The 5 Stages of Digital Transformation Maturity in Mid-Sized Businesses

By Mark Geschke | Digital Transformation

Mar 22

After many years of being on the sidelines of the digital transformation (DX) media frenzy you have decided that it is time to do something.

But where and how do you really start?


If you are like me, you will read all the information you can lay your hands on (articles, books, reports) ... and I suspect you will be as confused as I have been for a long time.

To save you all this trouble, we have created a super-easy to use digital transformation (DX) maturity model for mid-sized businesses.

By applying it, you will not only learn more about the big picture of digital transformation, but also gain clarity on what your possible next steps should be based on your current level of maturity.

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Armed with this knowledge, you can focus your time and energy on the activities that will generate the best results.

And this in turn will create momentum and buy-in for the next, more complicated steps.

Why Do We Need a DX Maturity Model for Mid-Sized Businesses?

More and more mid-sized businesses are starting to really worry about the effect that "digital" will have on the future of their business. (If you are still on the fence, read SMEs Potentially Biggest Losers of Digital Disruption.)

Fortunately for them, the number of successful digital transformations is also increasing at a rapid pace and there are good case-studies, books and tools available to reduce the risk.

One of the most potent tools for reducing risk and accelerating adoption is a maturity model.

There are many different types of maturity models, but at their most basic level each of them defines a few developmental stages one has to go through to achieve clearly understood and valuable outcomes.

Most maturity models are expected to have the following deliverables:

  1. To create shared understanding by providing a model that helps everyone see and talk about the same picture.
  2. To provide guidance and assist with identifying the next major developmental steps that will take the organisation forward.
  3. To facilitate comparisons by bench-marking against other, similar organisations.

Brian Solis from the Altimeter Group has done some great work developing and validating a Digital Transformation Maturity Model that delivers on each of these expectations.

Unfortunately, however, all efforts to date on developing DX maturity models have been focused on large organisations and there remains a need for much more specific guidance tailor-made for mid-sized business.

And this is exactly what we at Xuviate set out to do and what you are reading about in this article.

After reading this article I would really appreciate if you let me know how well we have achieved our goal.

Introducing the Xuviate Dx Maturity Model for the Mid-Market

Similar to other models, we have identified 5 distinct maturity stages on the DX journey.

Starting with the end in mind, the final stage (stage 5) is defined as "Agile Business" and depicts a state where digital transformation and other related change efforts have created a business that is highly effective at responding to rapidly and often dramatically changing market forces.

For a refresher on Agile, have a look at what Mathias wrote in The Speed of Agility: How IT is Teaching Businesses a Lesson.

Every organisation starts at stage 0 which is essentially "business as usual" where technology plays at best a supporting role to the many siloed business functions.

Moving from stage 0 to 5 requires increasing digital and organisational maturity at every stage.

In our work we have found that the most important factor for determining digital maturity in mid-sized businesses is the choice of organisational structure at each stage.

Having said this, just be careful to never confuse the need to digitalise (and grow in maturity) with the outcome one should be pursuing at each stage of the journey:

Digital transformation in itself is never the goal (but just a tool) to deliver better customer outcomes, more efficient processes and to create a truly adaptive business. More about this in Digital Transformation for Dummies.

Stage 0: Siloed

This stage is the kick-off point for digital transformation and most organisations that have not made a conscious decision to move forward will still be classified as such.

How do you know for sure your business is still at this stage?

For one you could read BTM is the New IT and ask yourself whether your business really understands the need for having strong business technology management skills across the entire leadership team?

You could also have a look at the following list for some more indicators:

  • IT is seen as a support function to the business and is usually only involved after strategic decisions have been made.
  • There is a strong view in the organisation that each business function has to operate at arms length of each other in pursuit of clearly defined business goals.
  • Business leaders (other than IT) believe that technology-based innovation should be driven by the IT department alone.
  • The IT leader is solely responsible for creating a business case for most line-items in the IT budget.

What may be really surprising to many people is that even some organisations that have sophisticated technology infrastructures are often classified as stage 0 as they may still have a strong silo-view of company operations where IT is just a support function.

Digital transformation is about leveraging technology to transform all aspects of the company in the pursuit of an agile business that continually delivers compelling and differentiated customer experiences.

Stage 1: Isolated

This is the first tangible stage directly associated with digital transformation.

In many instances it is driven by a few leaders who are warming up to the transformative potential of applying digital technologies within their own functions (often referred to as "shadow IT") but who then realise they can only achieve the intended results in collaboration with other functions.

Some very fruitful partnerships we have seen involve the Marketing Department and IT (collaborating on digital marketing), Finance and IT (tackling the need for better data) and Operations and IT (optimising business processes) but there are many other examples.

Whilst these efforts do often involve more than one business team, they are in the bigger picture of the business as a whole still isolated initiatives - thus also the name of the stage.

In some organisations (especially smaller ones), there are no digitally astute leaders to kick-start this process and other approaches are required (also read Who should start the Digital Transformation? It is not who you think... ).

In this case the future of the organisation may rest on the ingenuity of the IT leader for creating awareness and demonstrating the benefits of collaboration through some well-timed and executed projects with major pay-back.

In business transformation there is nothing as effective as an early, highly visible win that inspires minds and encourages broader action.

One of the most challenging aspects of this stage is to ensure that projects have real value to the business (i.e. they are either customer-focused or improve operational outcomes) and are not just pet-projects of functional leaders.

A simple opinion poll of stakeholders on whether the business should focus on operational excellence (OX), customer excellence (CX) or adaptability (which requires OX and CX) can help set the direction and reduce risk.

Stage 2: Synchronised

Visible results from some of the trailblazers in the previous stage and an increasing desire to leverage technology and gain speed are usually the trigger points for entering this stage where previously ad-hoc arrangements are formalised.

As a first step, leaders create a more formal, overarching group that assumes responsibility for prioritising and synchronising improvement initiatives and optimally using scarce resources such as IT and development skills.

By doing so, individual functions have to balance their need for doing well on their own KPIs (which they have agreed to during the regular business planning process) with the overall needs of the group to make decisions in the best interest of the business as a whole.

While this juggling act can become tough, the improved prioritisation and focus on what matters most lead to significant performance breakthroughs.

Stage 3: Strategic

Again the results of the previous stage tend to not go unnoticed and soon lead to the formal recognition of this rag-tag team and its digital improvement agenda at a strategic level.

What started out as a grass-roots movement now evolves into an important business priority as the need for better and faster decision-making and execution continues unabated.

The DX journey becomes the responsibility of the CEO and by extension the Exco/board of the business.

More funds and expectations lead to the formalisation of processes that were previously handled in an ad-hoc manner and as part of the team's normal way of operating.

When reaching this stage, some organisations will even elect to appoint a full-time Chief Digital Officer (CDO) or similar change agent to accelerate the digital transformation efforts across the company.

Stage 4: Integrated

Although significant amounts of new revenue are generated through digital initiatives, overall momentum is still quite slow and it becomes necessary to create a team with the sole focus of driving digital re-organisation across the business.

Although some of the skills will still be "borrowed" from other functions (especially leadership input) most team members will be dedicated to this new team. Having the resources, funding and freedom from other bureaucratic processes has a huge effect on company culture as everybody else starts to realise that this is the way of the future.

What was previously an afterthought to "business as usual" now in some instances becomes the default way of "how we do things here".

Having two operating models, however, is not efficient and it will soon herald the transition to Stage 5, another "business as usual" stage, but at a completely different level of capability than Stage 0.

Stage 5: Agile Business

The final stage is reached when digital and non-digital practices merge and make way for a finely tuned business that can respond rapidly and convincingly to any changes in market conditions.

It is highly likely that these digital masters will display many of the following characteristics:

  • Functional silos have lost their prominence in favour of small, nimble project innovation teams that assemble and disband as needed.
  • A culture that favours experimentation, innovation and risk-taking has emerged.
  • Manual processes have been automated in such a way that people can focus on activities that truly add value to the customer experience.
  • A purpose-driven organisation has been created, where employees are led instead of managed.

According to IMD and Cisco, what makes these organisations so successful are the three core capabilities of the operating engine they have upgraded at each stage of the DX journey:

  • They are highly attuned to changes in the market (hyper-awareness),
  • they are adept at leveraging data to rapidly decide on how best to respond and capitalise on opportunities (informed decision-making)
  • and they are supremely capable of rapidly introducing changes to the business (fast execution).

Achieving this stage brings an organisation to the end of its formal DX journey.

Since the business is now "digital by default", the continued need for a dedicated digital transformation team or even leader (CDO) in many instances also becomes questionable and should be re-evaluated.

Transformation has now been institutionalised as a core business capability and the engine is ready to deal with whatever the market throws at it.

Conclusion - Know Your DX Maturity

Even though the term digital transformation may cause some resistance, I have yet to find an organisation that doesn't aspire to become a Stage 5 Agile Business, as defined in the DX maturity model for mid-sized businesses introduced in this blog.

To conserve resources and focus on the most important step, I highly recommend you understand the main characteristics of each of the maturity model stages and ask yourself this simple question:

At what level of maturity is my organisation today?

Once you know the answer to this simple question, you will better understand what you need to do more of (in order to get all the benefits the stage promises) and what you need to focus on next if you want to move forward.

Enjoy the journey!

Was this information useful to you? Is everything clear? How can we improve? Please leave a comment and help us create the best DX advice for mid-sized business.

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About the Author

DX Sensei, Mastermind Facilitator, Abundance Thinker or CEO, call me what you like, but know this: I am extremely passionate about helping IT leaders from mid-sized businesses discover their true potential and realise just how important they are to helping their employer survive and thrive in our increasingly digital world.

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