UK companies trail their European counterparts when it comes to innovating their business model to drive digital transformation, according to new global research from Workday. The study, “Organisational Agility at Scale: The Key to Driving Digital Growth”, conducted by Longitude, surveyed almost 1,000 business leaders across Asia, Europe and North America. It found that 69 percent of UK respondents had made “significant progress” transforming their business model to create a portfolio of digital products and services, well behind German and French respondents.
The research focused on how organisations can translate their digital transformation investments into the right business outcomes. The findings highlight a strong correlation between digital revenue growth and organisational agility – a set of behaviours that help “leaders” drive digital revenue growth and shift digital transformation from a one-time event to an ongoing, new way of operating.
In the survey, Workday identified a group of leading organisations whose characteristics indicate they have embraced agility as part of their day-to-day operations in order to successfully transform their business for digital revenue growth. This group, the leaders, make up 15 percent of the global survey sample, and 10 percent of the UK sample.
By contrast, those that show significantly slower progress or are yet to begin their agile transformation the “laggards”, make up just over half of all respondents – and 65 percent of UK respondents. The remainder – those that have yet to embrace organisation-wide agility, but are on the path to doing so – ”aspirers” – make up the final 30 percent of the global sample.
According to the research, 60 percent of UK organisations expect to derive above 50 percent of their revenue from digital by 2022. This jumps to 82 percent among the global leaders in the study. There remains work to do though, as only 25 percent have made significant progress deriving a high share of their revenue from digital products.
The organisations that have most fully adopted organisational agility are two times more likely to derive a significant share of their revenue from new digital propositions and 10 times more likely to react to market shifts with agility and speed, resulting in higher levels of digital revenue growth.
Despite digital innovation being high on the agenda, “the constraints of legacy IT” (38 percent) and “risk averse mindset” (33 percent) were in the top three major barriers to driving digital growth opportunities for UK business leaders.
Similar to a global study from Workday in 2018, data privacy and compliance emerged as another leading roadblock to digital growth in the UK. As companies globally attempt to navigate the European Union’s General Data Protection Regulation (GDPR), it’s perhaps unsurprising that companies are struggling to get to grips with the regulation’s impact on digital business.
65 percent of UK organisations agree that their company has a culture in which learning from failure is encouraged – slightly under the 70-percent global average. Over three quarters of UK leaders stated that their approach to digital innovation was based on continual learning from customers and the broader business.
The research findings identified five characteristics of agile organisations, with varying degrees of uptake and maturity across participating regions. Key UK responses for each area are outlined below:
Annual planning cycles are not conducive to the volatile and dynamic market within which businesses now operate. More than ever before, organisations must be equipped with the capability to continuously plan. Just 15 percent of UK respondents say that their business planning process allows to react with agility and speed to market shifts.
Notably, UK leaders named a lack of employee skills (36 percent) and a bureaucratic organisational culture (25 percent) as the top two barriers to embracing continuous planning.
The research looked at the degree to which organisations are capable of reallocating resources to take advantage of new opportunities as they evolve. This is a core capability among leader organisations, which are almost five times more likely than laggards to be able to reallocate people to where their skills are needed. Likewise, leaders are five times more likely than laggards to have a system in place to measure skills and skills gaps.
Fluid structures and processes require a supporting culture, yet bureaucratic organisational culture was named as the top barrier to making this shift. A bureaucratic organisational culture (38 percent) and lack of motivation to move away from existing legacy processes (30 percent) were named as the other top barriers to adopting this dynamic capability.
To keep pace with the plans, structures and processes that agility brings, the right skills mix is required. The right combination of hard and soft skills alone is not enough – the cognitive ability to contend with constant change is becoming an increasingly critical success factor for tomorrow’s workforce.
The ability to identify, anticipate and manage risk (32 percent) and competence in using new tools and technologies (30 percent) ranks highest of the skills perceived to be of most value to the UK workforce in the years ahead. With so much in flux, the ability to upskill and reskill is also crucial, especially as machine learning and other advanced technologies become more present in the work environment. UK respondents cited creative ideation and lateral thinking as the third highest rated competence for the future workforce, highlighting the shift towards more analytical skills.
With this shift, keeping employees engaged and retaining talent will become a critical challenge for businesses. Notably, three-quarters of respondents admit that their organisation’s ability to succeed is tied to keeping employees engaged – but that their organisation needs a more fluid approach to management in order to retain those people. Interestingly, UK leaders plan to upskill close to half of their workforce in the next five years to meet the demand for new skills.
People need to be given the right information, at the right time, to make the best possible decisions for the business. This is a foundational characteristic of organisational agility, and the leaders in the study have made significant headway in this area.
IT teams – and the wider business – gain when data can be accessed quickly without intervention from the IT department. Leaders know this and are near-unanimous in stressing the role that a free flow of timely information and data plays in facilitating decision-making across their businesses. Notably, four in five leader organisations say there is full access to data across their business, and 99 percent point to the free flow of data and information as an effective driver of delegated decision-making.
But far from all organisations have empowered their employees through data. 62 percent of UK respondents (second only to Japan with 72 percent) say data in their organisation remains largely siloed within functional teams or out-of-date. Perhaps culture is to blame here – one in five also say that hierarchies hamper their organisation from effectively delegating decision-making.
Enabling informed and delegated decision making is about much more than giving leaders access to timely and relevant data. It’s also about ensuring that teams have full access to that data – with no gatekeepers or bottlenecks – and that they are empowered to use it to make decisions in line with businesses best interests.
To ensure innovation delivers the financial performance needed, organisations must unite agility and speed with close monitoring and control of their digital initiatives. The leaders in the study recognise this – they are twice as likely as others to have the tools to measure the performance of new digital products and services.
Despite this, nearly one in five also say they lack the KPIs to measure success in the digital era. Leaders are most likely to admit this is the case. Almost 20 percent of UK respondents strongly agree that their organisation's KPIs are not reflective of the digital era in which they are now operating. As more revenue comes from digital sources, a new set of KPIs will be needed.
The fail fast mentality is also pervasive among leaders. More than 90 percent of leaders say they are quick to shift course away from failing projects. The same number again say they have a culture in which learning from failure is encouraged. Together, these two factors form key ingredients for agile success as tomorrow’s winners will need to be able to quickly assess the impact of their new digital projects and pivot with them – at speed and scale – to maximise success.
If they are to keep pace with digital-first players and an ever-evolving market, UK businesses today must deliver on digital transformation and the growth opportunities it brings. The evidence from the research is clear: those leading the race to continuous digital growth are those that have successfully embraced most – if not all – of the capabilities of organisational agility. For those playing catch up: there is still time, but the clock is ticking.
Critically, the move to agility is a continuous one – as organisations shift from silo structures, bureaucratic processes and traditional ways of working to embrace all five capabilities of organisational agility. Those who plan continuously, build adaptable and fluid organisations, upskill, inform and empower their workforces, and put in place the right measurement and guidance will be best positioned to harness continuous innovation, grow their digital revenue and future-proof their business.