Digital Maturity Is Linked with Company’s Innovation, Collaboration Efforts
With digital transformation already underway in the enterprise, and many organizations now several years into their digital transformation journeys, many are looking to measure digital maturity, and benchmark against peers in their industry. The key questions are how to assess this digital maturity and under what parameters.
A new global research by MIT Sloan Management Review and Deloitte that investigated digital maturity in the enterprise, ascertains that this maturity level can often be explained by a company’s approach to innovation. According to the researchers, digitally maturing companies are not only innovating more, they’re innovating differently.
The study based on a global survey of more than 4,800 managers, analysts and thought leaders, observes that innovation is driven in large part by the collaborations within the IT teams, with CIOs as the mastermind as well as through cross-functional teams and also through external digital ecosystems, which it refers to the customers and stakeholders.
“Both ecosystems and cross-functional teams increase organizational agility. The risk of this increased agility, however, is that it can lead a company’s innovation efforts to outpace its governance policies. It is particularly important, then, that these organizations have strong policies in place regarding the ethics of digital business,” says survey’s authors assert. “.
Measuring digital maturity
- Digitally maturing companies innovate at far higher rates than their less mature counterparts. Eighty-one percent of respondents from these companies cite innovation as strength of the organization, compared with only 10% from early-stage companies. Maturing organizations invest more in innovation and constantly drive toward digital improvement in ways that less mature companies do not. Notably, innovation happens throughout digitally maturing enterprises; it isn’t caged in labs or R&D departments. Digitally maturing companies are more likely to participate in digital ecosystems, and their employees are often organized in cross-functional teams.
- Employees of digitally maturing organizations have more latitude to innovate in their jobs — regardless of what those jobs may be. Nearly five times as many survey respondents from maturing companies as from early-stage companies report that their organizations provide them sufficient resources to innovate. This year’s research also finds a strong relationship between a company’s rate of digital innovation and its staffers’ confidence that the organization will be stronger in the future, thanks to digital trends.
- Digitally maturing companies are far more likely than their less mature counterparts to collaborate with external partners. While 80% say their organizations cultivate partnerships with other organizations to facilitate digital innovation, only one-third of early-stage companies do the same. The nature of collaboration also differs depending on maturity level. Digitally maturing organizations tend to form alliances that involve less formal, controlled relationships; they rely more on relational governance and less on detailed contracts. Formal partnerships can still serve a vital role in collaboration and often exist as part of larger business ecosystems.
- Cross-functional teams are another important source of digital innovation. Not only are digitally maturing companies more likely to use cross-functional teams, those teams generally function differently in more mature organizations than in less mature organizations. They’re given greater autonomy, and their members are often evaluated as a unit. Participants on these teams are also more likely to say that their cross-functional work is supported by senior management. For more advanced companies, the organizing principle behind cross-functional teams is shifting from projects toward products.
- Digitally maturing companies are more agile and innovative, but as a result they require greater governance. Organizations need policies that create sturdy guardrails around the increased autonomy their networking strength allows. Digitally maturing companies are more likely to have ethics policies in place to govern digital business. Policies alone, however, are not sufficient. Only 35% of respondents across maturity levels say their company is talking enough about the social and ethical implications of digital business.
There are some ways companies can consider them digitally mature. First, they should look beyond their organization to drive innovation. The study said, “Digitally maturing companies identify opportunities to foster and participate in innovative ecosystems, which are less formal and more flexible than traditional partnerships.”
Some of these ecosystems are platform and product-driven, like Amazon, while others provide a way to tap into new innovations or market opportunities, like the MetLife-Techstars accelerator described in the introduction. Because ecosystems involve less control than traditional partnerships, managers must communicate clear objectives to employees and create governance practices to guide participation.
Secondly, they can reassess how their company cultivates and supports cross-functional teams.
Cross-functional teams are an integral part of the innovation efforts of digitally maturing organizations. They function best when managers pair team autonomy with clear team objectives that are understood both by the members and by the stakeholders working with them. For example, CarMax’s use of teams to drive new business opportunities.
Thirdly, they should establish ethical guardrails as they drive innovation in the company. “Start talking about the importance of ethics as an enabler of growth rather than as a constraint. Incorporating ethical considerations into product design can enable an organization to get ahead of potential problems before they materialize,” the study says, adding that employee enthusiasm for ethical and social issues can be leveraged to build a culture of trust. This not only benefit your brand but also attract new talent and new external partners who want to work with you.
Finally, the study finds that the goalpost of digital maturity keeps moving. Because internal collaborations and ecosystems enable companies to be not only more innovative but more agile as well, businesses will most likely continue to expand their participation in these arrangements. Nonetheless, the study sees ethical challenges are a risk as organizations innovate and transform at an accelerating pace. Companies that take the time to understand this risk and prepare for it by establishing ethical guardrails to support their path forward are in a better position to reach their digital maturity curve faster and safer.