Research group Gartner has issued a scathing assessment of the state of digital transformation in Australia, reporting that ambition surpasses performance, that the risk of disruption is underestimated, and that there is little appetite to experiment with new business models.
Called “Digital Business Transformation: An Australia Perspective” the report suggests there are other problems as well, such as a failure by business to develop a mature relationship with emerging technology ecosystems, and just as worryingly, a lack of preparation at a workforce level for the changes to come.
According to the report’s author, Gartner analyst Jenny Beresford, herself a former CIO, “Like enterprises around the world, two-thirds of Australian organisations say they are ‘transforming’ in some way. Based on discussions with clients, however, we estimate that the number of organisations that are really transforming their business model — a necessary step in digital disruption — is closer to 10 per cent. The vast majority of digital business initiatives optimise existing business models.”
Beresford ascribes slow uptake in Australia to complacency fuelled by 26 years of economic expansion, arguing that this growth has made Australian enterprises risk averse.
“That is a dangerous attitude because the risk of disruption by digital competitors remains high,” she writes.
As evidence she cites recent moves by global digital giants that directly impact the business world down under. “Alibaba built its first data center in Australia in 2016. Amazon started service at the end of 2017. In 2018, Google invested $550 million in JD.com, a Chinese online retailer that has started to move into Australia. Thus, competition from global digital giants is ramping up quickly. Australian companies will need to move faster in response.”
Even among those organisations who have started on their digital journey, progress is disappointing, according to the report.
“Australian enterprises have not made sufficient progress in the digital business initiatives they have started. About 81 per cent of survey respondents rate themselves 5 and above on a scale of 1 to 7 in strategy and planning for digital business, but only 8 per cent say their organisation has scaled a digital business.”
Beresford describes scaling is the acid test. “Only a digital business that scales can materially improve the enterprise’s financial performance. To survive and thrive in digital disruption, enterprises will need to look like today’s top performers — those that excel at strategy and planning and have demonstrated that they can scale a digital business.”
The report reveals that only 7 per cent of Australian organisations fit that description now. “Enterprises that are still working through the first two phases are already behind, and losing ground to those in their space that are scaling now.”
Nothing to see here
Almost every industry will eventually undergo digital disruption, warns Beresford.
“Roughly half of Australian survey respondents see a significant risk of disruption to revenue and customer experience, but roughly half don’t perceive this as a risk,” according to the report.
The latter are kidding themselves, or as the report more politely puts it “… leaving themselves vulnerable. The digitalisation of their industries may be more advanced than they think. Once digital revenue in a sector hits 20 per cent, digital transformation unfolds rapidly. By that point, it may be too late for a conventional enterprise to respond.”
Therefore, according to Gartner, enterprises would be prudent to experiment with, and develop, their own digital products and business models before the transformation occurs.