Many organisations are failing to grasp the full potential of the new technologies they are implementing, find Dr Catherine Mulligan of Imperial College Business School and Eric Kruse of Ericsson

How business leaders are managing digital transformation in their organisations is the subject of recent research conducted by Imperial College Business School in collaboration with Ericsson. The project, which spanned four years, canvassed senior business leaders at a variety of companies across several countries in regard to how they perceive digital technologies, how technology is changing their markets, and how they are integrating digital systems into their organisations.

We identified two distinct mindsets, which we have called the “laggards” and “leaders”. Leaders are those who are actively embracing their digital transformation and using new systems to change both the structure of their organisations and their products. Laggards are taking a narrower approach and applying new technology to improve what they are already doing.

We identified three main areas where leaders and laggards differ:

• How they are approaching innovation
• How they are approaching market development
• How they are approaching organisational structure

In terms of innovation, laggards typically see digital systems as an opportunity to speed up and improve the communication processes they already have in place. Leaders, meanwhile, are taking a much broader view of digital transformation and identifying opportunities for convergence between different types of technology. This creates efficiencies while also creating opportunities to develop ideas that were impossible under the previous system.

For market development, leaders are well aware digital technology is changing not just how they communicate, but who they communicate with as well. These new markets help businesses diversify and survive the challenges presented by start-ups and rivals.

Laggards, on the other hand, are focusing on improving and streamlining the relationships they already have. While they may be able to reduce costs and improve communication, they are missing out on the new markets that can be reached via digital systems.

The third major differentiator is how leaders and laggards are altering the hierarchy of their organisations. For the last hundred years, organisations have been typically run from the top down, with a CEO implementing decisions through a chain of managers. Digital laggards are maintaining this structure, with the systems they are implementing designed to make the delegation process easier or more efficient.

Leaders, however, are utilising new technologies to restructure their organisations to be more autonomous and agile. As an organisation that can function both in a hierarchy and as part of a network, they can respond to threats and changes in the market very quickly.

How businesses manage their digital transformation will dramatically affect how they operate in the coming years, and business leaders should consider reorganising for agility. By doing this, they are preparing for new competitors while also finding new ways of doing business themselves.

The full version of this article can be found on IB Knowledge.