Digital transformation in Chile

The 2018 Business Digital Transformation Index published by the Santiago Chamber of Commerce reveals a striking figure: two out of three Chilean companies have not taken any significant steps toward digital transformation ¹ . The study, based on surveys of executives at 200 companies, breaks the degree of digital maturity into 5 categories:

• Level 1 - Analog (30.8%):
  companies with little progress in digitalization; their processes are carried out mainly on paper.
• Level 2 - Digital beginner (34.3%):
  use of basic digital technology and tools such as email, spreadsheets, social media, etc.
• Level 3 - Digital intermediate (22.8%):
  companies showing meaningful progress across every dimension of the digital transformation process, such as advanced web portals and automated internal processes.
• Level 4 - Digital advanced (8.9%):
  companies close to completing their digital transformation. Only a small share of their processes fall outside the digital paradigm.
• Level 5 - Digital leader (3.2%):
  Companies that operate in a fully digital way and have broken with the traditional way of doing business.

The study concludes that 65% of companies sit at level one (analog) or two (digital beginner). It also shows a clear gap between SMEs and large companies: SMEs have been slower to adopt certain technologies. According to a study by the Digital Society Observatory ² , this is because SMEs generally do not yet see how cloud or big data technologies affect their business. Adoption of mobile technologies and social media is a different story, where the gap between SMEs and large companies is narrower.

What is the cost of delaying digitalization?

Digital transformation is not an ethereal concept floating in cyberspace: according to an analysis by McKinsey³, the potential of further digitalization in Chile could accelerate GDP growth by up to 0.7% a year. The two areas with the greatest potential are operational improvements (better R&D, supply chain, less waste of resources and energy) and higher labor productivity. The latter is of particular interest in Chile given the rise in labor costs that would follow from several reforms currently before Congress: the shorter working week AND higher pension contributions, together with zero progress on labor flexibility. Faced with this potential increase, and with the economy slowing after the protests of October 18, the answer many companies find to secure their survival may well lie in process automation. Knowing what is at stake, which areas do companies need to review in order to raise their digital transformation index?

How to climb the digital index

According to a global McKinsey analysis of 150 companies⁴, those that have managed to raise their digital quotient significantly did so by focusing on four key areas: strategy, digital capabilities, company culture and the ability to nurture talent.

First, strategy: companies must choose a digital strategy that is fully coherent with and integrated into the corporate strategy. They must ask themselves where the biggest threats and opportunities will arise, so they can proactively allocate the resources needed to face the changes. Second, the company's digital capabilities, which include data-driven decisions, process automation and closer connectivity with customers. Third: a fast-moving corporate culture is key, one capable of iterating quickly in agile development cycles. The company culture must also allow employees to take risks without being punished for missteps. Companies must also abandon the traditional paradigm of keeping their digital teams isolated from the rest and foster a culture of collaboration. Fourth, companies must know how to nurture and retain talent with the right incentives and organizational structure.

And in Chile? Which of these factors is the main bottleneck in organizations? The Santiago Chamber of Commerce (CCS) study mentioned above suggests that in Chile the main variable driving the digital index is leadership within the organization. Without leadership there is no digital strategy, and without a coherent digital strategy companies cannot identify the threats and opportunities in the market, nor adjust their organizational culture to move fast and seize those opportunities (or face the threats from competitors). In conclusion: it is impossible to take the first step toward digital transformation without the right people. For companies that lack the in-house leadership and technical knowledge to assess their level of digital maturity, or to develop a strategy that fits their needs, good advice is to bring in the talent or hire the technical advisory services needed to take that first step.

But it is not all bad news. According to the CCS, moving up from the analog level does not hinge on investment. It is possible to take big strides in ways of working, organizational culture and people's productivity without launching major investments and projects, but it all depends on backing from the organization's leadership.

If you are unsure where you stand on the digital scale, at Analyze we offer advisory services to assess your IT systems and develop a digital strategy in line with your corporate strategy.

---

¹ https://www.ecommerceccs.cl/indice-de-transformacion-digital-de-empresas-2018/
² Adopción & Brechas para Transformación Digital (2018), Observatorio de Sociedad Digital and Facultad de Economía y Negocios, Universidad de Chile
³ Impacto potencial de lo digital en la economía chilena (2017), McKinsey
⁴ Raising your Digital Quotient (2015), McKinsey

Back to blog