There is a saying that if you fail to plan, you plan to fail. A study by IDC Canada in partnership with SAP Canada conducted during the pandemic discovered that when it comes to performance, nothing could be truer: Companies without a digital strategy are being left behind.
The fifth SAP-IDC Intelligent Enterprise Study reveals that today 95 per cent of Canadian organizations now have or are developing a digital strategy, up from 85 per cent in 2019. But for many, its execution is in its early stages. Only 12 per cent say the strategy is fully integrated into the core business, the same proportion of respondents as in 2019.
When it refers to a digital strategy, the study defines it as “a strategy that enables organizations to transform data into action across all lines of business — driving process automation and innovation, unlocking new areas of growth, and delivering exceptional experiences.” And its execution can be a tall order, especially during a pandemic.
“At the beginning of COVID, we saw a lot of change,” said Sam Masri, chief operating officer at SAP Canada. “Many projects and digital transformation mandates were put on pause for some time, especially around the March/April timeframe. And I think largely it was because of the uncertainty that the pandemic has brought.
“What we witnessed after that is very similar to what the survey indicated, which was very interesting. Around 64 per cent of Canadian enterprises are either keeping or increasing their level of investments in digital. I did not expect to see that.”
To evaluate where businesses are in their journey, IDC developed the Intelligent Enterprise (IE) Overall Progress Scale, which categorized enterprises across four stages based on their strategic focus, technology readiness, and organizational readiness. IE “Observers” and IE “Participants” were on one side of what it calls the Digital Divide, and IE Challengers and IE Leaders on the other.
While the percentage of IE “Leaders” has grown from 12 per cent in 2019 to 17 percent in 2020, so has the number of Observers (from 11 to 14 per cent). Among Observers and Participants, 80 per cent or more are either building their digital strategies or have just begun to execute. Among Challengers, that number tops out at 46 per cent, with Leaders at 18 per cent. Conversely, 82 per cent of Leaders and 55 per cent of Challengers either have the strategy starting to show significant results, or it is fully integrated into the core business, compared to 3 per cent of Observers and 20 per cent of Participants.
The report noted that digital strategy maturity varies by industry, with sectors such as telecom/media, oil & gas, and manufacturing indicating a higher percentage of organizations adopting a digital strategy that is fully integrated to the core business. A combination of globalization, competitive dynamics, and changing customer expectations have driven these sectors to adopt digital more quickly. But COVID-19 gave every industry a nudge. Masri described how two Canadian banks found benefits from digital transformation.
The National Bank, he said, had just installed an advanced procurement and expense management system when the pandemic struck. Thanks to it, it was able to accelerate automation and cross lines of business with processes. The Bank of Montreal’s example was more in the people realm. Its system for understanding customers served it well.
“When COVID hit, as you can imagine, it has never been more important to understand how your employees and how your customers feel, to get that feedback from them on what their new requirements are, whether it’s an employee or a customer,” he said. “But if you’re an employee, also, what’s your engagement level, morale, mental health, etc. And in the case of BMO, because they had invested early on, it was immediately possible for them to exponentially grow their understanding of their customer needs and challenges at once, to the point that their net promoter score increased significantly during COVID.”
Tony Olvet, group vice-president, research for IDC Canada, added that although every organization is at a different stage of digital maturity, he believes that digital transformations have accelerated since the beginning of the pandemic.
“The speed of transformation was really dependent on organizational leadership and the degree to which change was needed to survive (or thrive) due to the impacts of COVID-19 and the volatility of the economy,” he noted. “In this year’s study, we asked: What are the three most important skills that the digital strategy sponsor needs in order to achieve success? The top response was really interesting. It has to do with having the ability to link the use of new technologies to business outcomes. It reminds me that sometimes connecting the dots between cool new technology and what this actually produces for the organization is really important, and perhaps not always the first instinct of tech-savvy business people. The second, third and fourth most important attributes had to do with communication, driving cultural change, and listening to feedback. So while digital transformation is often a topic focused only on technology, the reality is the people side of the strategy is a vital ingredient to success.”
This was reflected in the survey results, where nearly half of Leaders were willing to adjust their workforce to support digital initiatives. Only 7 percent of Observers voiced that sentiment. Interestingly, 76 per cent of Leaders planned to retrain existing staff, while only 42 per cent of Observers would do so. Since they are retraining so many, Leaders hired a few new internal staff but mainly filled the gaps with contractors or outsourcing. Observers tended to hire more new staff.
Another big difference between Leaders and the rest was the existence of a change management strategy. Overall, 41 per cent of respondents said they either did not have a change management strategy or were developing one, and 16 per cent said their change management was integrated into their digital strategy. Among Leaders, 47 per cent said they have change management integrated into their digital strategy.
“It should be 100 per cent,” Masri said. “But if you look at the gap, or the difference between the digital leaders and average, being 47 per cent versus 16 percent, that gives you a really good indication on why the leaders are leaders.”
He also cited executive leadership’s role – the CEO and the board – in driving digital strategy. “I don’t mean for them to be executive sponsors in a ceremonial way,” he explained. “But to be genuinely enthusiastic and aware of what digital can do for their business. And we are seeing that when those CEOs and boards are behind the change, and they’re driving the cultural change that comes with it, this transformation is much more likely to be successful, and their results, therefore, are significant.
“Digital is not something that you can or should fight,” he continued. “Instead, it’s something that you should use to fight the pandemic. And we realize that those who have invested early in digital before COVID or during COVID are the ones who were able to fight the pandemic better, minimize the impact of the pandemic on their business, and in many cases, even grow their businesses further.”
Methodology:
The study was completed in June 2020 among 371 organization strategy decision-makers or influencers with $50 million+ in revenue and a minimum of 100 employees (Canada =266, France=53, Australia=52). The study objective was to examine the progress of digital strategy, explore pathways to the intelligent enterprise, and examine the role of experience management in Canadian enterprises.