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As many parts of the world are doing their best to mitigate—or learn to live with—a disease that will forever be shorthand for the biggest inflection point of our lifetimes, our latest global study finds that even though the relentless pace of business transformation is slowing a bit from the mad rush of 2020 and 2021, it’s not stopping.
"Closing the Acceleration Gap: Toward Sustainable Digital Transformation” tracks the pace of digital transformation over the past 24 months, and asks whether and how it can be sustained. As it happens, our research finds that 58% of leaders say the pace of digital transformation has either already slowed from where it was a year ago, or they expect it to slow down in the future.
Just 14% of respondents expect their digital transformation efforts to continue at the current pace. Although the in-person interview portion of our survey indicates business leaders are still firmly seeking ongoing transformation, they’re looking to do it in a more thoughtful, sustainable way. We also heard that leaders recognize that digital transformation must be an ongoing effort—not just in terms of the technology, data, and analytics they use, but also in the way it develops and sustains the people, skills, culture, structures, and processes required to drive it forward.
Respondents cite a lack of workforce skills (38%) and cultural barriers (35%) as their biggest transformation blockers.
We also saw that some of the heady goals of earlier years came back to earth. In 2020, more than one-third of companies (36%) expected digital to account for 75% or more of their revenue within three years. By 2021, just 13% of organizations said the same—a figure that aligns to pre-pandemic digital aspirations (12% in 2019).
We were at first perplexed how leaders could be less bullish on digital revenues after a period when nearly everything went online only; organizations struggled with supply chain issues, and even the biggest streaming companies experienced filming difficulties. These challenges reminded us all that nearly every business is dependent on people or things making their way from one physical location to another.
It’s also interesting to note that fewer businesses are adopting a “fail fast” mentality (53% in 2021, compared with 77% in 2020), which suggests that the culture of experimentation that gathered pace during the pandemic has lost momentum.
We also found, as we detailed in an early look at results, that the slower pace of digital transformation at some companies isn’t always due to a lack of motivation. Respondents cite a lack of workforce skills (38%) and cultural barriers (35%) as their biggest transformation blockers. CEOs are even more acutely aware of these barriers: 45% and 39%, respectively.
Though the relentless pace of business transformation is slowing a bit from the mad rush of 2020 and 2021, it’s not stopping.
Rather than measuring how digitized a company is as the yardstick of transformation, it’s more important to ask whether the business can quickly take advantage of new markets and opportunities—be that a geographic expansion or, as the pandemic necessitated, a complete revamp of a business model or employment practices.
This is where the acceleration gap comes in as a measure of the missing steps between what a business _should _do to prosper and what it can do in the here and now. More than half of leaders (52%) say there is a growing divide between where their business is and where it needs to be to compete.
Although this is our third global study that queried decision-makers across finance, IT, and HR, it’s the first time we were able to dive more deeply into the particular, and sometimes competing, concerns of finance, IT, and HR leaders.
Among some of the eye-opening findings from the offices of the CFO, CIO/COO, and CHRO:
One thing is sure: Change is here to stay, and companies that are prepared to reassess and pivot are poised for success. As John Boudreau, senior research scientist, Center for Effective Organizations at University of Southern California, said in the report, “We’ll see a future with more unpredictability and disruptions, and thus increasing needs to perpetually refigure work and organizations. The genie is out of the bottle, and even if COVID-19 isn’t a factor tomorrow, it’s going to be impossible to simply snap back to the past.”
Download the full report, “Closing the Acceleration Gap: Toward Sustainable Digital Transformation,” for more findings from the office of the CFO, CIO, and CHRO.