You can keep throwing money at digital initiatives, but large IT budgets do not necessarily equate to digital success. Rather, it’s a cultural mindset that moves the needle toward growth and success.
That’s the word from Marco Iansiti and Satya Nadella, who looked at the digital success rates of 150 companies in a recent Harvard Business Review article. They found that “outcomes did not depend on the relative size of IT budgets. Nor were the success stories confined to ‘born digital’ organizations.” Rather, creating a digital innovation mindset and culture is the defining factor.
Throwing gobs of money at the opportunity “does not result in more growth or better performance; in fact, in some cases it can actually damage the business if it accentuates divisions and inconsistencies across groups,” Iansiti and Nadella observe.
It’s interesting to hear that tech alone doesn’t deliver nirvana, especially from the head of one of the largest tech vendors in the world — Nadella is chairman and CEO of Microsoft.
Digital success is tied to “architectural, managerial, and organizational approaches,” they write. Of course, technology is still a cornerstone of digital efforts. Tech intensity is key to supporting a culture friendly to digital innovation, Iansiti and Nadella claim. This refers to the proliferation of tools, platforms, and access to all levels of employees. Such digital democratization doesn’t spring up overnight. Rather, it evolves through a series of stages. From their study of 150 companies, Iansiti and Nadella pinpoint five different stages:
- Traditional model: Digital transformation is an IT thing. “Digital and technology investments are the province of the IT department (or other technical specialist groups).,” they explain.
- Bridge model: Things get more collaborative. This consists of launching pilots that not only involve technology, “but also a fundamentally different model of innovation in which executives, managers, and frontline workers from the business side work in collaboration with IT and data scientists.”
- Hubs: Centers of excellence develop. “Organizations form data and capability hubs and gradually develop the capacity to link and engage additional functions and business units in pursuit of opportunities for transformation.”
- Platform model: At this stage, “organizations begin to function a bit more like software companies,” Iansiti and Nadella state. Artificial intelligence is introduced to provide predictive capabilities.
- Native model: The most successful companies in Iansiti and Nadella’s study involve the comprehensive deployment of AI, along with “a core of experts; broadly accessible, easy-to-use tools; and investment in training and capability-building among large groups of businesspeople.”
The study’s conclusion is clear: to make digital transformation work, everyone needs to be involved in it, have a stake in it, and be encouraged — and not coerced — to participate.