Are you ready for digital transformation? Probably not.

The transition to a digital foundation under the enterprise is becoming the defining business challenge of our time.

I’ve been researching the state of the practice in what many are calling digital transformation, which can be characterized the as the application (or reapplication) of digital technologies and the restructuring of operations to better engage with customers, the company ecosystem, and the greater marketplace.

Altimeter Group’s The 2014 State of Digital Transformation highlights the stark fact that businesses are moving forward with digital transformation efforts, but don’t know what’s entailed:

Only one-quarter of the companies we surveyed have a clear understanding of new and underperforming digital touchpoints, yet 88% of the same cohort reports that they are undergoing digital transformation efforts.

In a 2013 report, MIT’s Sloan School of Business Digital Enterprise group and CapGemini worked jointly on a study that echoed the Altimeter report. The majority of companies are rank beginners, as shown in this chart:

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source: MIT Sloan/CapGemini

This isn’t a question of the usual difficulties with change: the human fear response when confronted by the disruptions and risks that change is looming, although that may factor into the lag on awareness. It’s something larger, and perhaps ever more of a barrier.

We’re being whipsawed by the rapid dislocation of the old economy, and barreling into a world dominated by exploding computing scale in our hands and in the cloud, and the imminent emergence of the Internet of Things, with 50 billion devices predicted to be connected by 2020. Companies have no time to waste, but they are dramatically unprepared for the transition before them.

The beginners are only starting to grapple with the issues of digital transformation, and conservatives are intentionally deferring any movement forward. Fashionistas are characterized by the researchers as adopting new technologies but without an effective vision for how it all will hang together. In the final analysis, only 15% of transformation leaders — the Digerati — have that vision needed to turn the corner on digital transformation, and make it all work.

Actually, I bet that is a bit optimistic.

When asked about the cultural barriers to digital transformation the participants responded this way:

source: MIT Sloan/CapGemini

Note that ‘lack of familiarity with digital’ shows up as one of the two top institutional barriers. I find the top most — ‘we don’t have time right now’ — as laughable, considering the digital imperative, and how little time companies have to get on it.

The transition to a digital foundation under the enterprise is becoming the defining business challenge of our time. We have rocketed into a new economy — a new era — where much of what we knew and relied upon ten years ago is being superseded by new insights and technologies.

We’re being whipsawed by the rapid dislocation of the old economy, and barreling into a world dominated by exploding computing scale in our hands and in the cloud, and the imminent emergence of the Internet of Things, with 50 billion devices predicted to be connected by 2020. Companies have no time to waste, but they are dramatically unprepared for the transition before them. This remaking of business practices and business models will be as far-reaching as the advent of web 1.0 (2000), web 2.0 (2005), and social web (2010).

Over the course of 2015, I intend to return to the topic of digital transformation, and explore its technologies, techniques, and the patterns of work that are being tested and proven in businesses around the world, and the challenges that companies are facing in turning that corner.

This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. I’ve been compensated to contribute to this program, but the opinions expressed in this post are my own and don’t necessarily represent IBM’s positions, strategies or opinions.

Written by

Founder, Work Futures. Editor, GigaOm. My obsession is the ecology of work, and the anthropology of the future.

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