Only 15% EMEA companies likely to create mature digital ecosystems in next 5 years

While the importance of digitisation in business is widely accepted and several corporate leaders believe that it can be a major boost to revenue as well as profitability, the outcomes of companies executing their digitisation strategy has varied greatly, according to a report by Strategy&, part of the PwC network.

Despite good intentions, few companies in the GCC have successfully implemented a digital transformation strategy. They need now to move from a conceptual appreciation of the importance of digitisation to a focus on execution, stated the latest Strategy& report. According to the Strategy& report, nearly two-thirds of global manufacturing companies have not seen any results from their digital transformation efforts.

This sentiment is also echoed in The Dell Technologies 2018 Digital Transformation Index, which highlights that more than 90% of businesses in Saudi Arabia and the United Arab Emirates are facing major obstacles in their efforts at digital transformation.

Furthermore, in Europe, Middle East, and African EMEA region, the Strategy& survey revealed that only 15% of companies plan to establish mature digital ecosystems in the next five years. In addition, just 5% of the companies in the EMEA region have implemented critical technologies that propel digitisation, such as integrated end-to-end supply chain planning, a smart environment using the Internet of Things IoT, or manufacturing execution systems.

Speaking about findings from the report, Jad Hajj, Partner with Strategy& Middle East, said: “Despite the good intentions of businesses within the region, few companies in the GCC have successfully implemented an effective digital transformation strategy. This has unfortunately hindered their progress and businesses now need to move from an appreciation of the importance of digitisation, to focus more deeply on its overall execution. We have also observed that this lack of progress has been because of business obstacles or misjudgments made by management which has prevented further development.”

More specifically, the report finds that some of the underlying reasons and challenges being faced by businesses include the following:

• Firstly, the approach of many companies has focused exclusively on the technology itself.

Instead, businesses should have defined the business challenge that digital transformation is supposed to tackle. Most industries cannot keep up with the rapid pace and development of digital technologies. This leaves companies asking if they should abandon their existing investment in a technology that has become outdated, or if they should spend their money on a next-generation wave of solutions.

• Second, organisations need to change their culture so that it becomes open to entrepreneurship and accepts more imaginative leadership styles, which encourage digitalisation.

This means being flexible, capable of learning from failure and responding accordingly. In the same vein, organisations need to be careful that rigid hierarchies do not prevent successful digital transformation. It does not matter where an idea emanates from, as long as it promotes innovation and creativity, or facilitates rapid decision making and prudent budgeting, or boosts problem-solving capabilities within teams.

• Third, companies have been more risk-averse when it comes to digital transformations.

Companies in the region already face multiple business challenges that bring considerable uncertainty to daily operations; which leads senior leaders to have little appetite for additional risks associated with digital transformation.

Addressing the challenges, Jean Salamat, Principal with Strategy& Middle East, said: “We believe that there are five ways in which companies can counteract these challenges and catalyse their digital transformation efforts, which will lead to an effective digitisation strategy.”

These include:

• Focusing precisely on the objective of digitisation
• Introducing a new performance management model
• Providing proper ownership of transformation
• Implementing change management
• Seeking strategic collaborations and partnerships

“Going forward, companies need to define the focus area for their digital transformation program after careful and objective analysis of their particular business needs and goals. To increase the chances of success, they need to establish clear lines of authority and enhanced capabilities within the organisation. Collaboration and partnerships with third parties can compensate for any lack of internal expertise or information. Once these catalysts for progress are in place, companies can look forward to a purposeful and successful execution of their digital transformation strategy,” concluded, Sergey Yakimenko, Manager with Strategy& Middle East.

Key takeaways

• GCC companies must improve execution of their digital transformation strategies to make significant progress.
• Strategy& found just 5% of companies in Europe, Middle East, Africa implemented critical technologies that help to foster digitisation.
• Nearly two-thirds of global manufacturing companies have not seen any results from their digital transformation efforts.