical terms.
You can download the full Flash Survey report here.