Cultural and structural challenges are the greatest impediment to digital transformation. These intrinsically linked barriers arethe result of insufficient or ineffective integration, alignment and vision. Gaps in capabilities make up the next three barriers.

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Digital Pulse 2018: Barriers to Transformation

Brief Summary of Respondents

Strategic Impediments to Digital Transformation

Skill & Capability Gaps

Organizations that are able to coordinate crossfunctionally in an effective manner remain in the minority.

Though more than 80% of executives reported that the collection and analysis of customer and operational data are of criticalimportance (and nearly 70% stated that AI is as well), many shared that their organizations are not equipped with the people,capabilities or infrastructure to successfully enable these initiatives. As a result, nearly a quarter of respondents reported thattheir organizations are unable to make use of data as part of their broader digital agenda.

Senior-most leaders consider key barriers less significant than more junior executives do.

Though structural, cultural and capability barriers resonate across industries, individual sectors are reacting to disruption atvaried rates and are faced with unique challenges.

An Absence of Alignment & Coordination

Percentage of respondents who disagree or strongly disagree with thefollowing statements

Percentage of respondents who rate these factors as very or extremely significantbarriers to effective digital business in their organization

Percentage of respondents who rate these as very or extremely significant barriers toeffective digital business

Job title Industry

The View from the C-Suite

Sector-Specific Barriers

The Path Forward

C-Suite

SVP/EVP

VP/Director

Organizational structure andculture are the chicken and eggof business transformation andtherefore need to be considered

with equal priority.

Executives in every industry agreethat CEO, board and C-Suite

buy-in is critical for the successof transformation efforts.

It is important that these leadersare realistic about the challenges

facing their organizations.

As businesses across industriesincreasingly embrace disruption,it is important they react to their

sector’s unique challenges.

Considerations

� Is your organization’s culture conduciveto the agile work environment whichtech enablement both requires anddrives?

� Do you have the leadership you need tocreate the technical infrastructure thatenables change?

� Do you have leaders within individualfunctions who are digitally literate ortechnically savvy? Is necessarycrossfunctional alignment supportedboth culturally and technically?

Considerations Considerations

� How can you break down functional silosto ensure critical collaboration in thedevelopment and execution of the digitalvision and strategy?

� Are your functional leaders aligned alonga unified, forward-looking vision?

� What measures has your organizationtaken to improve the digital and techliteracy of your senior-most leadership?

� Has your organization thought througha CEO/board succession plan thatconsiders the evolving nature of yourindustry and business?

People Technical ExpertiseData

45%

23%

32%C-Suite Executive

Senior Executive(SVP, EVP, etc.)

Junior Executive(VP, Executive Director, etc.)

Company size Location

Consumer

1–249

250–999 1,000–4,999 5,000–10,000 10,000+

Industrial Technology

Financial Healthcare Nonprofit

26%

24%

22% 18%

17% 11% 6%

15%10%

33%

18%11%

Asia Pacific

8%

Latin America& Caribbean

2%

8%34%

Africa &Middle East

Eastern &Northern EuropeWestern

Europe37%

NorthAmerica

55%

52%

47%

51%

45%

44%

42%

37%

35%

35%

31%

27%

23%

48%

49%

Organizational Inertia

Lack of Integrated Digital Expertise/Skills

Lack of Understanding of Emerging Technologies

Ineffective Crossfunctional Collaboration

Insufficient Data Infrastructure

Overall Resistance to Change

Lack of Funding/Budget

Not Seen as Important byLeadership Team

No Single Head of Digital

Information Security Concerns

Regulatory Concerns

CEO Does Not Understand the Barriersto Creating a Digital Business

CEO Does Not Recognize thePotential of Digital

71%of respondents statedthat their organization’sdigital capabilities areonly moderately (or less)aligned.

31%of respondents believetheir organization is structuredeffectively to capitalize on thenew opportunities presented bydigital.

42%of respondents think their organization has the right culture to achieve their digital strategy.

Absence of a Coordinated Digital Strategy

Insufficient Technology Investments

Sufficient Third-Party Data toRealize New Opportunities

Right People toExecute Digital Strategy

Utilize Data toRealize Strategic Capabilities

Utilize Data toRealize Analytical Capabilities

Right People to Define Digital Strategy

Sufficient Proprietary Customer Data

Sufficient Operational/Financial Data

Utilize Data to RealizeTechnology/Systems Capabilities

Sufficient Product Data

29%

28%

23%

23%

22%

22%

21%

20%

15%

IneffectiveCrossfunctional

Collaboration

OverallOrganizationalResistance to

Change

Insufficient DataInfrastructure,Collection and

Analysis

OrganizationalInertia

60%

40%

44%

48%

52%

56%

Percentage of respondents who rate these factorsas very or extremely significant barriers to effective digital business

Financial Services

Global

Technology

Global48%

31%

45%

35%

RegulatoryConcerns

Information Security Concerns

Financial Services: Security Conscious

35%

6%

Percentage of respondents who rate these factorsas very or extremely significant barriers to effective digital business

57%51%

45%52%

IneffectiveCrossfunctional

Collaboration

Lack of IntegratedDigital Expertise

Within Business Units

Nonprofit

Global

Consumer

Global

57%

49% 49%42%

Insufficient Technology Investments

Lack of Funding

Industrial &Natural Resources

Global

Healthcare

Global

34%28% 27%

22% 20%23% 25%29%

Sufficient Proprietary

Customer Data

Sufficient Third-Party

Data

Able to MakeUse of Data for Analysis

Able to Make Use of Data for SystemsCapabilities

46%

55% 55%52% 49%48%

Lack ofIntegrated

Digital Expertise

OrganizationalInertia

Absence of a Coordinated

Digital Strategy

Technology: Isolated Skill Sets

Average percentage of respondents who rate factors as very or extremely significant barriers across all factors

Nonprofit: Optimistic or Unprepared?Percentage of respondents who disagree or strongly disagree that their organization has…

Consumer: Investment Gap

Percentage of respondents who disagree or strongly disagree that their organization has…

Industrial: Missed Data OpportunityPercentage of respondents who rate these factors as very or extremely significant barriers to effectivedigital business

Healthcare: Motivated but Uncoordinated

35%

41%

In the past, digital transformation focused on adding new digital capabilities to help clients capitalize on mobile, social and big data. Today, technology-enabled disruption is compelling companies in all industries to think and act more like technology companies. Incremental, front-end changes are no longer enough—the new business ecosystem demands the rethinking of most companies’ strategies from end to end. A critical factor in tech enablement is a simultaneous emphasis on structure, culture and evolved capabilities. This trifecta requires a fresh look at collaboration, alignment, infrastructure and talent. In the fourth annual Digital Pulse, Russell Reynolds Associates surveyed 1,300+ senior executives to learn how digital is transforming talent and leadership needs in organizations around the world.

Cultural Leadership/Resources Structural External Risk