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Winning with Agility
How to transform your company
into a Digital Leader.
2The Digital Agility Study 2017 CONTENTS
Elvis Presley
A little less conversation, a little more action please,
All this aggravation ain't satisfactioning me
A little more bite and a little less bark.
3
03
04
06
08
09
10
13
15
19
22
CONTENTS
WHY AGILIT Y?
THE STUDY
THE DIMINISHING ROLE OF STRATEGY
KEY DRIVERS FOR SUCCESS IN DIGITAL TRANSFORMATION
#01 AGILE EXECUTION
High responsiveness to consumer needs and openness to fail
#02 AGILE LEADERSHIP
Accelerate speed of digital strategy execution
#03 AGILE ORGANIZATIONAL STRUCTURE
Effective internal and external innovation hubs
#04 RECRUITING AND DEVELOPMENT
To set free higher team performance
THE AUTHORS
4The Digital Agility Study 2017 WHY AGILITY?
Digital Transformation and Agility
- just buzzwords?
With the growing need for digital transformation across many different organizations
and industries, the idea of Organizational Agility has become a major buzzword and
is often seen as the secret sauce for winning in digital. Many top leaders see Agility as
a key enabler for flexibility, increased speed to market and finally as a weapon to beat
aggressive startups.
In our 2012 Digital Readiness Study we had already identified Agility as core driver
for business success, explaining 47% of the success in digital transformation (see
exhibit 1 – confirmed in our new study 2017). While the direct impact of having a
good strategy is not too valuable (17% of success), Digital Agility really makes the
difference.
Digital Agility drives
almost 50% of firm
performance.
EXHIBIT 1
Digital Agility as a key driver for firm
performance
Digital Agility as a key driver for firm performance
We understand Agility as “an organization’s ability to sense and respond quickly to
consumers' and market’s needs”. This capability is related to many different aspects
of a company’s organization, leadership and more (see exhibit 2).
5
EXHIBIT 2
Relevant dimensions of
Organizational Agility
Relevant Dimensions of Organizational Agility
Some, even large organizations, seem to be doing this better than others. Tesla for
example, in a recent effort was able to incorporate consumer feedback directly into
the car’s production line, within a timeframe of seven days.
Typically, Organizational Agility is one of the capabilities that startups bring to the
table based on their organizational setup, the fragile environment they live and work
in (lack of resources, threat of failure, etc.). But more and more incumbents and large
organizations try to copy agile work methods and tools. However, many leaders and
companies lack a full picture on the implications of building an agile company for
strategy, structure, culture, leadership and even recruiting and the work environment.
What does success look like in terms of “Agility”?
To answer this question, we have extended our 2012 study and built on the
dimensions of Organizational Agility outlined below.
Strategy
Leadership & failing culture
Recruiting & HR
Organizational structures
Market intelligence
Working methods
IT infrastructure & data
Organizational Agility
Digital
Transformation
Strategy
Digital
Agility
Firm
Performance
22% 47%
17%
The objective of our 2017 study on Digital Agility was to understand in more
depth what really drives business performance and success in digital and develop
recommendations for transforming businesses. We used the dimensions of
organisational agility as a starting point to derive key success factors and an
understanding of tools and methods that really work.
Only 8% of German
companies see their Digital
Transformation as a success.
6The Digital Agility Study 2017 THE STUDY
The objective of our 2017 study on Digital Agility was to understand in more
depth what really drives business performance and success in digital and develop
recommendations for transforming businesses. We used the dimensions of
Organizational Agility as a starting point to derive key success factors and an
understanding of tools and methods that really work.
While 72% of German
companies have a digital
strategy, almost 80% fail in
their Digital Transformation
because of a lack of agility.
Execution wins over strategy.
7
Digital Laggards (34% of the total sample)
Level 1
They act like prisoners and run their business more or less with a survival strategy, rather
passive, suffering from everyday inertia and having no success whatsoever in Digital
Transformation. Only 1% of the companies in this cluster would consider their Digital
Transformation as a success.
Digital Followers (43% of the total sample)
Level 2
They act like passengers and walk on pre-qualified paths only. They run the business
behind a certain “fear to loose” and make first steps in Digital Transformation by observing
in the Digital Transformation. They focus rather on explaining the past and are still scared
of making mistakes. Still, only 6% of the companies in this cluster consider their Digital
Transformation journey a success.
Digital Leaders (23% of the total sample)
Level 3
They behave like true players and show a high passion to win and learn. They are willing to
experiment, look for opportunities, accept errors and failure if they can conclude the right
learnings and are in general future-oriented. An astounding 66% of the companies in this
sample see their Digital Transformation already as a success.
Side note on study design: Sample includes around 500 (n=483) companies represented through middle and top managers with decision power in digital. Panel data
was conducted in Q4/2016 through an online questionnaire. Study design in collaboration with a graduate student team from the LMU University of Munich.
Based on the individual performance along the key indicators speed of innovation,
growth and profitability of the 500 companies interviewed, we split our sample in
three clusters.
72% of all organizations
in our sample have a
digital strategy.
8The Digital Agility Study 2017 THE DIMINISHING ROLE OF STRATEGY
But Digital Leaders not only have a strategy: they adapt it continuously, having an
agile “interpretation” of their strategy. We see a big difference between Digital Leaders
and Laggards: 81% of the companies in the leading cluster continuously
adapt their strategies to market developments, trends and other impact factors
(see chart below). This interpretation of strategy as a guiding principle, especially the
role of a strong vision, the ability and willingness to continuously adapt strategies, is
an important capacity of winning digital leaders.
Furthermore, the top management of Digital Leaders has substantial knowledge
around the relevant digital topics: In 82% of these organizations, top
management has the relevant knowledge (vs. only 25% in the group of the
Digital Prisoners).
Although we see strong differences in how Digital Leaders understand and practice
strategy vs. laggards, our data has shown no significant impact of strategy
on the success factors speed of innovation, growth and profitability. Success
in Digital Transformation is not driven by strategy – strategy needs to create the
burning platform, not more not less.
EXHIBIT 3
Digitalization's impact on
corporate strategy
Digital Laggards
Digital Followers
Digital Leaders
Our top management supports
and promotes corporate
digital strategy
Corporate digital strategy is
continuously adapted to new trends
and influences
Our management team has extensive
know-how on digital topics
0
50
100
67% 72%
87%
54%
66%
81%
25%
46%
82%
In contrast, other executional
factors have a more
important role for success.
9The Digital Agility Study 2017 KEY DRIVERS FOR SUCCESS IN DIGITAL TRANSFORMATION
AGILE EXECUTION
High responsiveness to consumer needs and openness to fail
EXHIBIT 4
Key drivers for a successful
Digital Transformation 39%
AGILE LEADERSHIP
Accelerate speed of Digital Strategy Execution22%
AGILE ORGANIZATIONAL STRUCTURE
Effective internal and external innovation hubs20%
RECRUITING AND DEVELOPMENT
To set free highest team performance19%
High responsiveness to
consumer needs and
openness to fail.
10The Digital Agility Study 2017 #01 AGILE EXECUTION
Strategy is important but execution wins digital transformation. After a period
of heavy investments in conceptualizing new digital products and business models,
we are now entering a time where fast execution embedded in a strong cultural
change, i.e. the openness to fail are becoming key drivers of success. Too many
companies have spent millions on strategic work, setting up heavy and complex
accelerator models, and investing in risky startups without creating sustainable
success. With many managers asking “why are we doing this”?
The Digital Leaders in our sample act differently. They have a very strong bias on
execution and on embracing a culture that supports the openness to fail and
actively reduces learning and failure anxieties (see exhibit 5).
EXHIBIT 5
Learning and survival anxieties as key
barriers in digital transformation
LEARNING ANXIETY
· Fear of losing power / position
· Fear of temporary incompetence
· Fear of subsequent punishment
· Fear of loss of personal identity and fear
of loss of group membership
SURVIVAL ANXIETY
· Fear of losing the job
· Fear of adapting too slowly
· Fear of not understanding the task
· Fear of consequence if no action
TASK TO LOWER LEARNING ANXIETY
Create psychological safety net to lower
learning anxiety by:
· communicating a compelling vision
· involving the learner beyond informal
training
· role modeling across all management levels
TASK TO GROW SURVIVAL ANXIETY
Drive willingness to act by:
· identifying the burning platform
· showing benefits of learning Agility and
impact on speed to market
· role modeling across all management levels
0
20
40
60
80
100
11
Embracing Agility requires to actively emphasize, nurture, grow, supercharge.
Charge means to bill (or attack but here we want this fear to get bigger than Learning
anxiety) “Survival Anxieties” and lower “Learning Anxiety”: Within the group of
Digital Leaders, 74% openly accept mistakes as an opportunity to learn
and improve. That is only the case for 24% Digital Laggards (see exhibit
6 below). Promoting a risk taking behavior, allowing mistakes, and sharing failure
experience during special meetings/events (such as Failure Fridays) is essential to
establish the right culture.
EXHIBIT 6
Accepting failure as an opportunity
In our company mistakes are seen as an opportunity
for change
In our company mistakes are accepted
Digital Laggards
Digital Followers
Digital Leaders
Also, Digital Leaders claim a significantly higher team spirit, empowerment and
responsibility. More than two thirds of them have established agile working methods,
stand-up meetings and open office spaces. Such changes seem to have a significant
impact, although they are just an expression of a more open working culture.
EXHIBIT 7
Agile work methods, meeting routines and
open office spaces as a success factor
Digital Laggards
Digital Followers
Digital Leaders
Our company offers employee training
on agile working methods
We try to keep our meetings short Our company provides flexible office
space to enable an agile work style
24%
54%
74%
33%
51%
77%
0
20
40
60
80
100
28%
48%
76%
27%
48%
66%
12%
31%
74%
12The Digital Agility Study 2017 #01 AGILE EXECUTION
Although agile working methods seem to become the latest trend in large companies,
not many of them really understand the fundamental ideas and how and when to
apply them. The unreflected establishment of pure scrum methodologies lead to
instability and misinterpretations. Agile is not the holy grail for large organizations!
However, Digital Leaders test prototypes (Minimum Viable Products) with customers,
worrying less about the imperfections and focusing more on the insights they may
gain (fail fast and fail cheap). Co-creation with customers, early testing with lead
users and consumers in general and MVP testing have become key differentiators
(see exhibit 8 below).
EXHIBIT 8
MVP testing and customer co-creation as a
key success factor for agile execution
Digital Laggards
Digital Followers
Digital Leaders
We collaborate closely with lead users
to identify customers’ needs at an
early stage
We develop new products or services
in close collaboration with our
customers and partners
Our company implements early
prototype testing in the market
IMPLICATIONS: •	Communicate a clear strategic burning platform - align and share an inspirational
vision as north-star to provide orientation
•	Make sure top managers act as role models for desired behavior and empowerment
•	Create a culture genuinely open to mistakes (lower learning anxiety)
•	Inspire passion to learn, lower anxiety of temporary incompetence
•	Drive speed and achieve quick wins using MVP testing with customers and other
agile testing methodologies (accepting failure to learn, optimize on the run)
•	Provide the right set of tools and trainings to run efficient meeting and project
– Interpret “Scrum” so it applies to the specificities of your organization (there
is no agile standard)
0
20
40
60
80
100
20%
42%
77%
22%
39%
78%
18%
34%
63%
Accelerate speed of
Digital Strategy Execution.
13The Digital Agility Study 2017 #02 AGILE LEADERSHIP
To support the agility of an organization, leadership style has to transform
dramatically. 60% of Digital Leaders agree that their leadership style has changed
during the Digital Transformation process, while this is only the case for 18% of Digital
Laggards. The keys to success in agile leadership are predominantly independence,
direct responsibilities and self-motivation of employees, i.e. of those team members
working on digital projects. (see exhibit 9 below).
EXHIBIT 9
Agile leadership to support self-motivation
and independence of teams
Digital Laggards
Digital Followers
Digital Leaders
Consequently, leaders need to adopt the so called “Host Leadership Style” in contrast
to the “old”, incumbent “Hero Leadership Style”. Host Leaders have to follow the
below principles:
EXHIBIT 10
Agile leadership principles
01
02
03
04
05
Create space for people
Support Response-ability in the team
Live the principle of co-participation
Open gates where needed
Spend time frontstage and backstage
0
50
100
32%
66%
83%
Leaders also need to make a significant change with respect to another behavior:
prioritizing the operational daily business at the expense of long-term company
goals (incl. resource allocation) is slowing down execution and putting agility at risk.
Yet, for most of the organizations in our sample, not only budgets but also human
resources are seen as a major hurdle to speed up the Digital Transformation process
(see exhibit below).
EXHIBIT 11
Key barriers to Digital Transformation
Budget, financial limitations
IMPLICATIONS: •	Specifically outline business models of future digital scenarios and allocate resources
accordingly
•	Empower top leadership to become host leaders who:
•	Foster and reward accountability, entrepreneurship and self-motivation
•	Provide support and remove roadblocks in all kinds of projects
•	Celebrate quick wins and milestones
14
Human resources Operational day-to-day
business
Lack of knowledge
Agile leaders need to set the right priorities and guide teams towards fast execution.
The necessary budgets and resources to sustain digital transformation must be
protected.
•	Leaders’ involvement has to be perceived as engagement and alignment yet not
as control
•	Foster and reward accountability by providing freedom within a framework
•	Clear definition and follow-through of financial incentives, and career paths
(i.e. within acceleration teams, new corps, etc.)
•	Leaders should impersonate business models that require investments and are
critical for long term success but with limited- and mid-term returns (preemptive
and grab-land strategy)
0
20
40
60
80
100
44% 43%
38%
26%
Effective internal and
external innovation hubs.
15The Digital Agility Study 2017 #03 AGILE ORGANIZATIONAL STRUCTURE
Triple Transformation
Our data shows that companies running a combination of internal innovation labs
and external accelerators are more successful in their transformation. 42% of Digital
Leaders run a combination of internal and external digital units. While this is only the
case for 21% of Digital Lagards.
Based on our experience of over a hundred projects related to digital transformation,
what we call the triple transformation approach best supports digital transformation
by combining managerial pull (usually provided by the CEO and/or the board) with
business unit push (e.g. accelerators). Triple transformation covers 1) the internal
core organization, 2) partially integrated units and 3) external units. Accelerators and
other organizational structures that work outside the core, i.e. on disruptive projects,
are fundamental to the success in transformation:
Creating an agile
organizational structure that
ensures flexibility and speed
in key strategic projects
is the third fundamental
driver for a successful digital
transformation, explaining
20% of the success.
Our data shows that overperforming Digital Leaders (10% of Digital Leaders) actually
run a combination of all three transformations simultaneously. Partially integrated
innovation lab for the more modest digital innovations and external unit for the
disruptive.
However, there is also a difference in the role of external units. Our learnings from
the numerous organizational projects we have done are now being verified by
data: Digital Leaders are using external accelerators not only as a playing field for
connecting with startups or spotting investment opportunities: Digital Leaders take
action and build substantial new products and services. They use the external unit
to develop faster, test with customers and launch new businesses in a protected and
agile environment (see exhibit 12 below for details).
16
EXHIBIT 12
Activities of external units
Digital Laggards
Digital Followers
Digital Leaders
Construction of
partnerships with
start-ups, partners
and software
developers
0
20
40
60
80
100
7%
48%
44%
16%
48%
36%
23%
27%
50%
16%
32%
52%
21%
36%
43%
Identification of
attractive investments
to speed up the entry
into digital growth
markets
Market launch of new
products and services
and measurement
of success
Customer/Market
testing of new digital
products and
services
Development and
design of new digital
products and
services
17The Digital Agility Study 2017 #03 AGILE ORGANIZATIONAL STRUCTURE
Agile external IT resources as a key enabler
Another key challenge related to internal and external innovation units is related
to IT resources and innovation. Even if key digital projects are handled in separate
units, many companies struggle to align IT architecture with their digital strategy. As
digital strategies are often driven by the board's office or strategy departments, their
lack of IT know-how leads to gaps in the architecture, scoping and budgets: Only 57%
of companies consider that their digital strategy and vision can be implemented and
executed by the existing IT architecture. Typically, a lack of CRM systems, marketing
automation, data analytics and big data know-how are the key barriers.
This is why most of the companies today need to rely heavily on expensive yet more
agile external IT resources (see following exhibit 13).
EXHIBIT 13
Need for agile, external IT resources
Digital Laggards
Digital Followers
Digital Leaders
We use external IT resources to obtain required
expertise for our projects
Our department mainly implements agile
development methods
Winning with startup cooperations
Finally, our data shows that companies having the openness to learn and collaborate
with technology startups are benefitting the most. 44% of Digital Leaders are actively
engaged startups, while only 11% of the organizations in the Digital Laggards cluster
have such initiatives. It is important to see that in this context, the number of startups
involved in the collaboration scheme seem to have an important effect on success.
Within the group of Digital Leaders, working with at least 5 different startups (see
exhibit 14) has become the norm. This requires the corresponding resources.
0
20
40
60
80
100
26%
36%
63%
16%
36%
67%
18
However, working with startups (regardless of equity and approach) requires the
buildup of effective firewalls to protect their independence, especially during scale up
stage where the culture of the start-up is undergoing mutation.
EXHIBIT 14
Cooperation with startups
Digital Laggards
Digital Followers
Digital Leaders
•	Success in transformation depends largely on having a broad and structured setup of
internalandexternaldigitalinnovationhubswithclearresponsibilitiesandgovernance
•	Leaders have to act as human firewalls to protect freedom of innovation hubs
(internal ones as much as external accelerators) and on the other hand foster
cooperation with external partners
•	Using external IT talents with agile development competences is a substantial driver
– the lack of experience with agile know-how among followers and laggards is
decisive
•	Regarding startup cooperation, leaders need to ensure clear alignment of the
organization concerning the independence of the start-up and their deviating
objectives (growth vs. efficiencies/profitability targets)
•	Embracing career moves by offering assignments at innovation hubs, but also
showing clear career paths back into the core organization once the venture fails
IMPLICATIONS:
0
20
40
60
80
100
11%
20%
44%
Unleashing team
performance.
19The Digital Agility Study 2017 #04 RECRUITING AND DEVELOPMENT
Cascading relevant training through the organization was identified as another key
to drive organizations towards agility. Our data reveals the importance of running
senior and especially middle management through digital training classes at a very
early stage to minimize their learning anxiety.
Digital Leaders spend significantly more time on training top and middle management
on agile procedures, new project management tools and other digital topics than
other clusters (see exhibit 15 below). These trainings for middle management are
crucial to loosen the “bed of clay” that often blocks digital innovation and potentially
paralyzes entire organizations (see following exhibit for more details):
EXHIBIT 15
Role of trainings for digital on top and
middle leadership level
Digital Laggards
Digital Followers
Digital Leaders
0
20
40
60
80
100
16%
34%
68%
13%
36%
69%
Top Management Middle Management
0
20
40
60
80
100
20
To win in digital transformation, building up competencies in the management teams
is not enough. It is also important to develop employees at all levels, i.e. particularly
the ones playing key roles in digital projects and new business building. Therefore,
it is crucial to identify of digital experts or digital natives and to support them to
become digital ambassadors. We see a significant difference between Digital Leaders,
where 64% of the organization have specific processes to identify digital talents and
entrepreneurs digital experts and intrapreneurs, compared to only 8% of Digital
Laggards (see also exhibit 16).
EXHIBIT 16
Formats for identification of digital
experts and natives
Digital Laggards
Digital Followers
Digital Leaders
Recruiting digital natives to accelerate change is another fuel to Agility. Hence,
having recruiting formats specified to digital natives is a major differentiator between
Digital Leaders and Digital Laggards (63% of the Leaders vs. 11% of the Laggards).
The benefits of recruiting digital natives lie in the diversity they infuse into the
organizational culture. Especially for the role of product owners for new digital
businesses (i.e. in innovation hubs) it becomes crucial to recruit from the outside (see
exhibit 17) - too many organizations have tried to fill those positons from the inside
without success. The right combination of internal know-how and agility of external
product owners seems to be the best recipe for success.
8%
29%
64%
EXHIBIT 17
Recruiting digital experts from extern
Digital Laggards
Digital Followers
Digital Leaders 0
20
40
60
80
100
Digital Natives are considered potential
Employees targeted and recruited
Product management in the external innovation unit for
Digital are mostly recruited from the extern
11%
30%
63%
25%
59%
71%
•	Provide trainings on agile and host leadership for top and middle management – use
formats that allow for new and challenging learnings (like hackathons etc.) but also
for anonymous learning (e.g. reverse mentoring)
•	Promote constant learning to ensure progress across all levels - recruit trainers and
coaches from within (and experts from outside) to maximize learning impact
•	Clear briefing and tracking of HR, referring recruitment of diverse teams
•	Integration of digital natives into existing organizations as meaningful completion of
existing talent pool, i.e. for product owner positions
•	Run capability assessment to monitor progress – leaders to champion “involvement
& agility” matrix and focus on learning by leading.
IMPLICATIONS:
21The Digital Agility Study 2017 #04 RECRUITING AND DEVELOPMENT
22The Digital Agility Study 2017 THE AUTHORS
DR. MARKUS PFEIFFER
Dr. Markus Pfeiffer is the founder and CEO
of Bloom Partners GmbH. Through his
start-up and consulting experience, he has
contributed significantly to the success of digital
transformation in various large enterprises.
MAXIMILIAN HINZ
At Bloom Partners GmbH, Maximilian Hinz is
responsible for Digital Transformation for various
clients in the consumer goods sector.
SARAH MAHR
Sarah Mahr is a research associate and PhD
student at the Institute for Market-based
Management at the Ludwig-Maximilians-
Universität in Munich. She is responsible for the
study from a scientific perspective.
FABIAN SCHREMPF
Fabian Schrempf is a research associate and
PhD student at the Institute for Market-based
Management at the Ludwig-Maximilians-
Universität in Munich. He is responsible for the
study from a scientific perspective.
23
24
© 2017 BLOOM PARTNERS GMBH
Bloom Partners GmbH
Prannerstraße 11
80333 Munich, Germany
www.bloom-partners.com
Digital Agility Study 2017 by Bloom Partners (English)

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Digital Agility Study 2017 by Bloom Partners (English)

  • 1. Winning with Agility How to transform your company into a Digital Leader.
  • 2. 2The Digital Agility Study 2017 CONTENTS Elvis Presley A little less conversation, a little more action please, All this aggravation ain't satisfactioning me A little more bite and a little less bark.
  • 3. 3 03 04 06 08 09 10 13 15 19 22 CONTENTS WHY AGILIT Y? THE STUDY THE DIMINISHING ROLE OF STRATEGY KEY DRIVERS FOR SUCCESS IN DIGITAL TRANSFORMATION #01 AGILE EXECUTION High responsiveness to consumer needs and openness to fail #02 AGILE LEADERSHIP Accelerate speed of digital strategy execution #03 AGILE ORGANIZATIONAL STRUCTURE Effective internal and external innovation hubs #04 RECRUITING AND DEVELOPMENT To set free higher team performance THE AUTHORS
  • 4. 4The Digital Agility Study 2017 WHY AGILITY? Digital Transformation and Agility - just buzzwords? With the growing need for digital transformation across many different organizations and industries, the idea of Organizational Agility has become a major buzzword and is often seen as the secret sauce for winning in digital. Many top leaders see Agility as a key enabler for flexibility, increased speed to market and finally as a weapon to beat aggressive startups. In our 2012 Digital Readiness Study we had already identified Agility as core driver for business success, explaining 47% of the success in digital transformation (see exhibit 1 – confirmed in our new study 2017). While the direct impact of having a good strategy is not too valuable (17% of success), Digital Agility really makes the difference. Digital Agility drives almost 50% of firm performance.
  • 5. EXHIBIT 1 Digital Agility as a key driver for firm performance Digital Agility as a key driver for firm performance We understand Agility as “an organization’s ability to sense and respond quickly to consumers' and market’s needs”. This capability is related to many different aspects of a company’s organization, leadership and more (see exhibit 2). 5 EXHIBIT 2 Relevant dimensions of Organizational Agility Relevant Dimensions of Organizational Agility Some, even large organizations, seem to be doing this better than others. Tesla for example, in a recent effort was able to incorporate consumer feedback directly into the car’s production line, within a timeframe of seven days. Typically, Organizational Agility is one of the capabilities that startups bring to the table based on their organizational setup, the fragile environment they live and work in (lack of resources, threat of failure, etc.). But more and more incumbents and large organizations try to copy agile work methods and tools. However, many leaders and companies lack a full picture on the implications of building an agile company for strategy, structure, culture, leadership and even recruiting and the work environment. What does success look like in terms of “Agility”? To answer this question, we have extended our 2012 study and built on the dimensions of Organizational Agility outlined below. Strategy Leadership & failing culture Recruiting & HR Organizational structures Market intelligence Working methods IT infrastructure & data Organizational Agility Digital Transformation Strategy Digital Agility Firm Performance 22% 47% 17%
  • 6. The objective of our 2017 study on Digital Agility was to understand in more depth what really drives business performance and success in digital and develop recommendations for transforming businesses. We used the dimensions of organisational agility as a starting point to derive key success factors and an understanding of tools and methods that really work. Only 8% of German companies see their Digital Transformation as a success. 6The Digital Agility Study 2017 THE STUDY The objective of our 2017 study on Digital Agility was to understand in more depth what really drives business performance and success in digital and develop recommendations for transforming businesses. We used the dimensions of Organizational Agility as a starting point to derive key success factors and an understanding of tools and methods that really work. While 72% of German companies have a digital strategy, almost 80% fail in their Digital Transformation because of a lack of agility. Execution wins over strategy.
  • 7. 7 Digital Laggards (34% of the total sample) Level 1 They act like prisoners and run their business more or less with a survival strategy, rather passive, suffering from everyday inertia and having no success whatsoever in Digital Transformation. Only 1% of the companies in this cluster would consider their Digital Transformation as a success. Digital Followers (43% of the total sample) Level 2 They act like passengers and walk on pre-qualified paths only. They run the business behind a certain “fear to loose” and make first steps in Digital Transformation by observing in the Digital Transformation. They focus rather on explaining the past and are still scared of making mistakes. Still, only 6% of the companies in this cluster consider their Digital Transformation journey a success. Digital Leaders (23% of the total sample) Level 3 They behave like true players and show a high passion to win and learn. They are willing to experiment, look for opportunities, accept errors and failure if they can conclude the right learnings and are in general future-oriented. An astounding 66% of the companies in this sample see their Digital Transformation already as a success. Side note on study design: Sample includes around 500 (n=483) companies represented through middle and top managers with decision power in digital. Panel data was conducted in Q4/2016 through an online questionnaire. Study design in collaboration with a graduate student team from the LMU University of Munich. Based on the individual performance along the key indicators speed of innovation, growth and profitability of the 500 companies interviewed, we split our sample in three clusters.
  • 8. 72% of all organizations in our sample have a digital strategy. 8The Digital Agility Study 2017 THE DIMINISHING ROLE OF STRATEGY But Digital Leaders not only have a strategy: they adapt it continuously, having an agile “interpretation” of their strategy. We see a big difference between Digital Leaders and Laggards: 81% of the companies in the leading cluster continuously adapt their strategies to market developments, trends and other impact factors (see chart below). This interpretation of strategy as a guiding principle, especially the role of a strong vision, the ability and willingness to continuously adapt strategies, is an important capacity of winning digital leaders. Furthermore, the top management of Digital Leaders has substantial knowledge around the relevant digital topics: In 82% of these organizations, top management has the relevant knowledge (vs. only 25% in the group of the Digital Prisoners). Although we see strong differences in how Digital Leaders understand and practice strategy vs. laggards, our data has shown no significant impact of strategy on the success factors speed of innovation, growth and profitability. Success in Digital Transformation is not driven by strategy – strategy needs to create the burning platform, not more not less. EXHIBIT 3 Digitalization's impact on corporate strategy Digital Laggards Digital Followers Digital Leaders Our top management supports and promotes corporate digital strategy Corporate digital strategy is continuously adapted to new trends and influences Our management team has extensive know-how on digital topics 0 50 100 67% 72% 87% 54% 66% 81% 25% 46% 82%
  • 9. In contrast, other executional factors have a more important role for success. 9The Digital Agility Study 2017 KEY DRIVERS FOR SUCCESS IN DIGITAL TRANSFORMATION AGILE EXECUTION High responsiveness to consumer needs and openness to fail EXHIBIT 4 Key drivers for a successful Digital Transformation 39% AGILE LEADERSHIP Accelerate speed of Digital Strategy Execution22% AGILE ORGANIZATIONAL STRUCTURE Effective internal and external innovation hubs20% RECRUITING AND DEVELOPMENT To set free highest team performance19%
  • 10. High responsiveness to consumer needs and openness to fail. 10The Digital Agility Study 2017 #01 AGILE EXECUTION Strategy is important but execution wins digital transformation. After a period of heavy investments in conceptualizing new digital products and business models, we are now entering a time where fast execution embedded in a strong cultural change, i.e. the openness to fail are becoming key drivers of success. Too many companies have spent millions on strategic work, setting up heavy and complex accelerator models, and investing in risky startups without creating sustainable success. With many managers asking “why are we doing this”? The Digital Leaders in our sample act differently. They have a very strong bias on execution and on embracing a culture that supports the openness to fail and actively reduces learning and failure anxieties (see exhibit 5). EXHIBIT 5 Learning and survival anxieties as key barriers in digital transformation LEARNING ANXIETY · Fear of losing power / position · Fear of temporary incompetence · Fear of subsequent punishment · Fear of loss of personal identity and fear of loss of group membership SURVIVAL ANXIETY · Fear of losing the job · Fear of adapting too slowly · Fear of not understanding the task · Fear of consequence if no action TASK TO LOWER LEARNING ANXIETY Create psychological safety net to lower learning anxiety by: · communicating a compelling vision · involving the learner beyond informal training · role modeling across all management levels TASK TO GROW SURVIVAL ANXIETY Drive willingness to act by: · identifying the burning platform · showing benefits of learning Agility and impact on speed to market · role modeling across all management levels
  • 11. 0 20 40 60 80 100 11 Embracing Agility requires to actively emphasize, nurture, grow, supercharge. Charge means to bill (or attack but here we want this fear to get bigger than Learning anxiety) “Survival Anxieties” and lower “Learning Anxiety”: Within the group of Digital Leaders, 74% openly accept mistakes as an opportunity to learn and improve. That is only the case for 24% Digital Laggards (see exhibit 6 below). Promoting a risk taking behavior, allowing mistakes, and sharing failure experience during special meetings/events (such as Failure Fridays) is essential to establish the right culture. EXHIBIT 6 Accepting failure as an opportunity In our company mistakes are seen as an opportunity for change In our company mistakes are accepted Digital Laggards Digital Followers Digital Leaders Also, Digital Leaders claim a significantly higher team spirit, empowerment and responsibility. More than two thirds of them have established agile working methods, stand-up meetings and open office spaces. Such changes seem to have a significant impact, although they are just an expression of a more open working culture. EXHIBIT 7 Agile work methods, meeting routines and open office spaces as a success factor Digital Laggards Digital Followers Digital Leaders Our company offers employee training on agile working methods We try to keep our meetings short Our company provides flexible office space to enable an agile work style 24% 54% 74% 33% 51% 77% 0 20 40 60 80 100 28% 48% 76% 27% 48% 66% 12% 31% 74%
  • 12. 12The Digital Agility Study 2017 #01 AGILE EXECUTION Although agile working methods seem to become the latest trend in large companies, not many of them really understand the fundamental ideas and how and when to apply them. The unreflected establishment of pure scrum methodologies lead to instability and misinterpretations. Agile is not the holy grail for large organizations! However, Digital Leaders test prototypes (Minimum Viable Products) with customers, worrying less about the imperfections and focusing more on the insights they may gain (fail fast and fail cheap). Co-creation with customers, early testing with lead users and consumers in general and MVP testing have become key differentiators (see exhibit 8 below). EXHIBIT 8 MVP testing and customer co-creation as a key success factor for agile execution Digital Laggards Digital Followers Digital Leaders We collaborate closely with lead users to identify customers’ needs at an early stage We develop new products or services in close collaboration with our customers and partners Our company implements early prototype testing in the market IMPLICATIONS: • Communicate a clear strategic burning platform - align and share an inspirational vision as north-star to provide orientation • Make sure top managers act as role models for desired behavior and empowerment • Create a culture genuinely open to mistakes (lower learning anxiety) • Inspire passion to learn, lower anxiety of temporary incompetence • Drive speed and achieve quick wins using MVP testing with customers and other agile testing methodologies (accepting failure to learn, optimize on the run) • Provide the right set of tools and trainings to run efficient meeting and project – Interpret “Scrum” so it applies to the specificities of your organization (there is no agile standard) 0 20 40 60 80 100 20% 42% 77% 22% 39% 78% 18% 34% 63%
  • 13. Accelerate speed of Digital Strategy Execution. 13The Digital Agility Study 2017 #02 AGILE LEADERSHIP To support the agility of an organization, leadership style has to transform dramatically. 60% of Digital Leaders agree that their leadership style has changed during the Digital Transformation process, while this is only the case for 18% of Digital Laggards. The keys to success in agile leadership are predominantly independence, direct responsibilities and self-motivation of employees, i.e. of those team members working on digital projects. (see exhibit 9 below). EXHIBIT 9 Agile leadership to support self-motivation and independence of teams Digital Laggards Digital Followers Digital Leaders Consequently, leaders need to adopt the so called “Host Leadership Style” in contrast to the “old”, incumbent “Hero Leadership Style”. Host Leaders have to follow the below principles: EXHIBIT 10 Agile leadership principles 01 02 03 04 05 Create space for people Support Response-ability in the team Live the principle of co-participation Open gates where needed Spend time frontstage and backstage 0 50 100 32% 66% 83%
  • 14. Leaders also need to make a significant change with respect to another behavior: prioritizing the operational daily business at the expense of long-term company goals (incl. resource allocation) is slowing down execution and putting agility at risk. Yet, for most of the organizations in our sample, not only budgets but also human resources are seen as a major hurdle to speed up the Digital Transformation process (see exhibit below). EXHIBIT 11 Key barriers to Digital Transformation Budget, financial limitations IMPLICATIONS: • Specifically outline business models of future digital scenarios and allocate resources accordingly • Empower top leadership to become host leaders who: • Foster and reward accountability, entrepreneurship and self-motivation • Provide support and remove roadblocks in all kinds of projects • Celebrate quick wins and milestones 14 Human resources Operational day-to-day business Lack of knowledge Agile leaders need to set the right priorities and guide teams towards fast execution. The necessary budgets and resources to sustain digital transformation must be protected. • Leaders’ involvement has to be perceived as engagement and alignment yet not as control • Foster and reward accountability by providing freedom within a framework • Clear definition and follow-through of financial incentives, and career paths (i.e. within acceleration teams, new corps, etc.) • Leaders should impersonate business models that require investments and are critical for long term success but with limited- and mid-term returns (preemptive and grab-land strategy) 0 20 40 60 80 100 44% 43% 38% 26%
  • 15. Effective internal and external innovation hubs. 15The Digital Agility Study 2017 #03 AGILE ORGANIZATIONAL STRUCTURE Triple Transformation Our data shows that companies running a combination of internal innovation labs and external accelerators are more successful in their transformation. 42% of Digital Leaders run a combination of internal and external digital units. While this is only the case for 21% of Digital Lagards. Based on our experience of over a hundred projects related to digital transformation, what we call the triple transformation approach best supports digital transformation by combining managerial pull (usually provided by the CEO and/or the board) with business unit push (e.g. accelerators). Triple transformation covers 1) the internal core organization, 2) partially integrated units and 3) external units. Accelerators and other organizational structures that work outside the core, i.e. on disruptive projects, are fundamental to the success in transformation: Creating an agile organizational structure that ensures flexibility and speed in key strategic projects is the third fundamental driver for a successful digital transformation, explaining 20% of the success.
  • 16. Our data shows that overperforming Digital Leaders (10% of Digital Leaders) actually run a combination of all three transformations simultaneously. Partially integrated innovation lab for the more modest digital innovations and external unit for the disruptive. However, there is also a difference in the role of external units. Our learnings from the numerous organizational projects we have done are now being verified by data: Digital Leaders are using external accelerators not only as a playing field for connecting with startups or spotting investment opportunities: Digital Leaders take action and build substantial new products and services. They use the external unit to develop faster, test with customers and launch new businesses in a protected and agile environment (see exhibit 12 below for details). 16 EXHIBIT 12 Activities of external units Digital Laggards Digital Followers Digital Leaders Construction of partnerships with start-ups, partners and software developers 0 20 40 60 80 100 7% 48% 44% 16% 48% 36% 23% 27% 50% 16% 32% 52% 21% 36% 43% Identification of attractive investments to speed up the entry into digital growth markets Market launch of new products and services and measurement of success Customer/Market testing of new digital products and services Development and design of new digital products and services
  • 17. 17The Digital Agility Study 2017 #03 AGILE ORGANIZATIONAL STRUCTURE Agile external IT resources as a key enabler Another key challenge related to internal and external innovation units is related to IT resources and innovation. Even if key digital projects are handled in separate units, many companies struggle to align IT architecture with their digital strategy. As digital strategies are often driven by the board's office or strategy departments, their lack of IT know-how leads to gaps in the architecture, scoping and budgets: Only 57% of companies consider that their digital strategy and vision can be implemented and executed by the existing IT architecture. Typically, a lack of CRM systems, marketing automation, data analytics and big data know-how are the key barriers. This is why most of the companies today need to rely heavily on expensive yet more agile external IT resources (see following exhibit 13). EXHIBIT 13 Need for agile, external IT resources Digital Laggards Digital Followers Digital Leaders We use external IT resources to obtain required expertise for our projects Our department mainly implements agile development methods Winning with startup cooperations Finally, our data shows that companies having the openness to learn and collaborate with technology startups are benefitting the most. 44% of Digital Leaders are actively engaged startups, while only 11% of the organizations in the Digital Laggards cluster have such initiatives. It is important to see that in this context, the number of startups involved in the collaboration scheme seem to have an important effect on success. Within the group of Digital Leaders, working with at least 5 different startups (see exhibit 14) has become the norm. This requires the corresponding resources. 0 20 40 60 80 100 26% 36% 63% 16% 36% 67%
  • 18. 18 However, working with startups (regardless of equity and approach) requires the buildup of effective firewalls to protect their independence, especially during scale up stage where the culture of the start-up is undergoing mutation. EXHIBIT 14 Cooperation with startups Digital Laggards Digital Followers Digital Leaders • Success in transformation depends largely on having a broad and structured setup of internalandexternaldigitalinnovationhubswithclearresponsibilitiesandgovernance • Leaders have to act as human firewalls to protect freedom of innovation hubs (internal ones as much as external accelerators) and on the other hand foster cooperation with external partners • Using external IT talents with agile development competences is a substantial driver – the lack of experience with agile know-how among followers and laggards is decisive • Regarding startup cooperation, leaders need to ensure clear alignment of the organization concerning the independence of the start-up and their deviating objectives (growth vs. efficiencies/profitability targets) • Embracing career moves by offering assignments at innovation hubs, but also showing clear career paths back into the core organization once the venture fails IMPLICATIONS: 0 20 40 60 80 100 11% 20% 44%
  • 19. Unleashing team performance. 19The Digital Agility Study 2017 #04 RECRUITING AND DEVELOPMENT Cascading relevant training through the organization was identified as another key to drive organizations towards agility. Our data reveals the importance of running senior and especially middle management through digital training classes at a very early stage to minimize their learning anxiety. Digital Leaders spend significantly more time on training top and middle management on agile procedures, new project management tools and other digital topics than other clusters (see exhibit 15 below). These trainings for middle management are crucial to loosen the “bed of clay” that often blocks digital innovation and potentially paralyzes entire organizations (see following exhibit for more details): EXHIBIT 15 Role of trainings for digital on top and middle leadership level Digital Laggards Digital Followers Digital Leaders 0 20 40 60 80 100 16% 34% 68% 13% 36% 69% Top Management Middle Management
  • 20. 0 20 40 60 80 100 20 To win in digital transformation, building up competencies in the management teams is not enough. It is also important to develop employees at all levels, i.e. particularly the ones playing key roles in digital projects and new business building. Therefore, it is crucial to identify of digital experts or digital natives and to support them to become digital ambassadors. We see a significant difference between Digital Leaders, where 64% of the organization have specific processes to identify digital talents and entrepreneurs digital experts and intrapreneurs, compared to only 8% of Digital Laggards (see also exhibit 16). EXHIBIT 16 Formats for identification of digital experts and natives Digital Laggards Digital Followers Digital Leaders Recruiting digital natives to accelerate change is another fuel to Agility. Hence, having recruiting formats specified to digital natives is a major differentiator between Digital Leaders and Digital Laggards (63% of the Leaders vs. 11% of the Laggards). The benefits of recruiting digital natives lie in the diversity they infuse into the organizational culture. Especially for the role of product owners for new digital businesses (i.e. in innovation hubs) it becomes crucial to recruit from the outside (see exhibit 17) - too many organizations have tried to fill those positons from the inside without success. The right combination of internal know-how and agility of external product owners seems to be the best recipe for success. 8% 29% 64% EXHIBIT 17 Recruiting digital experts from extern Digital Laggards Digital Followers Digital Leaders 0 20 40 60 80 100 Digital Natives are considered potential Employees targeted and recruited Product management in the external innovation unit for Digital are mostly recruited from the extern 11% 30% 63% 25% 59% 71%
  • 21. • Provide trainings on agile and host leadership for top and middle management – use formats that allow for new and challenging learnings (like hackathons etc.) but also for anonymous learning (e.g. reverse mentoring) • Promote constant learning to ensure progress across all levels - recruit trainers and coaches from within (and experts from outside) to maximize learning impact • Clear briefing and tracking of HR, referring recruitment of diverse teams • Integration of digital natives into existing organizations as meaningful completion of existing talent pool, i.e. for product owner positions • Run capability assessment to monitor progress – leaders to champion “involvement & agility” matrix and focus on learning by leading. IMPLICATIONS: 21The Digital Agility Study 2017 #04 RECRUITING AND DEVELOPMENT
  • 22. 22The Digital Agility Study 2017 THE AUTHORS DR. MARKUS PFEIFFER Dr. Markus Pfeiffer is the founder and CEO of Bloom Partners GmbH. Through his start-up and consulting experience, he has contributed significantly to the success of digital transformation in various large enterprises. MAXIMILIAN HINZ At Bloom Partners GmbH, Maximilian Hinz is responsible for Digital Transformation for various clients in the consumer goods sector. SARAH MAHR Sarah Mahr is a research associate and PhD student at the Institute for Market-based Management at the Ludwig-Maximilians- Universität in Munich. She is responsible for the study from a scientific perspective. FABIAN SCHREMPF Fabian Schrempf is a research associate and PhD student at the Institute for Market-based Management at the Ludwig-Maximilians- Universität in Munich. He is responsible for the study from a scientific perspective.
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  • 24. 24 © 2017 BLOOM PARTNERS GMBH Bloom Partners GmbH Prannerstraße 11 80333 Munich, Germany www.bloom-partners.com