While being a fairly nebulous term, digitization has changed and is changing companies beyond recognition. The ability to use technology and digital information to accomplish tasks that once required human judgment and action are almost too numerous to count at most firms.
Anything from helping an employee relocate across the world to testing and launching a new product now requires a much better grasp of how to use technology and digital information than it did even 5 years ago, and certainly a decade or more. It has meant that managers in all industries and roles must be as good at making IT-related decisions about what technology they need and how to deploy it as they are at making HR-related decisions about what people to hire and how to get the most out of them.
Unsurprisingly, this has also changed how those in the IT department do their jobs as well. Where once IT professionals were the technology experts and possessed most of the necessary knowledge, now they must work with line managers who often have a better idea about a niche piece of technology or vendor than they do. This doesn’t mean that the fundamental role of IT has changed – IT teams are still there to prevent wasted spending, excessive complexity, and the taking on of ill-considered risk – but how they do it has.
Business Building Lessons from Adobe
Today, you would be hard pressed to find a business leader who was openly resistant to digitization, but look beneath the surface of most large companies and you will find countless points of resistance.
Using digitization to make work more efficient or collaboration (another key shift in how companies are run) easier is held back by people’s worries about what it will cost or the disruption it will cause in the short-term. None of these sticking points is intentional, and none relate directly to the technology, but the problems they produce are no less real for that.
For example, when Adobe decided to transform its business model from selling “boxed” (or perpetual-license) software to bundled software in the cloud, the company worried about telling investors that the financial results would decline before picking up. Though the business model change was the right thing for the company to do, the expectations of everyone from shareholders to suppliers meant it was difficult to manage through the transition.
Four Barriers to Digitzation
And Adobe’s experience is typical of many companies. There are four types of expectation that can cause problems for companies as they get to work on digital products or services.
Margin expectations: Many CIOs are collaborating with other business leaders to launch analytic and data products that benefit from the massive volumes of data their companies.
But some report that since the margins on these new services were either difficult to calculate or expected to be low until the services scaled-up, they struggled to compete for investment with higher margin but lower growth products in the existing business portfolio.
Cost expectations: The CIO at a financial services organization in CEB’s network of IT professionals reports that their emphasis on reducing operating costs prevented them from taking advantage of new digital technologies in the cloud: “Our CFO has set aggressive OpEx targets.
We’re trying to achieve cost efficiencies in IT by moving to the cloud, but the central mandate prevents us from moving spending away from CapEx.”
Performance expectations: Successful digitization requires information sharing and cross-functional collaboration.
But while senior leaders might produce a mandate about how important digital initiatives are, the strict objectives and timelines they set for their teams often pull in different directions and discourage them from collaborating toward a common objective.
Behavioral expectations: Working in a digital environment requires employees to be more open to collaboration, risk-taking, and constant change. However, few companies formalize these behaviors in their employee performance objectives.
In fact, CEB research shows that only 27% of business employees have digitization-focused performance goals, which means they’re often not sure what is actually expected of them.