Risk averse companies struggle with digital transformation

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Risk averse companies struggle with digital transformation

MIT Sloan Management Review and Deloitte Digital 6th annual study

  • Recognising the need for digital technologies is no longer a concern
  • Scaling, overcoming risk and a clear digital strategy are the biggest hurdles for early stage organisations.


July 14, 2017 - Overcoming aversion to risk is one of the most important characteristics of digitally native companies, according to a new study released today by MIT Sloan Management Review (MIT SMR) and Deloitte Digital

The sixth annual study, in its third year of focusing on digital business, found that 71% of digitally maturing organisations accept the risk of failure and actively encourage their organisations to experiment, compared with 29% of early stage companies. 

The study, Achieving Digital Maturity: Adapting Your Company to a Changing World, examines the digital transformation habits of digitally maturing companies and what sets them apart from digitally early stage companies. 

A key finding this year is that a significant number of companies struggle to implement a clear digital strategy in order to evolve the way business is done as digital technologies constantly change the market. 

Nearly 40% of the 3,500 business executives, managers and analysts from organisations around the world say they need to improve digital strategy and innovation in order to progress to digital maturity. 

Frank Farrall Lead Partner, Deloitte Digital Asia Pacific said: “The research found that digitally maturing companies are more than four times as likely as non-digitally maturing companies to have a clear and coherent digital strategy in place - 80% of digitally maturing organisations vs. 19%of early stage companies.

“The study also found that successful digitally maturing organisations are becoming talent magnets.

“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 just keeping pace with digital change, they are more likely to retain talent, including executive-level talent, than early stage entities.”

More findings:

  • 77% of digitally maturing organisations recognise and reward collaboration and cross-functional teams as a cornerstone of how they operate, versus slightly more than 34% of early stage entities
  • Approximately 75% of digitally maturing entities plan to increase the monies and resources they put into digital business initiatives during the next 12-18 months
  • Only 49% of early stage organisations plan to do so
  • More than 70% of organisations that provide their employees with the opportunity to thrive, and more than 70% whose leaders have sufficient vision to lead digital efforts, say their initiatives are successful
  • Less than 25% of those organisations that do not can make the same claim
  • Vice President level executives without sufficient digital opportunities are more than 15x likely to leave within a year than those with satisfying digital challenges.

“Cross-functional working is key, yet many organisations still have their structures divided between 'digital' and 'traditional’, which is a problem,” said Deloitte Digital's leader in Australia, Steve Hallam

He agrees with the co-author of the report and US-based principal, Deloitte Consulting LLP Doug Palmer that this has been quite the norm for a company’s structure. They both confirm however that they are seeing companies increasingly breaking down these silos and transforming culture and talent by assessing and redesigning processes, workflows and workforce.

Hallam says: “Becoming a digital business takes more than simply digitising your front office. It requires moving digital into the core of your business, having a defined and coherent digital strategy and committing to that strategy. Then re-designing the way that your organisation works – including business processes, culture, talent, experimentation and technology.

“Those that are willing to take on this clear strategic approach are seeing the positives of this strategy, and are prepared to accept the risks of trying and failing, and trying again. Only 13% of organisations report that improving technology development and deployment is a source of concern.”  

‘How to’ principles

Additional analysis of this year’s study uncovered the following principles for how companies can adapt and change to compete effectively in a digital environment:

  • Walk the walk – 34% of respondents from early stage companies say that their companies spend more time talking about digital business than acting on it. Digital maturity is more about how to synchronize talent, culture and organisational structures with digital environments than technology. Executives need to reconfigure aspects of their organisations and operations to drive digital success
  • Growth vs. scaling – Reaching digital maturity is an ongoing process that requires a flexible mindset and an organisational structure that supports the company’s ability to react to digital trends. Companies are struggling to scale successful experiments and bring them to the core of their business. They can do so with a culture of transformation, which is the cornerstone of increasing the pace of experimentation
  • Figure out the funding model – Options range from capital funds to savings from operational improvements. Adequate funding provides the necessary resources to begin driving small experiments into enterprise-wide change.

“These discoveries tell us that digitally maturing organisations understand that they have to take a short and long view,” said Gerald (Jerry) Kane, guest editor at MIT SMR and professor of information systems at the Carroll School of Management, Boston College, and co-author of the report. 

“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 never completely arrive.”

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

About the study

  • The MIT Sloan Management Review and Deloitte Digital business study is based on findings from the sixth annual global survey of more than 3,500 business executives, managers, and analysts from organisations around the world
  • The survey, conducted September through November 2016, captured insights from individuals in organisations of various sizes across 117 countries and 29 industries
  • Digital maturity was measured by asking respondents to imagine an ideal organisation transformed by digital technologies and capabilities that improve processes, engage talent across the organisation, and drive new value-generating business models
  • Respondents then rated their company against that ideal on a scale of 1 to 10. Three maturity groups were observed: ‘early’ (1-3), ‘developing’ (4-6), and ‘maturing’ (7-10).

Visit www.deloittedigital.com/au or deloitte.com.au or MIT SMR to download and read the full report. To view and manipulate the interactive charts associated with the report, please visit the chart site.

Media Contact:

Louise Denver
Director, Corporate Affairs & Communication
M: +61 414 889 857

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