I D C T E C H N O L O G Y S P O T L I G H T. I m p e r a t i ve s C a l l f o r D i g ital Transformation

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1 I D C T E C H N O L O G Y S P O T L I G H T H R i n t h e B oardroom: Overarching B usiness I m p e r a t i ve s C a l l f o r D i g ital Transformation November 2015 Adapted from IDC MaturityScape: Digital Transformation by Lisa Rowan, Vanessa Thompson, and Cushing Anderson, IDC #255819, and IDC MaturityScape Benchmark: Digital Transformation by Lisa Rowan, Vanessa Thompson, Cushing Anderson, and Suya Xiong, IDC # Sponsored by SAP The "people dimension" of digital transformation means that human resources (HR) organizations need to actively participate in contributing to better business outcomes through improved workforce visibility and effectiveness. Only with effective management and deployment of the enterprise's workforce resources can HR contribute directly to achieving positive business results. Digital transformation is becoming key to effective management through better visibility, access to key metrics, and a collaborative culture. This Technology Spotlight examines the need for the digital transformation of HR and looks at the role of human capital management (HCM) solutions such as those of SAP's SuccessFactors in achieving this goal. Introduction Digital transformation is rippling across all of the enterprise's functions and processes and HR is no exception. For HR, digital transformation is about flexibly and reliably accessing, connecting, and leveraging skilled human resources by adopting strategies that employ digital interactions, connections, relationships, and tools. The application of emergent digital technologies can help empower HR to achieve enterprise business objectives. However, achieving true digitization requires HR to look beyond its own HCM systems to understand where its data is being used across the enterprise in finance, sales, operations, etc. Linking HCM systems with other enterprise systems can provide the insight that HR requires to begin to show the cause/effect relationships between HR strategies and investments and how they tie to business outcomes. Digital Transformation Requires the Reinvention of HR The digital transformation of the broader business impacts the workforce in several dimensions. For instance, transformation across the enterprise is enabled by the ability of the organization to create a digital transformation mindset in its employees and to use digital and social connectivity to optimize relationships and collaboration within the workforce. Emerging and established technologies can be leveraged to create stronger talent management processes and to support more flexible staffing arrangements. However, digital transformation requires HR to reinvent itself, a process IDC refers to as Transformation. US

2 Digital transformation of HR can help enterprises achieve better business outcomes by making key connections between work and workers. Imperatives that call for robust connection between business objectives and the workforce include: Determining companywide productivity and identifying pockets of excellence and areas of weakness Delivering a true cost of workforce analysis Planning for succession Forecasting future business performance and adjusting plans accordingly Definitions Digital transformation: This term refers to the application of the digital technologies of mobile, social, cloud, and big data/analytics to make business processes, functions, and activities more responsive and effective. Digital transformation of HR: This term specifically refers to the evolution in how organizations achieve business objectives by effective sourcing, deployment, and integration of internal resources (full-time and part-time employees) and external resources (contract, freelance, and partner assets). Transformation and optimization are improved by adopting strategies that leverage digital interactions, connections, relationships, and tools. Digital Transformation Is Influenced by HR's Maturity Level Digital transformation of the sourcing, management, and deployment of the workforce offers benefits not attainable to HR organizations that hold to older technology and engagement practices (see Figure 1). HR organizations that achieve transformation benefit from: Optimized productivity and flexibility of the internal and external contributors to organizational value Identification of the right people resources to achieve business objectives Superior business outcomes through a modular, agile structure; facilitated relationships; and maximized productivity of interactions Attitude and belief systems that affect and reflect a more continuously connected and entrepreneurial workplace society IDC assesses digital HR transformation maturity along the dimensions of managing talent, sourcing talent, optimizing work, and facilitating a digital transformation mindset. Five stages of maturity result: Traditionalists generally view talent management as unimportant and maintain a "personnel" mindset. Traditionalists have a bias toward full onsite employment, eschewing remote, contingent, or freelance workers. Desktop, Web, and paper-based business processes are leveraged exclusively. And the culture consistently honors the founder's vision without adapting it to current conditions or market opportunities. Opportunists manage talent in silos, providing some guidelines on how business units and lines of business interact. Cross-group collaboration is "case by case" with occasional successes with some groups that leverage mobile tools, while others leverage social collaboration tools. The enterprise management style can vary widely for opportunists, but it generally achieves business objectives by focusing on the work environment and conditions IDC

3 Progressives regularly align work environment and management practices to achieve shifting business objectives. The talent management process has pockets of integration with broad acceptance of remote workers. Mobile and social access to business applications and processes is limited. Transformers see talent management as the result of the "war for new talent." Transformers believe that internal development is the primary tool to source organizational leaders and critical positions. Teams have broad access to business applications and business processes through mobile and social connections. Management structures favor flexible work arrangements and management styles that consistently achieve business objectives. Disruptors are visionaries who believe talent and talent processes represent a competitive advantage. High-quality resources are tapped through internal development, contingent, contract, or freelance channels. Business applications are ubiquitously available to remote and mobile workers, which facilitates collaboration and timely communication. The organizational culture adapts to support business strategy and operating philosophy. FIGURE 1 IDC's MaturityScape Digital Transformation Stage Overview Traditionalists Talent is managed with a "personnel" mindset. Priority is for full onsite employment. The culture honors the founder's vision. Onsite employees are individually productive but without coordinated use of collaboration tools. Opportunists Talent is managed in silos, with some guidelines on how business units interact. Collaboration is "case by case." Management style generally achieves business objectives. Talent pipeline is overwhelmed by low-quality applicants, and teams are internally competitive with inconsistent use of collaboration tools. Progressives Talent management process has pockets of integration with broad acceptance of remote workers. Mobile and social access to business apps/processes is limited. Work environment and management adapt to achieve business objectives. Talent and recruiting are aligning. Team capability is inhibited by limited tools for collaboration. Transformers Talent management fights a "war for new talent": Internal development is the primary tool for leaders. There is broad access to business apps/process through mobile and social connections. Flexible work environment and management styles consistently achieve business objectives. Turnover reduced by increased hire quality. Collaboration tools are widely leveraged to align efforts. Disruptors/Visionaries Talent is a competitive advantage. Resources are tapped through internal development, contingent, contract, or freelance channels. Business applications are ubiquitously available. Organizational culture supports business strategy and operating philosophy. Talent, recruiting data, and internal bench strength are leveraged to maximize role performance. Ubiquitous collaboration is enabled by the right tools. Source: IDC, IDC 3

4 Most enterprises are at the opportunistic and repeatable stages of maturity, with variation in strengths and weaknesses across the four dimensions of managing talent, sourcing talent, optimizing work, and facilitating a digital transformation mindset. The synergies among the dimensions mean it is important that business leaders take a structured, road map driven approach to moving up the transformation maturity ladder to ensure that initiatives and investments deliver maximum value and produce consistent results for leaders and employees. Moving up the maturity ladder requires both the adoption of modern digital technologies and a more sophisticated approach to the culture of managing human resources. On the culture front, at the early stages of maturity, the workforce is seen as a mere means to an end with little or no regard to how employees are nurtured. A much-needed change of mindset takes place as HR matures until, at the most mature level, talent is seen as a competitive advantage. The application of digital technologies goes hand in hand with the culture's maturation process. In the early stages of maturation, where human resources are not considered strategic, organizations see little value in connecting the workforce or integrating the HR function. As HR matures, the business case for connecting and developing the workforce through technology that integrates the many HR functions becomes clear. Through the maturation process, HR organizations farther along the maturity continuum, especially transformers and disruptors/visionaries, are better able to contribute to the achievement of enterprise business objectives and earn their place in the boardroom. Business imperatives that call for high workforce maturity include: Determining companywide productivity and identifying pockets of excellence and areas of weakness The best way to improve organizational effectiveness is to identify where the highest level of performance is delivered and identify what successful units do differently. Where are the most efficient workers, what plant, what store? Which regions sell the most? Which regions give the biggest discounts? Which units lag, and why? Cost of workforce analysis A single cost per worker metric is insufficient for understanding how these costs vary depending upon the output by workers. What is the average cost per worker, per most effective worker, per least effective worker? Planning for succession Enterprises constantly live with the risk of losing key staff. Know what roles are most critical for sustaining business, understand the risks of loss should roles go unfilled, determine readiness of bench strength to backfill, and build a staffing plan. Forecasting future business performance and making adjustments What works well today cannot be assured of continuing without examining staff risks and projecting future need. Analyze future workforce state, how much normal attrition to expect, what level of retirement to anticipate, how many new hires are needed, and length of time until new hires reach productivity. Models can forecast sales impact and production impact of the workforce mix. Launching a new business initiative Senior executives need to know where expertise exists to support a new business launch. Do we have the right manpower? Do we have sufficient manpower? How long might it take to fill positions for key roles? IDC

5 HR's Adoption of New Technologies Is Key to Achieving Digital Transformation A key barrier to achieving digital transformation and thus full workforce optimization is that HR organizations differ in their approach, aptitude, and formal policies for adopting new technology. In addition to technology, reacting to disruptors such as new sharing economy business models, more millennials entering the workforce, and the trend toward presenting a consumer-like experience affects HR's ability to be proactive in achieving digital transformation. Trends affecting HR's ability to achieve digital maturity include: Lack of formal "bring your own device" (BYOD) policies. A third of companies have no policy at all, according to IDC surveys of HR executives. Only half of companies surveyed by IDC see value in socially connecting employees for purposes of collaboration. Just 28% of HR executives feel it is HR's job to spearhead collaboration endeavors. The only HR function for which social is broadly seen as imperative is externally focused recruiting. Only 20% of executives see mobile as a key to workforce productivity. These trends highlight the lack of broad adoption of digital technologies internally by the enterprise for optimizing human resources and underscore the fact that most organizations still fall within the early stages of digital transformation of HR. HCM solutions will help HR organizations realize the true business benefits of digital transformation by offering fully integrated solutions that take advantage of best practices in digital technology. Considering the SAP SuccessFactors HCM Suite The SAP SuccessFactors HCM Suite includes a complete set of tightly integrated talent management solutions and robust workforce analytics and planning, plus a next-generation core HR solution. The suite acts as the HCM solution for the new SAP Business Suite 4 SAP HANA (SAP S/4HANA), which is built on HANA, SAP's in-memory platform. Some related HR processes such as timesheet, project staffing, resource management, and time confirmation on projects are a part of S/4HANA. Each of the suite's integrated business solutions makes full use of digital technology to help HR move through the stages of maturity. SuccessFactors solutions can help organizations achieve better business outcomes by leading HR to a higher level of digital maturity in the following areas: Core HR: Captures employee, organizational, and talent data in one solution to deliver better results faster Onboarding: Speeds up time to productivity of new employees and improves first-year retention Recruiting: Looks to internal and external sources and guides HR and management through the process of making the best hiring decisions quickly and effectively Performance & Goals: Empowers organizations to communicate strategy, create meaningful individual goals across the organization, and focus employees on what matters (Executives monitor goal progress in real time, and employee performance is tied to business results, streamlining the performance appraisal process.) Learning: Encourages employee development and empowers a social learning approach to achieve greater team collaboration 2015 IDC 5

6 Workforce Planning: Examines in-depth workforce information and benchmarks to assess readiness to execute strategies, forecast the impact of business decisions, mitigate risk, and take action Workforce Analytics: Delivers actionable, quantitative insights to business leaders with talent and business data that's easy to understand All of the SuccessFactors HCM solutions deploy the SAP JAM social networking solution to take advantage of collaboration, communication, and content creation tools. Challenges SAP faces several challenges. One challenge is the varying stages of HR's digital maturity in the marketplace. Technology alone cannot move HR organizations to become "transformers" or "disruptors." Organizations need to deal with their cultural maturity and grasp the importance of effective talent management on achieving business objectives. HR must educate business leaders on the connection between people success and business success. HR then can introduce solutions like those from SuccessFactors to bring the HR technology and functions together. Another challenge is the state of the art for digital transformation is a moving target. However, the "state of the art" approach will advance as technologies (and their use) become more sophisticated and transformative. Conclusion For HR to effectively contribute to organizational success, the management of the workforce must be tied to key business objectives. The processes, policies, and technology deployed to manage the enterprise's human resources need to become more mature to make the necessary business imperative connections. IDC believes that maturity in human resource management will require embracing digital transformation. HCM solutions such as those from SuccessFactors are vital in bringing to market a consolidated and integrated set of HR capabilities underpinned by digital technology. Without integrated systems, HR remains stuck in suboptimal silos of functionality with little or no visibility across the organization. HR stands little chance of achieving digital maturity without tools that take best advantage of mobile, social, cloud, and big data. HR will be able to achieve success in the boardroom only by becoming an integral part of effective business execution. Achieving this transformation will involve taking the right steps to introduce a collaborative and mobile environment and adopting a digital mindset. A B O U T T H I S P U B L I C A T I ON This publication was produced by IDC Custom Solutions. The opinion, analysis, and research results presented herein are drawn from more detailed research and analysis independently conducted and published by IDC, unless specific vendor sponsorship is noted. IDC Custom Solutions makes IDC content available in a wide range of formats for distribution by various companies. A license to distribute IDC content does not imply endorsement of or opinion about the licensee. C O P Y R I G H T A N D R E S T R I C T I O N S Any IDC information or reference to IDC that is to be used in advertising, press releases, or promotional materials requires prior written approval from IDC. For permission requests, contact the IDC Custom Solutions information line at or gms@idc.com. Translation and/or localization of this document require an additional license from IDC. For more information on IDC, visit For more information on IDC Custom Solutions, visit Global Headquarters: 5 Speen Street Framingham, MA USA P F IDC