That’s how much organizations will spend globally on digitalization or digital transformation in the next four years, according to IDC, a worldwide market research and consultancy based in the U.S. For perspective, the figure is as large as the GDPs of France and the UK combined.
It’s a massive sum, in other words. And it’s only getting larger. In its 2019 “Pivoting to Digital Maturity” report, global management consultant Deloitte found that the average corporate digital transformation budget increased 25 percent in 2019. What’s more, Deloitte found that the number of organizations that committed to spending at the higher end of the spectrum on digitalization in 2019 — at least $20 million per annum — is twice the number as the year before.
Unfortunately, a significant portion of the money spent on digital infrastructure and services won’t produce the outcomes companies hope. Some spending, in fact, is going wasted. Consider a 2019 finding from the American global consulting giant Accenture, which concludes, “Only 13 percent of businesses have realized the full impact of their digital investments, enabling them to achieve cost savings and create growth.”
We at Zalaris believe we know why: Despite their best intentions, many companies do not include the one department within their organizations that has the greatest capacity for ensuring digitalization success. That department, of course, is HR.
HR is the single place where people, organizational alignment and technology come together to advance business success. Instead of following or merely supporting digital transformation initiatives, HR, we believe, can help lead them. The reason is obvious: when properly supported, HR can realise the digital aspirations of other corporate functions that depend on talent, process and technology investment.
Let’s consider each for a moment.
Solving the Talent Conundrum
By definition, digitalization means doing new things in different ways. Be it developing new revenue streams, automating manual processes or embracing new innovations, digital transformation depends on leveraging new capabilities and understandings to create new business value.
Where will these new capabilities and understandings come from? Research indicates that the overwhelming majority of organizations expect it to come from outside their four walls. Consider some recent findings amassed by the Kellogg School of Management at Northwestern University, one of the top 10-ranked business schools in American.
Kellogg recently found that 54 percent of organizations believe that a “digital talent gap is hampering their transformation initiatives.” What is more, 51 percent of organizations believe they lack talent with proper digitalization skills. Not surprisingly, six in ten employers, Kellogg found, plan on hiring new talent “with skills relevant to new technologies.”
As an HR professional, these findings present new challenges and opportunities. No doubt you will be tasked to look in different places for new talent. You’ll also be pressed to consider different types of candidates. Some potential hires, for example, may be “gig economy” workers who are not interested in full-time employment but seek exacting technology challenges instead. This may force you to rethink your company’s traditional reward and management structure.
Digitalization will undoubtedly force you to reconsider your company’s corporate culture. The MIT Sloan School of Management counsels that you “develop a culture of innovation within a framework of accountability that empowers people to communicate, work in teams, share information, and share customers.”
Does that sound like your workplace? If not, you need to make some changes.
Aligning for New Business Success
Who should lead digital transformation within an organization? No one seems to agree.
The global management consultant McKinsey has said “digital transformation is now on the CEO’s shoulders.” Forbes Insight has suggested a company’s Chief Marketing Officer (CMO) is best positioned to lead a digital revolution. Still others suggest a Chief Digital Officer (CDO) is the best person to lead a digital transformation.
In the end, who leads digital transformation matters not a fig if HR is not involved. Think about it: By design, digital transformation is an opportunity to create new value by marrying the trapped potential of existing data within your organization with the new capabilities afforded by digital innovation. Doing so successfully will require an organization ensure that data is properly managed and secured, and that innovation adoption is done in a responsible manner that accommodates and empowers all shareholders. Only one function in an organisation has the wherewithal to achieve these aims, HR.
Don’t just take our word for it. Consider what the Harvard Business Review concluded in 2019 in Digital Transformation Is Not About Technology: “…if people lack the right mindset to change and the current organizational practices are flawed, [digital transformation] will simply magnify those flaws.”
Proceeding blindly ahead with digitalization without organizational alignment and process reform is a formula for disaster, in other words. So regardless of who is leading digital transformation within your organization, success won’t come easy without the heavy involvement of HR.
Which brings us to technology.
Putting Technology (Responsibly) in the Driver Seat
Drones. AI Marketplaces. Bitcoin. Along with 5G networks, quantum computing and deep learning networks, these innovations were not on the radar screen of most organizations until a mere few years ago. And yet these and other emerging technologies will be at the heart of digital transformation in a mere few years.
Is your organization prepared? As stated above, leveraging these to help your customers will require new talent, improved organizational alignment and yes, new investment in technology capabilities that will support the implementation of these concepts.
Take your own department, for example. If you agree that you will need to find new talent to achieve your digital ambitions, then ask yourself if you have the necessary technologies to properly recruit, onboard, compensate, reward, train and retain new talent.
What I am getting at is this: if HR is going to play a role in leading digital transformation, then HR itself must lead by example. It must embrace modern technologies that transform the workplace.
My colleague Stephen Burr, Head of Professional Services at Zalaris, likes to say the role we can play is by “reducing the cost, complexity and risk of payroll processing, which is a core business function so that the organisation is able to focus on moving and supporting the business.”
I agree. But there’s so much more. Transforming HR for the next decade is about building HR portals for the next generation of mobile, full-and-part-time workers; it’s also about leveraging analytics and reporting, and integrating with global accounting solutions so that organisations can operate with agility and confidence.
Alas, when I look across the landscape of business customers, I see foot-dragging when it comes to moving to the cloud, hesitancy when it comes to embracing new SaaS capabilities and uncertainty of how to secure data and applications.
It doesn’t have to be this way.
Consider the words of Dr. Brian Kropp, group vice president of Gartner Research & Advisory, who recently said, “Ultimately, digitalization is a revolutionary force in HR. If you don’t adapt, you will find hiring costs soaring, retention falling and productivity flatlining. But if you can identify the challenges and deploy digital solutions to each issue, the potential for improvement is sensational.”
We at Zalaris couldn’t agree more.