Accepting failure can fuel success, drive advances for companies looking to reach digital maturity: global study

Trying and accepting the possibility of failure has proved an effective way for organizations to clear the aversion-to-risk hurdle and advance toward digital maturity, notes a new study from MIT Sloan Management Review and Deloitte Digital.

In all, 71% of digitally maturing organizations have conquered the risk-aversion barrier by encouraging their organizations to experiment and accept the risk of failure, notes Achieving Digital Maturity: Adapting Your Company to a Changing World.

That is more than twice the percentage – 29% – of early-stage companies, Deloitte Digital reports in a statement Thursday announcing the availability of the study.

Overcoming aversion to risk is one of the most important characteristics of digitally native companies, the statement emphasizes.

“Adapting to increasingly digital market environments and taking advantage of digital technologies to improve operations are important goals for nearly every contemporary business,” the report states. “Yet, few companies appear to be making the fundamental changes their leaders believe are necessary to achieve these goals.”

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Based on findings from the sixth annual global survey of more than 3,500 business executives, managers and analysts from organizations around the world, the study examines digital transformation habits of digitally maturing companies and what sets them apart from digitally early stage firms. The survey captured insights from individuals in 117 countries and 29 industries, from organizations of various sizes.

The divide between digitally maturing companies and early-stage companies is also seen with regard to digital strategy adoption. Findings indicate the former (80%) is more than four times as likely as the latter (19%) to have a clear and coherent digital strategy in place than other companies.

Digital maturity was measured by asking respondents to “imagine an ideal organization transformed by digital technologies and capabilities that improve processes, engage talent across the organization, and drive new value-generating business models.” Respondents then rated their company against the ideal on a scale of 1 to 10: 1-3 is the “early” group, 4-6 is the “developing” group, and 7-10 is the “maturing” group.

Responses make clear that a significant number of companies continue to struggle to implement clear digital strategies to evolve the way business is done as digital technologies change the market, the statement points out.

Consider that 13% of organizations polled report that improving technology development and deployment is a source of concern, while almost 40% say improving digital strategy and innovation is what their organization needs to do differently and progress toward digital maturity.

It is a problem that many organizations still have their structures divided between “digital” and “traditional,” suggests Doug Palmer, co-author of the report and principal for Deloitte Consulting LLP.

“This has been quite the norm for a company’s structure. However, we are seeing that companies are increasingly breaking down these silos and transforming culture and talent by assessing and redesigning processes, workflows and workforce,” Palmer points out in the statement.

Being able to effectively compete in a digital environment demands taking a number of steps:

• walk the walk – digital maturity goes beyond the technology and is more about how to sync talent, culture and organizational structures with digital environments, meaning that executives should reconfigure aspects of their organizations and operations to drive digital success;
• growth versus scaling – requiring a flexible mindset and a digitally supportive organizational structure, companies can better scale successful experiments with a culture of transformation;
• figure out funding model – adequate funding offers the necessary resources to begin driving small experiments into enterprise-wide change; and
• almost 30% of digitally mature organizations are looking out five years or more versus only 13% for the least digitally mature organizations, with the former’s digital strategies focusing on both technology and core business capabilities.

Related: Digital Strategy

“Businesses must craft strategies that allow for execution within the next 12-18 months while also keeping an eye on the horizon since the end-points of digital change will never completely arrive,” Gerald Kane, report co-author and a professor at the Carroll School of Management, Boston College, recommends in the statement.

“To create these innovations, companies should foster cultures that embrace risk and create environments where employees want to learn and stay,” suggests David Kiron, executive editor at MIT SMR. “Equally important, operations need to become more cross-functional to fully support customers’ digital experiences,” Kiron continues.

“At digitally maturing entities, small “i” innovations or experiments typically lead to more big “I” innovations than at other organizations,” the report points out.

“Digitally maturing organizations are more than twice as likely as companies at the early stages of digital development to drive both small, iterative experiments and enterprise-wide initiatives rather than mainly experiments,” it adds.

Other study findings include the following:

• 34% of respondents from early-stage companies say their organizations spend more time talking about digital business than acting on it;
• vice president-level executives without sufficient digital opportunities are more than 15 times likely to leave within a year than those with satisfying digital challenges;
• 73% of digitally maturing organizations recognize and reward collaboration and cross-functional teams as a cornerstone of how they operate, versus slightly more than 34% of early-stage entities; and
• about 75% of digitally maturing entities plan to increase the monies and resources they put into digital business initiatives during the next 12 to 18 months, while only 49% of early-stage organizations plan to do so.

Recognizing the need for digital technologies is no longer a concern, the study found. Rather, scaling, overcoming risk and a clear digital strategy are among the biggest hurdles for early-stage organizations, the statement emphasizes.

Related: 43% of companies achieving positive outcomes from digital transformation investments: XL Catlin-sponsored survey

“Driven by investment from leadership, opportunities to develop in a digital environment, and a culture that rewards collaboration, experimentation and risk-taking, these companies are not only keeping pace with digital change, they’re also more likely to retain talent, including executive-level talent, than early-stage entities.”