Legacy companies begin digital transformations to meet two main goals: improve customer experience and increase operational efficiency.
Companies that accomplish this transformation are “future ready,” according to researchers at the MIT Center for Information Systems Research. Future-ready companies outperform companies that lag in digital transformation, with transformed companies showing average revenue growth of 17.3 percentage points.
In a new research briefing, Stephanie Woerner, Ina Sebastian, and Peter Weill write that these high-performing companies create value through customers, operations, and ecosystems, as well as foundational capabilities that enable progress in all the other areas.
Within these areas, the researchers identified 10 capabilities that top-performing companies share. The capabilities were identified over five years of research, including more than 50 interviews with executives and several surveys with more than 2,000 respondents. The results were also field-tested in workshops with senior management teams and boards.
1. Provide a great multiproduct customer experience. Future-ready firms integrate products to convert the typical customer journey into a seamless multichannel experience. They aim to meet customer needs instead of pushing products.
2. Be purpose-driven. Leaders, customers, employees, investors, and partners are increasingly demanding that firms have a purpose beyond maximizing shareholder wealth. People associated with the company can unite around a strong purpose, which encourages excellence.
3. Become modular, open, and agile. Future-ready companies take the components and capabilities that make them great — their crown jewels, as the researchers put it — and turn them into modular, digitized services. These services can be combined into many different digital offerings.
4. Strive for ambidexterity. Future-ready firms use digital technologies in two different ways: to constantly innovate, and to control costs and accelerate transformation. This allows companies to solve customer problems and offer a seamless customer experience while improving processes, encouraging reuse of data and technology and enhancing productivity.
5. Lead or participate in ecosystems. By leading or creating an ecosystem, companies become go-to destinations for their customers, and partner with others to provide a variety of products.
6. Pursue dynamic (and digital) partnerships. The fastest-growing firms pursue digital partnerships to increase reach — by adding new customers — and increase range, by widening the variety of products they offer to existing customers.
7. Treat data as a strategic asset. Firms should treat data as a single source of truth, the researchers found. This should be supported by data monetization capabilities that are accessible to everyone in the company and used to make evidence-based decisions, and norms of acceptable data use.
8. Develop and retain the right talent. With the introduction of data analytics, artificial intelligence, and other technologies, the skills employees need are changing. Companies need to ensure that employees have the right skills for their roles, but also empower employees to work together to solve problems.
9. Link individual and team behaviors to firm goals. Strong firms link individual and team behaviors to company goals. This helps empowers employees and helps in their decision making.
10. Facilitate rapid learning throughout the firm. The future is always uncertain. To be truly future-ready, companies need to be able to quickly learn and adapt.
To begin developing these capabilities, companies should assess existing capabilities and start by working on weaker areas.
“Building these capabilities is an ongoing effort that requires leadership, purpose, metrics, budget, fresh approaches, and perseverance,” the researchers write.
“The payoff is helping move your firm toward future ready and enabling it to achieve and sustain competitive advantage.”