Australian companies have failed to digitally scale: Gartner

Australian companies have failed to digitally scale: Gartner

Appetites for new business models are low, ecosystems are being underused and workforces are unprepared

A meagre 8 per cent of Australian enterprises are getting results from their digital transformation activities, according to a new report.

The research, Digital Business Transformation: An Australian Perspective, published by Gartner’s research director Jenny Beresford, found that our ambition surpasses performance in transformation efforts.

Beresford spoke to 372 organisations (90 in Australia) for the research survey which also discovered that organisations here underestimate the risk of technology adoption. Their appetites to experiment with new business models is low, ecosystems are being underused and undervalued, and workforces are unprepared for digital business.

Beresford said that two-thirds of Australian organisations are transforming in some way. But based on Gartner’s discussions with local execs, she estimates organisations that are really transforming their business models, a necessary step, is closer to 10 per cent. The majority of digital business initiatives optimise existing business models, Beresford said.

Most (81 per cent) of survey respondents rate themselves 5 and above on a scale of 1 to 7 in strategy and planning for digital business but only 8 per cent say their organisation has scaled a digital business, the research found.

“Scaling is the acid test,” said Beresford. “Only a digital business that scales can materially improve the organisation’s financial performance. To survive and thrive in digital disruption, enterprises need to look at today’s top performers, those that excel at strategy and planning and have demonstrated that they can scale a digital business."

Only 7 per cent of Australian companies fit that description now, and enterprises that are still working through the first two phases are already behind, and losing ground to those in their space that are scaling now, Beresford said.

Underestimating risk

Meanwhile, half of the respondents in Australia don’t see the risk that digital disruption poses to their revenue and customer experience. This leaves them vulnerable, said Beresford.

“Once digital revenue in a sector hits 20 per cent, digital transformation unfolds rapidly,” said Beresford. “By that point, it may be too late for a conventional enterprise to respond. Prudent enterprises will experiment with, and develop, their own digital products and business models before the transformation occurs.”

A low appetite

Beresford said there are four types of platform business models. First, a collaboration model amplifies existing relationships in a business ecosystem. Second, an orchestration model enables different components to be brought together to deliver combined value.

Third, a creation model allows participants to build new value, based on building blocks and infrastructure provided by the platform. Fourth, a matching model matches supply with demand or providers with consumers (Airtasker, Alibaba, Amazon and Uber).

The largest proportion of respondents (43 per cent) use the most conservative collaboration model with only 21 per cent using the matching model. One per cent didn’t have any of the models in place today.

Many use the models internally among staff rather than privately with their supply chain partners or publicly (open to any participant).

“For example, 43 per cent of Australian respondents say they use the collaboration business model internally, compared with 17 per cent who use it publicly. Digital business will require exploring more types of business models and extending their use outside the enterprise,” Beresford said.

Ecosystems undervalued, workforce not ready

Most respondents reported that their digital business ecosystems consisted of familiar participants such as employees, customers and developers. Less familiar types of partners such as a startups, competitors and other organisations outside the tech industry appear less often. Employees are a valuable ecosystem but scaling digital business requires more; successful digital businesses are tapping into their customers, developers, digital giants or even competitors to scale, Beresford said.

“More worrying is that respondents expect their commitment to include various parties in their digital business ecosystems to go down over the next two years. In fact, ecosystem participation will have to go up as digital business becomes more important. The number and variety of partners will also need to increase,” Beresford said.

Finally, most CIOs should make “digital dexterity” – the ability and desire to exploit existing and emerging technologies for better business outcomes – a priority because they risk being held accountable for corporate failure in this area, Beresford said.

A digital dexterity program has to improve the organisation’s skills and culture, not just its workplace technology, Beresford said. About 54 per cent of respondents said their organisation had no formal program to systematically and continually boost pragmatic workforce skills.

“Thus, many digital dexterity programs do not deliver what the enterprise needs for digital business success. CIOs should revamp these programs so that they do,” Beresford said.

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