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By Fred Geyer, Senior Partner at Prophet, a leading growth and transformation consultancy and Joerg Niessing, Senior Affiliate Professor of Marketing at INSEAD,
2020 digital transformation plans were filled with upheaval because of Covid-19. B2B organisations made drastic changes by shifting to remote work, digitising customer offerings and moving commerce online. Digitisation planned to take years happened in months.
A new study of 170 senior B2B transformation leaders and C-suite executives by Altimeter@Prophet revealed that a given B2B company’s Covid-19 response and their level of digital maturity were the most important drivers of their digital investment priorities, ways of working and initiatives in 2020.
Substantial Operational Shifts Due to Covid-19
80% of respondents reported working from home more than before the pandemic. 48% reported increasing their virtual delivery of products or services. In the face of Covid-19’s threat to revenue and operations, 43% of respondents reported increases in investment in growth initiatives and 48% increases in digital transformation investment (see Figure 1). Although intuitive, we should not overlook the transformative impact on future digital behavior these findings may represent. The key implication for B2B transformation leaders is to think through the lasting changes that are happening among their customers and adjust transformation plans accordingly.
Figure 1: The Organisational Impact of Covid-19
“What impact has COVID-19 had on how much your organisation is doing each of the following, compared to what you did before the crisis?”
(Base: 170 B2B respondents)
Covid-19 Exposed Significant Gaps in Digital Selling Capabilities
80% of B2B respondents reported gaps in digital-sales readiness. 42% found those gaps to be significant (see Figure 2). Plugging the gaps is clearly a key priority for B2B leaders but will that be sufficient? Many companies may need to consider a more significant digital selling shift that we’ve described in our book The Definitive Guide to B2B Digital Transformation. The shift depicts how digital marketing and sales work together to generate demand from new and existing customers.
Figure 2: Covid-19 Digital Selling Gaps
“What has the impact of COVID-19 been on using digital tools to conduct sales with clients?”
(Base: 170 B2B respondents)
Marketing Transformation Continues During the Pandemic
77% of B2B companies are still working to improve their digital marketing operations and a quarter are accelerating their transformation programs (see Figure 3). 23% are continuing their marketing digital transformation, but with less investment due to the pandemic, suggesting that they now have to do more with fewer resources. Companies continue to evolve technologies and practices to deliver what have become mission-critical operations. It makes sense to accelerate optimised web, mobile, and e-commerce channels, personalised digital outreach, and virtual selling because they are so important in the absence of in-person selling caused by the pandemic. Transformation leaders must think through how building digital marketing capabilities to address the crisis can turn into leverageable assets in a post-pandemic environment.
Figure 3: Covid-19 Impact on Marketing Transformation
“What impact has the COVID-19 crisis had on your plans to improve or transform your marketing operations?”
(Base: 170 B2B respondents)
Five Stages of Digital Transformation Maturity:
Digital maturity was determined by evaluating the adoption of digital practices across five areas: Leadership and culture, customer experience, marketing and sales, technology and innovation, and data and artificial intelligence. We assessed a total of 26 criteria, assigning scores ranging from one (lowest level of maturity) to five (highest level of maturity) to arrive at average scores in each area and a total digital maturity score for each respondent. To understand the impact of digital transformation maturity, we grouped all of the respondents into one of five stages of transformation based on their maturity scores (see Figure 4).
Figure 4: Stages of Digital Transformation Maturity
14% 15% 48% 12% 12%
(Base: 170 B2B respondents)
72% of B2B companies have moved past the initial stages of digital transformation maturity and are investing in digital technology and data to accelerate growth and improve productivity. Two thirds of these companies are in stage three where they are focused on operationalising the use of platforms and data at scale and putting them to work to drive growth. The third in stages four and five are characterised by efforts in integrating operations to deliver more personalised experiences and using emerging technologies such as AI to redesign customer experiences and offer digital services to accelerate growth. Time is running out for the laggards in steps 1 and 2 while those companies in stage 3 must turn their efforts into impact so they can justify their investment and continue to accelerate progress.
Most Continue Transformation Initiatives – Digitally Mature Are Accelerating
Organisations that are furthest down the path of digital transformation have been able to better respond to the pandemic — and also take a more opportunistic approach compared to those who are still struggling to put in place basic digital capabilities. While 82% of stage one through four organisations are continuing or pivoting their transformation efforts, seventy percent of the most digitally mature companies are accelerating their digital transformation efforts (see Figure 5). They recognise that disruption is a time to step forward not back and have the confidence in their digital capabilities to capitalise on the situation. The gap between the digitally advanced may grow further providing urgency for those in stage three to move faster and reward for those in stages four and five to double down on their investments to generate competitive advantage.
Figure 5: Transformation Initiative Shifts Due to Covid-19
“How have your digital transformation initiatives shifted because of the spread of Covid-19?”
(Base: 170 B2B respondents)
Application of Digital Tools Varies by Maturity Stage
Looking at the use of digital tools by maturity reveals significant differences in the use of tools on behalf of customers and to support organisational leadership and culture (see Figure 6).
Technology on behalf of customers:
Stage four and five companies stand out in their use of AI for personalisation and in super responsive/proactive reach out to customers based on their actions. Stage three companies demonstrate progress in using conversational technologies (chat bots, digital assistants, voice agents) and in mapping customer journeys to a much higher degree than less mature companies.
Organisation leadership and culture: Stage four and five companies show a marked increase in leadership connecting transformation to strategy and in prioritising employee engagement. Stage three companies join their more mature peers in the adoption of agile business practices.
The key implication for transformation leaders is to ensure they are focused on putting technology at the service of customers and in the command of empowered teams.
Figure 6: Application of Digital Tools by Maturity Stage
(Base: 170 B2B respondents)
Technology Priorities Reflect Level of Digital Transformation Maturity
Because digital transformation initiatives differ by digital maturity, the technology priorities also vary significantly depending on maturity. More advanced in their usage of and reliance upon data, stage four & five organisations are more likely to focus their investments on technologies that support cohesive, data- enabled initiatives — such as machine learning/artificial intelligence, cybersecurity, and 5G to (see Figure 7).
Given the prevalence of distributed work, we also added audio and video conferencing technologies to the list this year. Overall, 15% of all respondents said that conferencing was a top priority, with 24% of organisations at the lowest digital maturity, stages one and two, naming it as one of their top priorities.
Figure 7: Top Technology Investment Priorities for 2020 by Maturity Stage
“What are your top technology priorities? Select up to five.”
(Base: 170 B2B respondents)
Digital Transformation Sponsored Primarily by CIO/CTOs and CEOs
Because both technology and business transformation reside at the heart of digital transformation, it’s natural for the CIO/CTO, CDO, Chief Digital Officer and the CEO to sponsor or own responsibility for leading it (see Figure 8). Together, the CEO, CDO and CIO/CTO roles provide leadership for digital transformation among 80% of responding companies.
CMOs, CXOs and CINOs are rarely the executive sponsors yet most digital transformations are propelled by shifting to digital marketing, remaking customer experiences or pivots in innovation and business model. This leaves open the question of how these customer facing roles should be included in transformation leadership.
Figure 8: Digital Transformation Leadership
“Which executive officially owns or sponsors the digital transformation initiative?”
(Base: 170 B2B respondents)
Implications for Action:
The major implications from this report are rooted in digital maturity:
First, when it comes to taking advantage of business opportunities, digital maturity matters. Digital leaders can afford to invest in innovation and use the disruption created by events like Covid-19 to their advantage. The lesson from these digital leaders is to not lose sight of the need to invest in digital transformation, even when budgets tighten. While no one can predict future moments of opportunity with certainty, they will continue to come — creating chances for digital leaders to further outperform digital laggards.
Second, more than ever, digital maturity is about building outward facing applications, digitising marketing and sales, and driving innovation to increase revenue. Organisations without mature digital capabilities in a world that has shifted more digital than ever will lack revenue engines.
Finally, digital transformation is about the most senior levels of leadership. For every CIO/CTO entrusted with the responsibility, there is a CEO who thinks business when they think digital and has taken responsibility upon themselves for driving digital transformation. Collaboration between these two key leadership roles – supplemented by CDOs, Chief Innovation Officers, and Boards – will be critical to ensure that companies remain on the path to business transformation through digital.
