60% of organizations have the capabilities for digital transformation success

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Even as all organizations did better the last two years, a Capgemini report notes that so-called digital masters widened the gap.

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Nearly two-thirds of organizations today have the digital (60%) and leadership (62%) capabilities required to successfully implement digital transformation—an increase from 36% on both fronts in just two years, according to a new report by the Capgemini Research Institute.

While all organizations are doing better in their digital transformation journeys in 2020, digital masters—organizations with a high level of mastery across digital and leadership capabilities–are widening the gap with their competitors, according to “Digital Mastery 2020: How organizations have progressed in their digital transformations over the past two years.”

Capgemini examined average ratings across four categories: Talent and organization, operations, business model innovation, and customer experience (CX) to understand the changes over the past two years.  

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COVID-19 has been a powerful accelerant, and, given the urgency for change, organizations have become more enthusiastic and optimistic about the maturity of their capabilities, the report found.

Additionally, organizations have taken time since 2018 to evaluate the challenges that stand in the way of success, Capgemini said. They are also increasing their investment in digital transformation and their adoption of emerging technologies, and putting a renewed focus on talent and culture, the report said. 

Large organizations, with $10 billion or more in revenue, have an edge in both digital and leadership capabilities, according to the report. Some 68% of respondents at these organizations said they have the required digital capabilities, compared with 55% of those with less than $10 billion in revenue.

When it comes to leadership capabilities the gap is similar: 57% of smaller organizations said they have the required leadership capabilities, marginally lower than the overall average of 62% and the 70% seen among large organizations, the report stated.

Every industry has reported progress in both its digital and leadership capabilities in the past two years with retail at the forefront; 73% of retail organizations said they have the digital capabilities required for transformation, up from 37% two years ago.

The telecom sector follows with 71% of organizations reporting they have the digital capabilities required, according to the report. The automotive sector leads in terms of capability growth, and has increased its digital capabilities to 69% from 32% in 2018, according to the Capgemini research.

Talent and culture initiatives take precedence

Capgemini’s 2018 research revealed that the people dimension was a significant barrier to digital transformation, as organizations failed to bring employees along in the transformation journey. However, more organizations today involve employees in their digital initiatives: 63% in 2020, up from 36% in 2018.

Despite this progress, Capgemini found less than half of organizations (48%) are investing in building soft skills such as emotional intelligence, adaptability, and collaboration. 

The research also consistently found that culture is a top barrier to successful digital transformation, with some organizations not having a culture where new ideas and experimentation are valued, Capgemini said.

Accelerating investments in sustainability is critical

While organizations must keep their eye on factors such as customer experience, operations and business technology, the report advises they should also place emphasis on sustainability and their broader purpose, stating that this has become important for both customers and employees.

Consumers are increasingly concerned about environmental footprint and climate change impact and want to make a difference with their actions: 78% agree that companies have a larger role to play in society beyond their self-interests, the report said.

However, only 45% of organizations are accelerating sustainability investments, projects, and commitment, according to the report.

Recommendations

To advance their digital transformation journey, the report recommends that organizations reinvent the employee experience, leveraging the fluid workforce and ensuring employees’ social contracts align with the digital age.

In addition, they should build robust data and platform capabilities, scale new business and engagement models, and embed purpose and sustainability as a core part of the business, making it part of the organizational culture and viewing technology from the twin aspects of digital transformation and sustainability.

COVID-19 has forced many organizations to reinvent themselves, which may be the impetus for the continued rapid pace of technology innovation and business model disruption over the past two years, said Claudia Crummenerl, managing director, people and organization, at Capgemini Invent.

“While organizations have progressed on a wide variety of measures across areas such as customer experience, operations, business, and technology, many are still challenged to incorporate purpose and sustainability into their transformation strategies,” Crummenerl said in a statement.

“By reinventing the employee experience and ways of working, embedding purpose into the operating model, truly becoming a data-powered enterprise, and scaling new business models beyond the pilot stage, organizations can attain digital maturity and demonstrate the resilience required to adapt to future uncertainties,” she said.

The Capgemini Research Institute surveyed 1,000 executives from organizations with at least $1 billion in revenue in May and June 2020 across sectors to gauge their views on the maturity of their organization’s digital and leadership capabilities required for digital transformation.

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