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Business Commentary Adapting to the digital economy requires strategic leadership

John Graham is managing director at SAP Canada. Tony Olvet is group vice-president, research domains, at IDC Canada.

Corporate Canada could learn a thing or two from the manager of a Blockbuster video chain – if they could find one. Digital transformation is upending a growing number of legacy industries, catching many leaders and their workers unprepared. Some are trying to piece together their businesses and livelihoods. Others are giving up completely.

When it comes to competing in the digital economy, business leaders in Canada arguably hold a better position. The good news is that in a recent survey of senior leaders in 200 large organizations in Canada, the majority recognized that the digital economy will have a major impact on their businesses in the next three to five years. The bad news is that only 17 per cent have integrated a digital transformation plan into their corporate strategy.

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While global giants including GE, Starbucks and Caterpillar are shifting their business models using cloud computing, analytics and social technologies, less than 50 per cent of Canadian organizations are making technology investments – even though most agree that they are necessary.

There are exceptions. Canada's banks have announced significant technology investments, which will allow them to compete with startups in a red-hot fintech sector. There are leaders in other sectors – from snowmobiles to circuses – that are using data to transform sales, modernize operations and better communicate with their customers. They are the minority.

Organizations across industries and borders are facing pressure to reduce costs, improve service – be faster, better, cheaper – and transform their processes and even their business models. New technologies such as machine learning, cloud computing and 5G networks are shaping and redefining how customers interact with all types of organizations.

In addition, transformation has moved beyond the consumer realm and is affecting every sector in the economy. Positive digital experiences in leading industries such as media and online retail have now created higher expectations for digital service everywhere, raising the bar for all organizations.

Canadian companies ignore this reality at their peril. Numerous studies and reports place Canada's productivity and level of innovation and competitiveness behind other industrialized countries. When it comes to digital transformation, we are at an early stage, with overall maturity levels estimated to be behind other countries, particularly the United States.

Our analysis indicates that Canadian businesses have the means to succeed. So why aren't they keeping up?

Caution around the adoption of new approaches, strategies or technologies has a lot to do with it, and is rooted in two issues: a lack of understanding of the benefits of technology, or a fear that the benefits are not worth the costs. A secondary challenge, experienced by Canadian divisions of multinational companies, is that the latest digital technologies, rolled out in headquarters, are slow to take root in other countries, including Canada.

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More important, it seems many are having trouble putting theory into practice. Business leaders in Canada recognize that the early adopters of the digital economy model have a competitive advantage, but when it comes down to it, they are having trouble getting the ball rolling. They are constrained by both real and perceived challenges, including implementation costs, increasing complexity of technology and businesses processes and developing the right skills among their employees.

To improve, change must start at the very top. Executive leadership on issues including core business processes, customer experience, supplier engagement and technology including the Internet of Things plays a critical role in any transformation. They need to ask themselves what kinds of quick wins they can achieve that would make a meaningful impact and demonstrate to stakeholders the value of digital transformation. While sustained digital transformation requires an organization-wide approach, using pilot projects and showcasing successful success on a smaller scale can create momentum and build confidence.

Leaders will need to foster a culture of change by sharing a vision and building a culture of support for digital transformation from the c-suite down in order to be successful. They should articulate what they believe their organizations will look like in five and 10 years, and beyond, which helps prioritize ideas and investments. We note that those leaders who have a more positive view when creating the business case will be able to share a vision of digital transformation, where business outcomes outweigh the investment costs.

Our message to Canadian leaders is that awareness is far from enough. If you want your company to succeed and your employees to have jobs in the digital economy, digital transformation must be integrated into your strategic plan. The impacts may not materialize today or tomorrow, but they will be felt soon enough and they will be significant.

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