Thriving Enterprise Transformation? Think Again.

Tech for tech’s sake won’t cut it, and companies that don’t understand disruption from the top down will get left behind.
 
Just when businesses thought they were ahead of the game, disruption throws yet another curveball. Digital disruption is everywhere. From the AI that powers your connected thermostat to your email accounts stored in the cloud, new technology is constantly reinventing day-to-day business tasks and interactions.
 
For companies and their leaders, this disruption doesn’t just mean adding a few shiny new tools—it’s much more existential. In the case of business, disruption will not be choosy about the industries it impacts. New technologies and processes are already beginning to shift the tides for stubborn sectors that previously thought themselves immune to disruption, such as construction, legal services, and healthcare.
 
“There’s no incremental way to be more digital,” said Brian Farrar, partner and founder of Maven Wave, an Atos company. “You can’t change a little bit, you have to change a lot and you have to do it all at once.”

At face value, this fast, wholesale need to adapt may seem intimidating, but it will also prove advantageous to organizations that can adjust appropriately. In a 2020 survey of digital “transcenders,” PwC found that companies that have successfully made the digital transition are seeing a 17 percent higher profit margin growth than their peers. To become “transcenders,” however, organizations will have to find ways to deal with rapid technology changes, shifting workforces, and increased security risks.

New Tech, Faster Changes

Today’s economy has entered what some have called the Fourth Industrial Revolution, an era marked by a rapid and unprecedented increase in the rate and scope of technological advancement. This intimidating new pace may push many businesses into defensive mode, innovating and updating just to keep their heads above water.

“Technology is changing the way that logistics happen. It changes the way that the supply chain is managed. It’s changing everything about how we acquire and deliver services and products,” said Brian Smith, senior managing partner of IA Business Advisors. Unfortunately, while many are trying to stay ahead, they still have what Peter Kippes, CEO of Hegemony Consulting Group, calls a “technology debt.” Essentially, it’s tech that’s not adding value. “Sometimes those investments were made for all the right reasons but are no longer valid and no longer valuable to the organization,” he said.

To truly find staying power and avoid digital disruption in the long term, businesses are going to have to focus on long-term growth, not only short-term changes. This doesn’t need to be as hard as it sounds—quick operational improvements can pave the way to more structural changes, acting as a “set of training wheels when seeking new opportunity, finding and training new talent, and defining agile ways of working,” said a 2019 report on digital transformation from Deloitte.

Though finding solid ground in this new world will be difficult for many organizations, it is large, legacy entities that will face some of the steepest challenges. After sustaining themselves for decades through consistent growth and risk aversion, moving toward a more agile way of doing business will require a massive shift. That’s because the GEs of the world don’t have the luxury of burning their proverbial ship and building solutions anew.

Fast-changing technology is calling for a shift in the way businesses are structured as well as what is expected of the C-Suite. The role and focus of the C-suite executive, across all functions, must change if organizations are to effectively harness technology. The org chart of the typical business—with staple “function heads” and titles such as President, CEO, VPs of Marketing, Finance, Sales, Operations, and IT—will likely persist. But the next generation of C-suite leaders that populate the org chart will understand and harness technology to address new ways of working. People are working through agile processes and networks of information and data, more so than working within the constraints of the traditional functional hierarchy.

Smart leaders, according to Garrett Sheridan, president of Axiom Consulting Partners, are no longer looking simply at the profitability of their customers but must also be continuously developing new and innovative ways to add value to their customers. “Technology is allowing, and requiring, executives to transform how they think about and deliver solutions to customers,” he said.

To become better equipped to handle change, functions like technology, innovation, and data analysis can no longer be siloed into one department of an organization. Instead, they need to become part of the core of how the entire organization operates.

According to McKinsey, IT operations should be a central part of shaping and streamlining strategy for the business as a whole. Deloitte’s 2019 Global Human Capital Trends report found that only 17 percent of C-suite executives regularly collaborate on long-term, interdependent work, a decrease from 2018. To truly stay ahead of disruption, executives will have to break this mold, fostering more collaborative environments and welcoming smart changes into all aspects of business.

The Workforce Problem

Beyond the C-suite, there is much anxiety that new, disruptive technologies, such as AI, robotics, and data analytics, are going to automate a workforce out of its jobs. This anticipation has basis: According to Deloitte’s Global Human Capital Trends report, 41 percent of respondents are using automation extensively or across multiple functions and only 13 percent anticipate that this automation will eliminate a significant number of roles over the next few years.

“There’s a limit to how much you can remove the human from certain tasks,” said Ben Jacobson, CEO of Conifer Research. Instead of becoming a systematic purging of labor, these new technological abilities should represent opportunities for organizations and their employees.“

“The change management side of it is important,” said Amir Azarbad, CEO of Inspirant Group. “You try to tell people, ‘This is why we’re doing this: It saves us more money, but it also creates all these new opportunities for you to do something new instead.’”

And so, on top of preparing for digital transformation, many organizations are having to transform their workforces with reskilling programs and creative hiring strategies. In the Deloitte survey, 84 percent of the respondents who said that their automation efforts would require reskilling reported increased funding for reskilling and retraining.

“What many organizations forget is that it’s not always about the technology,” said Laura Dribin, CEO of Peritius Consulting. “Even in the push towards all these technological advances, you still have people who have to work together to get you there.”

It may, in many cases, payoff to retain and retrain current employees for new roles, rather than hit the job boards anew. Many of the tech-based skills that employees need to thrive in a forward-thinking organization are hard to come by—32 percent of CEOs were extremely concerned about the availability of key skills, according to a PwC survey. The survey also reports a correlation between upskilling progress, economic optimism, and revenue confidence. Sixty percent of CEOs with advanced upskilling programs say they have been very effective at creating stronger corporate culture and employee engagement, and 43 percent report a very effective increase in workforce productivity.

But to make this transition work, employees will need to bring new skills to the table—namely, flexibility, said Azarbad from Inspirant Group. “It’s not so much of what you learn in school anymore,” he said. “It’s how adaptable you are, how you deal with change, how you deal with uncertainty. All those soft skills.”

Staying Secure

For each tool that is pushing for progress in the Fourth Industrial Revolution, there are new nefarious capabilities that may spell trouble for organizations. Security, especially cybersecurity, is more slippery than ever before, as the very technologies, such as 5G, cloud computing, and IoT devices, that are helping businesses digitally transform are also putting them at risk of attack.

As the number of wireless connected devices in an organization’s infrastructure grows, the number of access points for a hacker or virus increases, as well. The result is technology that is vulnerable in ways that many companies, and their employees, might not even be aware of. They must take it more seriously and do something; but too many are not taking steps.

Despite a lack of action, executives are certainly worried about cybersecurity. Fifty-three percent of U.S. CEOs are extremely concerned about cyber threats, according to PwC. And they have good reason to be. Web attacks are up 56 percent, according to Symantec’s 2019 Internet Security Threat Report, while enterprise ransomware have increased 12 percent and supply chain attacks were up a whopping 78 percent.

 
Effectively addressing cybersecurity threats will also require a restructuring from the top of organizations. Eighty-nine percent of organizations have clarified the security roles and responsibilities within their executive teams, according to a 2020 cybersecurity report from Cisco.

This clarification is important, because in many organizations, CIOs or CTOs can be caught off guard with the time and resources cybersecurity takes. “Executives are thinking, ‘My CIO will handle security because that’s IT,’” explained Steve Melchiorre, CEO of Stratosphere Networks. “But that person is already overwhelmed, and now you’re dumping an entirely new set of responsibilities on them that they’re not experts on. The security element brings in a whole other set of responsibilities.”

A new generation of security solutions is looking to address this problem, helping organizations prepare for this brave new world of technological advancement. One of these potential solutions is blockchain, a data security technology that uses an anonymous and immutable ledger to track and secure information.

“I think it’s a very cool concept because it is a sort of governance from the masses,” said Brian King, founder, board member and former CEO of Kenway Consulting. “If people really do leverage blockchain, the masses will all be able to point to a record and say it’s right. I think there’s power in that.”

Global research and advisory firm Gartner predicts that blockchain will be a scalable technology by 2023. But for many, it’s too soon to tell if blockchain will be the panacea it has been predicted to be. This is in part because it requires widespread adoption in order to be viable.

“If you want to do blockchain, that’s great,” said Jacobson from Conifer Research. “But if your suppliers and the rest of your network isn’t in that blockchain network, you can’t do anything with it.”

Blockchain’s potential will also rely on organizations’ willingness to adapt, plus users will have to agree how it will be used so there is enough sharing, but not oversharing. “The tough thing is, you need sort of a neutral central platform to do this, and that’s the most complex thing,” said Mark Karhoff, CEO of Ten Count Consulting. “I think the possibilities are there, the pieces are there, they just need to be put together and everybody agrees to think about how to do that.”

Regardless of whether blockchain is the next big thing, or the next big thing is still an unknown on the horizon, companies are sure to continue to be faced with disruptive forces that will require them to rethink business as usual.

“The minute we think that we have transformed in a way that is responsive to the marketplace, the marketplace actually changes,” according to Caleb Gardner, managing partner of 18 Coffees. “We have to completely overhaul how business is done at a foundational level in order to take advantage of something like digital transformation and to recognize that change.”