Digital maturity

It’s been well accepted by CEOs and senior executives that the world is indeed getting more volatile, uncertain, complex, and ambiguous brought about by fast changing consumer preferences, break-neck speed of technological advancements, and the entry of nimbler technology competitors.

That’s why globally and in the Philippines more recently, CEOs and businessmen have embraced digital and how it can be more of an ally to respond to the ever-changing world. Hence, digital transformation (DX) as a strategic action to accelerate business processes, competencies, and business models to fully leverage on the changes and opportunities of digital technologies and their impact in a prioritized way, has become imperative for senior executives.

More recently, senior executives realized that DX is not about technology as previously misinterpreted, but about culture of the organization and mindset of the employees. Hence, DX should be treated as a strategic action that the CEO champions and considers execution and organization culture, rather than a functional IT strategy.

But in our consulting work, we have seen the huge gaps of organizations in terms of their digital maturity, which is the process of how organization learns to respond appropriately to the emerging digital competitive environment. It is an organization’s level of preparation and readiness to embark in or progress with its digital transformation strategies and programs.

Yet, it’s also not something that CEOs, business leaders, and employees will instinctually know how to do. Why?

This is because digital maturity is more of organization psychology, mindset, and culture. It draws on a psychological definition of “maturity” that is based upon a learned ability to respond to the environment in an appropriate manner. Digital maturity is about adapting the organization to compete effectively in an increasingly digital environment.

In our digital transformation consulting practice, digital maturity consists of five dimensions: 1) leadership and strategy, which spans from lowest maturity, i.e. having no strategy and no clear ownership of the digital initiatives to highest maturity, i.e. having clear strategy and ownership; 2) execution and delivery, which ranges from less than 40% of processes digitized to more than 75% of processes digitized; 3) customer experience, which extends from ad-hoc updates, no strategic plan, and slow to deliver to ground-breaking initiatives continually delivered; 4) organization and culture which range from continual resistance from parts of the organization and business as usual thinking prevails to having no barriers and we having a successful digital transformation program fully supported by the organization; and 5) digital platform which range from the lowest where there’s no integrated platform and many separate applications in place to the highest where there’s fully operational and integrated platform through which the organization delivers all of its digital solutions.

One interesting dimension that we always observe is in the area of leadership and strategy. In our study, we ask the question: “Who owns implementation of digitization strategy?” Most organizations in the Philippines showed a mix of different answers, ranging from the CIO, the chief digital officer, the chief marketing officer, the business unit, and the CEO. Lack of clear ownership of digital transformation in an organization is a clear sign of a low digital maturity.

With all these five dimensions, we then rate the digital maturity of an organization — from the lowest being “emerging,” moderate is “progressing,” and most digitally mature as “optimizing.” A big majority of Philippine companies display an “emerging” digital maturity. These companies are in the infancy stage of their digital journey.

A handful of companies in the banking and telecommunication sectors display “optimizing” digital maturity. A celebrated case I always cite is how UnionBank of the Philippines is able to reach high digital maturity in a just a short span of time, and the financial gains are nothing short of outstanding.

The digital maturity model is an exhaustive one that measures an organizations readiness. Hence, the CEO needs to own and orchestrate the many parts of the digital transformation journey.

Reynaldo C. Lugtu, Jr. is the co-founder and CEO of Hungry Workhorse Consulting, a digital and culture transformation firm. He is the chairman of the Information and Communications Technology Committee of the Financial Executives Institute of the Philippines. He teaches strategic management in the MBA Program of De La Salle University. The author may be e-mailed at rey.lugtu@hungryworkhorse.com.