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Nearly half of UK bosses believe they must transform their company or it will fail

Nearly half of UK bosses believe they have to embrace digital transformation or see their company fail within the next five years, new research has revealed.

While 44% of business managers understand that the sudden shift to a more digital society will require changes in how they work in order to survive, 46% believe their senior leadership is not yet willing to take such big decisions.

“The dawn of the fourth industrial revolution is a massive opportunity for British businesses but many are still living in an age of innocence or inertia when they need to be innovating,” said Nicola Hodson, General Manager, Marketing and Operations, Microsoft UK. “While this research indicates that business models are breaking, many business leaders appear unwilling to address them.”


Digital Transformation: The Age of Innocence, Inertia or Innovation? – one of the most extensive research studies ever conducted into the impact of digital transformation on UK organisations – found that 50% of UK business leaders believe technology will cause at least some disruption in their industry in the next two years.

However, most have not adequately embraced the need for change and “there is a sense that many organisations are tinkering around the edges of their business model”, the report stated, while citing “slow decision making, risk aversion, legacy investments and poor IT agility” as key blockers.

“Possibly this is a characteristic of short-termism. A CEO who boosts the share price because their customers are delighted with the new mobile app will be rewarded accordingly. The CEO who realises that the changes required need to be profound may be sacrificing their own track record to make their successor appear the hero,” according to the report.

Download the digital transformation report here

Those who have realised the urgent need to change their business and embrace technology – such as cloud computing and machine learning – cited an improved customer experience, optimised operations and survival as a business as key drivers.

Companies in the financial services sector, which have traditionally made customer service one of their top priorities, are the most anxious about digital change, with 65% of business leaders in that area citing concerns. Cheaper and smaller disruptors are their biggest fear.

As such, two-thirds of financial services firms who responded to Microsoft’s survey already have a formal digital transformation strategy in place, including embracing the cloud. Almost three-quarters (70%) of commercial organisations said storing information online in data centres was as secure as having it on their own premises.


However, the financial sector is in the minority when it comes to planning for the digital future. Just 27% of manufacturing companies believe they will face significant disruption in the next two years and less than half have developed a coherent transformation plan, while the retail sector was “indifferent” to using machine learning and analytics software.

“The use of big data, analytics and cloud technologies is expected to continue growing across all sectors in the years ahead. However, what is clear is that many organisations are starting to experiment with newer innovations such as virtual reality, augmented reality, chatbots and machine learning,” the report revealed.

This reinforced the gulf between senior members of staff and those elsewhere in the business. Less than half of business leaders (47%) believed they had a transformational strategy in place compared with 65% of chief information officers and IT bosses.


The report – which interviewed 1,000 business and IT leaders from the financial services, retail, manufacturing, public sector and services sectors – highlighted this as “a major cause for concern” adding that “such organisations might well be vulnerable if they are not a disruptor or don’t have a plan to avert disruption”.

Worryingly, most managers are seen to be making strategic decisions based on gut instinct. More than a third (35%) of the survey’s respondents in the public sector – which is falling behind other sectors in digital transformation – said bosses did not look at data or use analytics in their decision-making.

“Given the short lifespan that many respondents perceive their current business models have left to run, the need for leaders to make the right strategic decisions that will keep their organisations competitive in evermore disrupted markets is paramount,” the study reported.


Additionally, a high percentage respondents do not think their senior leadership are  “digitally literate”, “[which] suggests that for many, digital transformation is an isolated project happening somewhere else in the business… There has never been a time when strong technology leadership was so important.”

A digitally-minded leader is important when trying to attract and retain talented staff, as technology can be used to help people work more efficiently and remotely. The top reasons cited by those who say they have a millennial-friendly office include flexible working, a good career path and prospects, pay and benefits, use of the latest technology or being “a digital company”, culture and being an ethical and responsible employer. A significant number also say they have specific initiatives to engage and recruit younger workers, or that they have a strong graduate and apprentice recruitment programmes.


A third of the survey’s respondents said that the older generation of workers will get left behind in the digital revolution. This rises to 40% for the retail sector.

To ensure future success for these organisations, Microsoft’s report concluded they must embrace digital transformation. The use of cloud computing would “enable organisations to service employees, customers and other stakeholders on the device of their choice”, while allowing people “to engage when and where it suits them”. Chief executives must be “digitally-savvy” and focus on innovation, while their companies must be obsessed with data.

“The day business leaders start to believe their businesses are bulletproof is the day they take their eye off the market,” the report stated.