Pursuing transformation like digital natives

In the ongoing—and often challenging—pursuit of digital transformation, traditional enterprises can re-energize their efforts with a fresh perspective. And where better to look for inspiration than their digital-first colleagues? These nimble, quick-moving companies that were born in the cloud are known for efficiently delivering rich digital experiences.

Understanding how digital-native organizations (DNOs) operate can help leaders of legacy businesses shift from approaches that worked well in the past to modern tactics that accelerate technology adoption. Ultimately, such changes can result in enhanced customer experiences and competitive advantages.

“Enterprises are crawling, while DNOs are sprinting.”

—Ravi Simhambhatla, Chief Digital Officer, Avis Budget Group

To give enterprise executives first-hand insight into digital-native companies, the IBM Institute for Business Value (IBV) partnered with Amazon Web Services (AWS) and Oxford Economics on exclusive qualitative research. Through a series of one-on-one interviews with hand-selected tech leaders who have rich experience at both traditional and cloud-created enterprises, an unmistakable set of lessons has emerged, spanning culture, strategy, and execution.

The overarching lesson: digital-first organizations approach technology as a central part of the business strategy itself, not as an enabler of that strategy. Technology is viewed as integral to the business roadmap.

“At the highest level, there isn’t a separation between business strategy and a technology strategy. Our enterprise strategy connects technology and business for the future.”

—Melanie Kolp, CTO, Nationwide Insurance

For established firms to make the leap to a digital-first strategy, they must make fundamental changes in three key areas:

Leadership mindset: Legacy company leaders need to adopt a digital-first mindset and be open to new technologies. They should also motivate employees to pursue a digital-first approach, but IBV research shows incentives for this have not necessarily been in place. In our 2021 CIO study, CIOs at digital-native businesses reported they are measured for strategic contributions to the enterprise, while CIOs at more mature organizations said they are evaluated for tactical budget and financial contributions. Part of this shifting frame of mind also includes recognizing the benefits and digital tools that ecosystem partners can bring to innovation initiatives.

“It’s about rewarding innovators for breaking glass.”

—Ravi Simhambhatla, Chief Digital Officer, Avis Budget Group

Tech infrastructure: Digital-native businesses have the luxury of building their infrastructure from scratch. And most of their tools are “plug and play” from the cloud and other marketplaces. In contrast, traditional companies are often burdened with a legacy infrastructure. They must identify more flexible, agile alternatives, such as cloud, to support their use of digital technologies and pursuit of new opportunities. Similarly, emerging technologies, such as artificial intelligence (AI) and AI-powered automation, can position them to deliver improved customer-centric and employee experiences.

“There is a competitive advantage to being able to tell your customers that whatever system they use, you can easily deploy, easily integrate.”

—Mathias Schlecht, CEO, Biota

Operational process: Digital-native businesses have leaner, less systematic approaches that enable them to develop, experiment, and innovate more quickly. Conventional companies need to reconsider their old ways and embrace an environment of rapid experimentation with minimum viable products that support digital-first business models.

“If you don’t lift those historical constraints, you’re basically going to get the same old results, just with fancier technology.”

—Gregor Hohpe, Enterprise Strategist, AWS

Download the report to explore more business leader observations from their time with traditional and digital-native companies. Then consider the thought-provoking questions at the end as you pursue your own digital transformation efforts.