European Study: Four in Five Business Leaders Face Digital Disconnect

The story of digital transformation starts at the very top of the organisation. The disruption of traditional business models, demand for agility, and advances in technology have all contributed to forward-thinking CEOs making digital transformation across their global organisations a key strategic pillar for future success and stability.

The majority of European business leaders have started the journey to digital transformation, yet many are heading for a stalemate caused by a lack of the right technology and poor systems integration—that’s the verdict of an IDC white paper, “Digital Leaders: Transforming Your Business,” June 2018, sponsored by Workday, featuring a survey of more than 400 digital leaders across the UK, France, Germany, Sweden, and the Netherlands.

The survey showed that 76 percent of European organisations were either undergoing or were about to start their digital transformation (DX) journey, and a further 15 percent reported being in the planning process of their DX initiative. In addition, four out of five digital leaders find it difficult or impossible to adapt key processes, including finance and HR, to deal with the emergence of new data sources, evolving business models, and new interactions with customers.

When “Adequate” Just Isn’t Enough

Digital leaders stated that they find their finance and HR systems are only “adequate” for today’s requirements and lack the flexibility and sophistication to deliver on the broader DX mandate. Of the 400 organisations interviewed, IDC identified just less than 10 percent as “best-in-class” when compared to their peers in terms of DX maturity. IDC classifies best-in-class as a business that aggressively disrupts the status quo in the use of new digital technologies and business models to affect markets.

In fact, just 19 percent of finance and 10 percent of HR respondents would class their core systems as state-of-the-art. These findings flagged the need for digital leaders to advance their digital transformation agenda. While “adequate” or even “reasonably modern” may be good enough today, the question remains: Will these systems be fit for purpose in 12-24 months when fundamental, strategic digital transformation projects begin in earnest?

Digital Disconnect Looms Large

One of the key reasons why so many organisations are stalling on digital transformation is the absence of the right technology architecture to facilitate new ways of working. This is exacerbated by the fact that new technology platforms are often set up separately from the traditional enterprise IT platforms, with APIs and integration services connecting them.

This creates a digital disconnect as organisations are effectively limited by their own systems, creating insufficient operational visibility and agility, siloed organisational structures, and limited collaboration and sharing of expertise.

Advice: The Traits of a True Digital Leader

The survey provides insight into the correlation between organisations that are digital transformation leaders and the impact of having state-of-the-art systems in place for finance and HR departments.

Digital leaders need to focus on delivering simple and intuitive user interfaces with self-service capabilities, enabled around an environment of auditability and security. As a result, outside of these departments, other business functions are struggling to navigate finance and HR to advance their broader DX strategies.

Despite some country differences, the message here is clear: Digital transformation is happening in Europe and one of the major obstacles that digital leaders face irrespective of country of operation is their aging systems and their inability to deliver what is needed.

Below we explore the three core areas that stand out as critical success factors for driving enterprise-wide digital transformation, from a core business system perspective:

1. Create Digital Dream Teams Across Finance, IT, and HR

Highly successful organisations want the ability to reconfigure HR and finance systems as business changes occur. IDC’s research found that digital leaders from organisations rated best-in-class have stronger relationships with the finance or HR department heads (73 percent) than those with lower levels of DX maturity.

Equally, digital leaders from organisations with perceived state-of-the-art systems have stronger relationships with the finance or HR department heads (63 percent) than those with older or adequate systems.

Given the correlation between a digital-savvy, frequently engaged and dedicated team and an organisation’s overall digital transformation success, this should be the starting point for any business looking to embrace digital change.

2. Support New Business Models Through Finance and HR

Finance and HR systems may be adequate for the tasks they are handling now, but they are not positioned to handle the DX challenges, and at least one important or very important task cannot be completed with the current systems.

As organisations adopt and excel at the use of digital technologies, they are better placed to maintain flexibility, profitability, and innovation, delivering what their customers want in terms of new products and business models, while expanding their reach to other domains. Seventy-six percent of best-in-class businesses rate the ability for finance and HR to support new business models.

It is a fact that the best-performing businesses — equipped with a digital-native culture, applications, and trend-setting best practices — are effectively widening the gap with market peers. This deep divide is being realised in market growth, share capture, stock valuation, and employer brand, and is adding to the strain less advanced organisations are feeling from powerful globalised market dynamics.

3. Modernise Finance and HR Systems

A majority (57 percent) of non-HR respondents surveyed believe that the modernisation of the core HR business systems is needed to support the success of the overall DX strategy for their company.

The survey found that disruptive businesses place greater emphasis on the role of finance and HR in the process of digital transformation. Best-in-class organisations invest in advanced finance (88 percent) and HR (86 percent) systems to support the digital transformation journey.

Finance and HR systems that have aged and cannot keep up are holding digital transformation back and create a gap between the organisation and its competition. Businesses must recognise the importance of leaving behind transactional and functional tasks and manual tools in favour of more sophisticated solutions to complete their new responsibilities.

At best-in-class organisations, 70 percent of respondents see the ability to quickly reconfigure finance and HR to meet business requirements as very or extremely important. This number drops to just 22 percent with organisations with less sophisticated approaches to digital, highlighting the capabilities successful businesses prioritise on the road to digital transformation success.

Read the full report and learn more about the journey towards digital transformation.