By Bas van Bennekom – Cloud & Artificial Intelligence Intern
Over the last years, questions such as: ‘How does digital maturity improve firm performance?’, ‘What factors positively influence digital maturity?’ and ‘Do industry-specific factors play a pivotal role during digital transformation ventures?’ have occupied the attention of multiple c-level executives. Since Microsoft is poised to answer these questions, academic case study research is conducted. Accordingly, Microsoft aims to use the results of this study to empower clients along their digital journeys.
The study concludes that Microsoft Azure positively impacts an organization’s digital maturity by affecting four different influencing factors (e.g. digital workforce). This uplift consequently results in firm performance improvements with regard to four firm performance aspects (e.g. products & services). As Microsoft Azure complies by default, this relationship is not substantially influenced by industry-specific factors, such as regulatory compliance. Figure 1 visualizes the above-mentioned connections while the upcoming sections provide a deep dive into every individual relationship.
Figure 1: How does Microsoft Azure impact digital maturity and firm performance across industries?
How does digital maturity improve firm performance?
Generally, firm performance is measured in financial terms, stakeholder engagement, business process performance or learning and growth. Accordingly, executives are confronted with a wide array of firm performance aspects that are impacted by improvements in digital maturity. Nonetheless, these aspects can be consolidated into a set of five overarching items (see Figure 2): products & services, internal processes , customer engagement , partners & competitors, and financial performance. Research confirms that an uplift in digital maturity positively impacts all firm performance aspects, except partners & competitors. With this knowledge, executives can conceptualise how digital maturity drives specific firm performance aspects. Consequently, organizations can more accurately quantify the impact of digital maturity improvements and make more well-informed investment decisions about digitalisation.
In conclusion, four firm performance aspects are positively influenced by improvements in digital maturity. Hence, companies can benefit from initiating their digital transformation.
Figure 2: How does digital maturity improve firm performance?
What factors positively influence digital maturity?
Despite increasing acknowledgement of the importance of digital maturity, a substantial number of firms have failed to enhance their maturity levels. This trend is visible across sectors, as all industries host so-called digital beginners. Research indicates that a lack of guidance and absence of best practices mainly induce this struggle. Extensive research proved the positive impact of five overarching influencing factors on digital maturity: digital workforce, digital culture , digital capability , digital leadership and digital vision. Organisations should thus internally cultivate and align these factors to drive digital maturity improvements. Executives must also support and propagate digital change, since it stimulates the development of the other four influencing factors. This simplification avoids confusing organisations with a wide array of digital transformation options. Rather, companies can focus on building the five comprehensive factors and allocate their investments to specific initiatives instead of wasting assets on an excessive number of projects.
To conclude, organizations need to create and align the five influencing factors, as indicated in Figure 3, in order to substantially drive digital maturity improvements.
Figure 3: What factors positively influence digital maturity?
Do industry-specific factors play a pivotal role during digital transformation ventures?
Industry-specific factors, such as regulatory compliance, influence the digitisation of organisations. Nevertheless, research on these factors is minimal due to the ambiguity of this concept. Therefore, companies do not comprehensively understand their impact on digital transformation. Such ignorance can deter executives from initiating digital transformation or impede companies along their digital journeys because of non-compliance. Research implies that the influence of industry-specific factors depends primarily on the organisational attitude towards digital change, which evidences that its effect can be positive as well as negative. Hence, companies in various sectors can drive digital transformation while taking the effect of industry-specific factors into account.
Figure 4: Do industry-specific factors play a pivotal role during digital transformation ventures?
Does Microsoft Azure impact digital maturity?
Azure, Microsoft’s cloud computing solution, can assist firms during their digital transformations. Research illustrates that the solutions and characteristics of this cloud platform drive the development of four influencing factors (see Figure 5): digital workforce, digital culture, digital capability and digital vision. In other words, organisations can implement Microsoft Azure to advance their digital maturity and consequently drive four firm performance aspects: products & services, internal processes, customer engagement and financial performance. In addition, as this cloud solution complies by default, the influence of industry-specific factors is marginal. Consequently, the impact of Azure on digital maturity and firm performance is positive and does not substantially fluctuate across industries.
Figure 5: Does Microsoft Azure impact digital maturity?
You can read the whole study here.