The challenges of the pandemic forced many business to jump start their digital strategies, according to research by SAP, but it came at the potential cost of the more holistic transformation strategies that drive performance.

To compile the report, SAP partnered with data intelligence firm IDC to survey strategic decision makers at VP level or above at 150 Canadian organizations with over $50 million in revenue and at least 500 employees.

Just under 40% of business say their digital strategies are integrated with core business, triple the amount who said the same in the 2020 edition of the survey.

But what’s more is that the divide between innovative companies and those that have typically lagged behind is shrinking.

IDC divided respondent companies into four groups: Innovation Readiness Leaders, Challengers, Participants and Observers, in order from most to least mature digital strategies. And among the Participants and Observers, 34% say they have a fully integrated digital strategy – up from just 2% in last year’s study. Among even the lagging Observers, 13% say that a digital strategy is now fully integrated into its core business, compared to none who were able to say that last year.

There has still been room for growth among the early movers, as 65% of leaders say their digital strategy is fully integrated with core business, up from 40% last year.

But all of this means that a fine-tuned digital machine is not the differentiator it once was.

“We are seeing that organizations will need to continue to fully integrate their operations in the coming year to remain competitive,” says Brian Moore, COO at SAP Canada. “Simply put, a digital transformation strategy is no longer a ‘nice to have.’ It’s a necessity for organizations to thrive.”

With that in mind, Moore adds that the year ahead will likely have Canadian businesses move away from “tactical and reactive enhancements” that many organizations made to stay afloat during the pandemic, and to more fullsome and proactive digital transformation strategies.

It will take some work to make that shift, though. The number of organizations that said they have an integrated strategy for digital transformation actually decreased from 48% to 32% over the last year, which SAP attributes to responding to the challenges of the pandemic. In fact, 54% said they had to implement new tactical digital initiatives in response to these challenges, pulling focus from large scale transformation to ensure basics like remote work and customer engagements were running effectively.

But that shift was more pronounced at some companies. Despite the fact that 58% of Leaders said the challenges of the pandemic was a hurdle to implementation, 71% maintained their integrated transformation strategy, instead of shifting to the tactical approach that most Observers, Participants and Challengers had to take. This meant that despite challenges, they were more able to respond to both the pandemic and bigger-picture business shifts with things like new business models and customer experiences. Also, 84% of Leaders said they utilize digital technologies to make incremental and continuous improvements to their core business, taking a more proactive approach.

The results were evident in their business performance. Leaders had improvements across KPIs, with 90% stating they had improved profits, revenue, CX and employee productivity, as well as reduced capital expenditure requirements to modernize their businesses. In addition, 22% of respondents from Leader companies had an increase in their top three KPIs over the last year, a number that declines steadily until it hits 13% for Observer companies.