Despite good intentions, few companies in the Gulf Cooperation Council countries have successfully implemented a digital transformation strategy. They need now to move from a conceptual appreciation of the importance of digitization to a focus on execution.
The importance of digitization in business is now widely accepted. Corporate leaders believe that digitization can be a major boost to revenue and profitability. How companies have responded, however, has varied greatly, with some disappointing results.
Some companies have implemented effective plans for digitization that fit their own commercial ambitions. These efforts have taken various forms. Others have introduced a comprehensive business-wide digital transformation, involving a fundamental overhaul of the company’s business models. One example is how the logistics company C.H. Robinson ventured into customer service in the supply chain. The company has developed a smart platform, which allows its customers to take full control of their supply chain. Customers can transport goods around the world with more precision, collaborating efficiently with internal teams and their own clients, and making swift decisions based on real-time data. Using this platform, companies can anticipate challenges and opportunities in their supply chain.
However, the corporate approach to digitization has often not been so far-reaching. Some companies have embraced only a tactical adoption of digital technologies to target specific business needs. Indeed, the execution of digital transformation programs often fails completely. In some cases, very specific approaches to digitization have fallen out of fashion even as they were being developed, victims of the ferocious speed of change. This misfiring is a global phenomenon, with companies in the GCC countries equally affected.
A 2018 Strategy& survey showed that GCC executives acknowledge the importance of digitization, and have sought to transform their operations accordingly. However, despite significant investment, year after year, few clear-cut success stories have emerged. According to The Dell Technologies 2018 Digital Transformation Index, more than 90 percent of businesses in Saudi Arabia and the United Arab Emirates (UAE) are facing major obstacles in their efforts to undertake a digital transformation.
Several obstacles or mis-judgments have hindered progress. Rather than concentrating on the commercial goal of the digital transformation, too many companies have fixated on the technology itself, which soon becomes obsolete in a fast-moving environment. Moreover, the prevailing corporate culture has often worked against fundamental change, being incapable of generating and supporting new ideas. For their part, leaders have typically shied away from the inevitable risks associated with digital transformation.
The 2018 Strategy& survey of executives at global manufacturing companies revealed that digital transformation has been on every board’s agenda for a number of years. However, nearly two-thirds of global manufacturing companies have not seen any results from their digital transformation efforts. In Europe, the Middle East, and Africa, only 15 percent of companies in the survey plan to establish mature digital ecosystems in the next five years. Furthermore, just 5 percent of companies in this region have implemented critical technologies that propel digitization, such as integrated end-to-end supply chain planning, a smart environment using the Internet of Things (IoT), or manufacturing execution systems.
There are a number of underlying reasons why these plans have not lived up to hopes and expectations.
First, the approach of many companies has been misguided, focusing exclusively on the technology itself. Instead, they should have been defining the business challenge that the digital transformation is supposed to tackle. Most industries cannot keep up with the rapid pace of development of digital technologies. Consequently, companies need to ask if they should abandon their existing investment in a technology that has become outdated, and instead spend their money on a next-generation wave of solutions. As such, they often have no clear idea of what digital means, nor of the potential economic benefits from digitization.
Second, digital transformations often encounter difficulties because of an unhelpful corporate culture. Organizations need to change their culture so that it becomes open to entrepreneurship and accepts more imaginative leadership styles. This culture needs to be flexible, capable of learning from failure and responding accordingly. In the same vein, organizations need to be careful that rigid hierarchies do not prevent successful digital transformation. It does not matter where an idea emanates from, as long as it promotes innovation and creativity, or facilitates rapid decision making and prudent budgeting, or boosts problem-solving capabilities within teams.
Third, companies have tended to be risk-averse when it comes to digital transformations. Companies in the region already face multiple business challenges that bring considerable uncertainty to daily operations. As such, senior leaders have had little appetite for the additional risks associated with digital transformation.
There are five ways in which companies can catalyze the successful execution of a digital transformation strategy.
Precise focus on the objective
Companies need a precise focus for digital investment, targeting a particular business area for development and spelling out exactly which financial metric the investment seeks to improve. The precise focus allows a company to allocate resources and manpower in a timely and efficient way.
Proper ownership of transformation
Major digital transformations require commitment and leadership from senior executives with the authority to act. This strong sponsorship could involve senior management taking control of digital transformation within their daily agenda.
A new performance management model
Performance management is an ongoing process that seeks to ensure that investment decisions are based on only objective criteria. Companies need an objective performance management system before embarking on any investment.
Change management
Companies should improve their internal capabilities through extensive internal training, and recruiting and retaining staff with appropriate skills. Improved capabilities facilitate innovation within the organization, with employees as the originators and driving force.
Collaboration and partnerships
Companies need to collaborate and form partnerships with external organizations to gain access to specialist experience, information, or knowledge that may not be immediately available internally. The pace of digital change means that companies cannot depend entirely on the capabilities and ideas of their own employees.
Companies need to define the focus area for their digital transformation program after careful and objective analysis of their particular business needs and goals. To increase the chances of success, they need clear lines of authority and enhanced capabilities within the organization. Collaboration and partnerships with third parties can compensate for any lack of internal expertise or information. Once these catalysts for progress are in place, companies can look forward to a purposeful and successful execution of their digital transformation strategy.
This article originally appeared in the February 2020 issue of CEO ME.
About the authors
Jad Hajj is a partner, Jean Salamat is a former principal, and Sergey Yakimenko is a manager with Strategy& Middle East, part of the PwC network.
Related content
Connect with us
Menu