Within the concept of digitalisation, an obvious question arises: where do we stand as an organisation with respect to our ability to take on a digital transformation? This is especially interesting as digitalisation not only shifts core competencies towards information technology (IT) and data analytics-enabled products, services or business models, but it also changes the entire operating sphere of a firm (e.g., customers, competitors and markets).
Moreover, in the digital age disruptive innovations can cannibalise existing products and services more easily than ever.
Consequently, a company needs to be more innovative regarding customer satisfaction, more agile towards market changes and customer requests and more technology-driven to provide sufficient digital solutions. From this perspective, a company needs to reanalyse all of its competencies if it is to be fit to survive and lead in the digital age. This perspective can focus on internal or external attributes. The approach in this book is to focus on the internal attributes, and hence the capabilities of the firm itself.
We call this analysis a digital readiness assessment.
In the first place, digital readiness must address customer or user centricity, creating and operating new business models and entire organisational aspects such as a fast-failing culture or agile ‘intrapreneurship’.
We therefore recommend using five layers of digital competency to analyse digital readiness (see table below).[1]
Within these layers we suggest digital dimensions that can be assessed. The Customers and Users layer focuses on the interaction with customers and users and how well they are integrated into development processes. In the Business Models, Products and Services layer, available methods and skills are pooled to develop products and services, addressing how well these can be executed within the organisation to extend the core business with digitalisation. The Organisation and People layer refers to the core of the organisation, addressing cultural, employee or management topics.
The Processes layer is included because digitalisation requires a high level of automation as well as flexible processes to provide a stable backbone for digital customer interfaces and interactions.
The Technology layer contains many essential enablers for digital transformation and should definitely be assessed for its readiness.
It needs to be pointed out that these layers and dimensions must be customised according to the specific industry, market situation, objectives, etc., of the enterprise. The sections on digital capabilities, skills and culture later in this book give additional insights.
We recommend a qualitative approach to applying the digital readiness assessment.
Interviews provide the data required for the assessment.
It should certainly include the perspectives of a responsible person, most likely at the middle or senior management level, but can also be extended by observing and interviewing employees in their working environments. Furthermore, the recommended qualitative approach allows open questions and discussions on all aspects. For example, one can ask a product manager about the available technology and its suitability for his/her needs, and not just the responsible person in the IT department. The information can be synthesised by clustering the interviewees’ statements and observations (e.g., through qualitative data analysis). This should allow various perspectives on the layers and dimensions, and also reveal whether there is a misalignment or difference in perspectives.
For example, would two different divisions agree on the level of customer centricity? In this context, having the assessment guided by a third party might also provide a more objective view. In order to establish a measure of readiness, the layers or dimensions can be rated on scales, where many positive answers would result in a high readiness level, mixed findings a medium level of readiness, and many negative answers a low readiness level. The resulting ‘as-is’ state of digital readiness will reveal areas demanding action (e.g., there might be not enough customer- or user-centric interaction and development). In this way, the assessment can be helpful in planning and guiding the transformation process. In designing the assessment, it is good practice to have a potential transformation process in mind.
The assessment dimensions will function as KPIs that help steer the process.
To shape this transformation process, we suggest a step-by-step use of the assessment because it identifies areas that need attention and action. A governance framework is also recommended to successfully manage the transformation. In this regard, the digital matrix presented in the ‘Modelling for Digital’[2] book provides an approach that can be built based on the presented layers and also adds an external perspective of the market environment. The assessment can be regarded as the first step of the governance process.
In conclusion, applying the digital readiness assessment provides a first impression of the current status regarding the digital readiness of an organisation. It can further support the transformation process by defining action priorities, and sets the basis for the internal perspective on the governance of the transformation progress.
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[1] Österle, H., Blessing, D.: ‘Ansätze des Business Engineering’, HMD, Vol. 241, pp. 7-17, 2005.
[2] Krafzig, D., Deb, M., Frick, M.: ‘Modelling for Digital – Best Practices for Digital Transformation in Everyday Project Life [Practitioner Edition]’, Digital Cookbook Series, Dr. Dirk Krafzig, 2020.
