Five Essential Digital Business Capabilities

No matter how you look at it, digital is accelerating everything around us. It has become the catalyst for change as business leaders embrace new ways of working, as well as new go-to-market and operating models. In our most recent Key Issues Study, enterprise digital transformation catapulted to the No. 1 priority for 2021, up five spots in the ranking from the previous year. More than one-half (53%) of companies report having a major digital transformation initiative on the enterprise agenda, and 65% of these companies have accelerated their digital programs in response to the 2020 crisis.

While the mandate to accelerate digital transformation may be clear, the process for accomplishing it remains a challenge for most organizations. Which digital capabilities should your procurement organization develop? And how will you prioritize investments in new technology in order to deliver speed to value? This paper offers an approach for answering those questions.

Digital Excelleration® is About Speed to Value

The term “digital transformation” has come to represent a whole host of technology and business transformation initiatives. But what does it really mean? Simply stated, it is the process of unleashing digital technologies to create new and enhance existing business capabilities, processes, and experiences that meet rapidly changing requirements — with speed to value of the essence.

Unlocking speed to value has been a goal for some time; however, it took on a new and more existential meaning during the pandemic. This management maxim refers to the need for continuous innovation of products, services, and operations that yields demonstrable economic and experiential — think ease, transparency and speed — business results.

For many organizations, the business disruption triggered by the pandemic was a real digital wake-up call. Out of sheer necessity, companies made massive changes in weeks — sometimes days — that otherwise would have taken months to plan and execute. Effectiveness of response was directly correlated with digital maturity or the ability to quickly employ technology to adapt the business model to new needs.

As organizations continue to respond to the impact of the pandemic, The Hackett Group has identified five digital business capabilities required to succeed:

• Digital engagement
• Digital workforce and organization
• Digital service optimization
• Digital ecosystem
• Analytics-driven business insight

1. Digital Engagement

A flood of technology innovations has transformed the way companies and business services functions engage with customers, suppliers, partners, and other stakeholders — and the field is still rapidly evolving. These technologies can optimize stakeholder experiences by digitizing and integrating interactions across channels and leveraging data. Broad-based capabilities for digital engagement encompass front-office automation, customer self-service, e-commerce and social media platforms.

2. Digital Workforce and Organization

Technology has changed the nature of work by automating routine tasks, digitizing workflows, connecting co-workers in virtual teams, and untethering and empowering knowledge workers with personal productivity tools. These capabilities utilize digital tools and platforms to maximize productivity, intellectual property creation, and the value contribution of both individual workers and the teams in which they work. Most of today’s digital capabilities enable workers through remote access to applications and self-service provisioning; knowledge management tools; workforce collaboration platforms such as Microsoft Teams, Zoom and Slack: and other means of communication and engagement.

3. Digital Service Optimization

Historically, business process automation has never fully lived up to its promise due to the inherently dynamic nature of business processes and operating models, and the inability of business applications to adapt to changes at the speed at which business operates. Without a major overhaul of technology platforms and upgrade of IT capabilities, this agility gap will only widen. Digital service capabilities center around the use of content and process digitization, business process management, automated workflows and approvals, robotic process automation to maximize the efficiency and effectiveness of business services, and execution of underlying processes.

4. Digital Ecosystem

Traditional organization structures and value chains are evolving into networks of digitally connected resources, service providers, and consumers. The business-to-business networks, knowledge networks and internet of things (IoT) are examples of emerging digital ecosystems. Within a knowledge network, companies may, for example, crowdsource innovation, collaborate with strategic suppliers to innovate, or incorporate customer feedback into product development. An ecosystem based on the IoT may enable entirely new business models, products or service offerings.

5. Analytics-driven Business Insight

Superior ability to mine data for business insight is an important — and for many industries, the most critical — competitive differentiator. Digitally native companies like Uber, Amazon, Facebook and Google optimize their service offerings almost in real time based on analytics-driven insight. Established industrial age firms like Caterpillar, GE and Bayer are redefining their business models, generating analytics-based revenue streams. Consumer packaged goods giants like Unilever and Procter & Gamble compete based on the analytical capability of their marketing functions.

by Laura Gibbons and Timothy Yoo of The Hackett Group
Available for download with permission.