For a long time now, we’ve talked about how the digital economy is shaping business. But here’s the thing. There’s no point now in talking about a ‘digital economy’ as though it’s a subset of the wider global economy. It is the economy.
For many businesses, this requires a wholesale change in mindset. It means that a few targeted digital initiatives aren’t enough to survive and thrive. Instead, we believe organisations need to aim for digital sustainability.
What is digital sustainability?
Unlike many others, we’re not just talking about digital transformation which is so often seen as something achieved through investment in technology and then marked as ‘complete’.
Digital sustainability is different. It’s about enabling organisations to continuously adapt and thrive. And it’s never done. It involves a disruption mindset, so the business is never standing still.
Digital sustainability impacts performance
In our recent research report, we looked at the conditions organisations need to put in place succeed in a disruptive environment. We found there are five critical leadership and organisational capabilities that make the difference. When quantified, our research showed these five dimensions explained a 44% variation in company EBITDA margin. In short, digitally sustainable businesses are outperforming their less digitally sustainable competitors in a real way.
Together, these five dimensions make up the Korn Ferry Digital Sustainability Index (DSI) and represent a fundamentally new way of looking at business. Based on existing literature, our extensive proprietary data and experience, as well as insights from a panel of experts, our research aims to help traditional organisations chart the path towards digital sustainability by focusing on the factors that will make the difference:
- Agility: Rapid decision-making, execution and response to change.
- Connectivity: Consistent collaboration with internal and external stakeholder ecosystems.
- Discipline and focus: Unequivocal clarity on what ‘digital’ means to an organisation and how to achieve desired outcomes.
- Empowerment and alignment: A definitive mission statement and an aligned workforce equipped to make decisions.
- Openness and transparency: Deliberate transparency about ethics, responsibilities and practices. Employees are valued and creativity is encouraged.
Digital sustainability index in APAC
As part of our research, we looked at how 14 countries ranked against the DSI. Perhaps unsurprisingly, the US and UK topped the rankings. In APAC, results varied.
Australia ranked fourth overall, topping other APAC nations by some way. Factors driving this result include strong performances from individual organisations, like Australia’s big four banks, as well government-backed digital schemes and an increased focus on hiring from across the globe to develop digital skill sets.
In contrast, Japan ranked 8th, India 9th and China 11th. In particular, Japan and China lagged on openness and transparency, and discipline and focus. While these countries are home to organisations developing highly innovative products and solutions, their structures and ways of operating don’t appear to be keeping up.
People are the roadblock to a digitally sustainable future
There’s no doubt that CEOs understand the future (and the now) is digital. But no one feels like they’re doing this well enough or fast enough.
Further investment isn’t the answer – our research shows people are the roadblock. While organisations pour investment into technology, they’re not effectively mobilising their people; leaders are resistant and talent isn’t properly deployed.
And initiatives are failing as a result. While figures vary, it’s estimated that between 30% and 84% of digital transformation efforts fail resulting in $500 billion to $1.4 trillion in value being destroyed annually.
Unlocking value through empowerment and alignment
While individuals have never been more tech-enabled, empowerment and alignment is often overlooked. Organisations are no longer a corporate army marching lockstep, but decision-making frameworks often assume they are.
This requires seismic change across the entire talent ecosystem, from the development of all individuals as leaders to structuring performance and reward around new ways of working. Most importantly, it requires inclusive and agile leaders who are humble enablers of the teams’ expertise and ideas.
Three ways to increase digital sustainability
With so many organisations making false starts, it’s hard to know where to begin. Focusing on these three areas will help organisations shift the needle on all the dimensions of digital sustainability:
- Promote, develop, and hire “misfits”: Steve jobs claimed that so-called “misfits” will change the world. Their agile thinking and deep curiosity perfectly position them to lead companies through the rocky digital age with confidence.
- Speed up the move from incubation to integration: Digital efforts are often nurtured in separate, nimble units outside business as usual processes but then struggle to gain life in the wider organisation. Businesses need to stop fearing internal disruption and focus on organising to innovate.
- Define what the organisation does and doesn’t do: While companies like Google, Tesla and Amazon look like they do everything, in reality they make fundamental choices on the digital platforms and capabilities that offer maximum opportunity. Traditional companies must focus relentlessly on honing their intentions and, importantly, deciding what to let go.
To learn more about what it takes to be digitally sustainable, download The Korn Ferry Digital Sustainability Index Report and join our webinar series.