Businesses aren't ready for the digital age, suggests research

The digital future has taken the corporate world by storm, but many employees are jumping ship. A new study by MIT Sloan Management Review, in collaboration with Deloitte, finds that only 44% of managers and executives believe their company is adequately prepared for digital disruption. Worse, 50% of employees who believe their company is lagging behind in digital innovation plan on leaving that company within a year.

In the report, MIT Sloan and Deloitte identified a number of key characteristics that define digitally adaptive companies, such as a cohesive corporate culture and an eagerness to take on risk. The report paints a picture of a new kind of company for the digital age, one that values flexibility and talent, one that can pivot and adapt quickly. These will be the successful new corporations. Slower, more unwieldy competitors are being left behind.

In the fall of 2015, MIT Sloan surveyed more than 3,700 executives, managers, and analysts at companies in 131 countries. They asked respondents to rank their company’s digital preparedness on a scale from 1-10, and then divided companies into three groups based on their digital growth: “early” (1-3), “developing” (5-6), and “maturing” (7-10).

Ninety percent of those surveyed believed digital technology would be disruptive to their industry. But only 26% ranked their company’s digital strategy as “maturing,” or digitally savvy. Almost one third said their company was “early” in its digital understanding.

The problems respondents identified with their companies’ digital capabilities are telling. Nineteen percent listed “internal issues” –a lack of corporate agility or inflexible culture – as their company’s number one threat. It was the single most popular response. In other words, managers and executives fear their company’s own rigidity more than the rise of competitors or the costs of digital transformation.

Doug Palmer, the Digital Strategy Leader at Deloitte, stresses the danger of internal inefficiencies. “Companies and executives point out that culture and internal things are what’s holding them back, more than reduced barriers to entry or the fact that startups may come after them,” he says.

A second key problem the report identifies is what Palmer calls the “talent gap.” The companies that need digital talent the most are also the ones with the least opportunity for internal digital advancement, leaving them unattractive to potential employees. On top of that, these same companies also struggle to retain the talent they already have. In companies that offer employees little to no opportunity for digital advancement, 30% of VP-level employees and 36% of sales staff wish to leave in less than one year. With little digital appeal, these companies have trouble attracting the outside talent they need, or keeping current employees around to develop their digital skills.

Internal barriers and a significant failure to develop talent combine to spell major trouble for companies. So what is the solution to digital stagnation? The report suggests that the key is maintaining a company culture that is compatible with a changing, digital world.

The survey asked employees to rank their company on a scale from 1 to 5 on a number of organizational capabilities. Digitally “maturing” companies were most likely to receive high ranks for traits such as collaborative work style, distributed leadership, appetite for risk and decision making that is driven by data. Companies still in the “early” phase of digital adoption, meanwhile, were more likely to be considered slow to act, risk-adverse, and instinctive in their decision-making.

A company whose culture values risk, distributed leadership and teamwork is inherently more adaptable to a digital landscape. Palmer calls this relationship between a company’s culture and its strategy “digital congruence.” Companies must adapt their digital strategy to their corporate culture, and vice versa, to get the most out of employees and their digital resources.

The idea of “digital congruence” is especially important when bringing on employees. Companies must be careful not to put their normal operations at risk in order to facilitate new digital talent, Palmer warns. “You can’t just come in and say ‘we have a digital agenda, here we go,’ because the rest of the organization is still doing its super-important day-to-day thing.”

As a case study for digital congruence, the report points to Salesforce and its emphasis on shared values among its employees. The corporate environment at Salesforce encourages candid feedback and active career advancement. The result is a stable workforce and an innovative digital company.

But Palmer does see an increasing number of larger, more traditional corporations beginning to adopt new strategies. In many cases, this begins with an influx of new talent. “You’re starting to see tech company executives hired and pulled over to other industries and sectors. And that’s giving those companies a leg up,” he notes.

For companies still struggling to adapt in a digital world, Palmer argues, the most important step is organizing the company around a single, unified plan.

“Companies need to have the conversation with their team about how are they going to fuse digital across their organization and across their business.”

In companies around the world, these conversations need to start sooner rather than later. The influence of digital tech on the corporate environment will only become more pronounced in the coming years, and companies that fail to catch the digital wave will only fall further behind.