“What is hindering French companies in their digital transformation?”

Poorly ranked at the European level, French companies face four main obstacles in their digital transformation. Digital transformation is marking time in French companies. Many CAC40 CEOs complain of a lack of visible results to motivate teams, while worrying about the significant amounts invested in this area. Moreover, in several sectors, such as distribution or the automotive industry, their competitors are making giant strides, which does not reassure their shareholders or employees and does not make it easier to deal with the issue calmly. But what are the obstacles to this transformation? Our work shows that investment in CAC40 groups has not slowed down: since 2013, it has even been growing steadily, even if the amplitude of this growth is tending to decline. An analysis of a significantly larger number of companies (nearly 250) shows, however, that four factors predominate and more generally slow down corporate progress than others.

1. Delegation to a dedicated expert The first, and probably the most important, factor is the propensity of many companies to delegate digital transformation to a dedicated expert (CDO, CIO or external consultant), thus limiting the investment of top management and CEOs on the subject. While this solution offers the advantage of immediately acquiring good expertise, it has the disadvantage of creating internal tensions: the "digital transformation" team will most often be perceived as a hindrance to go around in circles as soon as it takes an interest in the company's important issues. However, without a good mastery of digital issues, it is rare for the CEO to be bold and arbitrate in favour of a team that is by nature cross-functional and for which it is necessary to oppose those who run the business on a daily basis. I once made a bet with one of my associates that by 2019, one of the CAC40 companies would be run by a former entrepreneur in the digital economy. I only have a few months left to win this bet, but I am now much more pessimistic. Within the CAC, too few CEOs have personally invested in the digital economy. Frédéric Oudéa, at the head of Société Générale, is the only one (to my knowledge) who has decided to learn how to code...

2. The choice of the incremental method The second factor of failure lies in the method used to introduce digital literacy. Too often, companies see digital transformation as an incremental process that can be approached gradually. This is anything but. On the one hand, it eventually generates a profound reorganization, removing functional silos and flattening the hierarchy, but, on top of that, a successful digital transformation changes the core of the business, fundamentally disrupting all the processes of the actors who run the company on a daily basis (see also the column: "What digital transformation really means"). Thus, production functions will generally be in contact with the customer, with permanent access to analytics that measure user behaviour. Marketing functions will also frequently find themselves integrated into the product itself... And these are just two examples among many. We must therefore fear a very sharp and often effective reaction from the players in place, who will try to discredit any plans to break with the past. Whether it is a bank that launches an application free of charge, or a supplier of industrial equipment who decides to lease the latter in "XaaS" ("Everything-as-a-Service"), the reaction will generally be virulent, so much so that the threat will be perceived as existential by a number of employees deeply dependent on traditional activity. However, it is possible to avoid these two pitfalls: firstly, by sharing and, if possible, building the transformation project with the entire company. This project will highlight the difficulties that may be encountered, will focus on adapting human capital and, above all, will protect innovators by giving them an autonomous space and allowing them to implement offers that could potentially cannibalize the company's core business (see also the article: "How Google converted its engineers to management"). Once these new offerings have reached a certain critical size, it will then be possible to bring them closer to the company's traditional business lines, and then merge activities and skills.

3. Lack of digital experts The third factor is the lack of sufficient digital experts. In France, about 7500 good developers enter the market every year. In comparison, 40,000 students graduate from engineering schools. Thus, companies are sorely lacking in experts. Whether for management positions or business functions, business and engineering schools today give too few hours of courses to digital (digital transformation strategy, code courses, digital project management, etc.). Moreover, France is probably the only major OECD country that has not created a digital higher education institution in the last twenty years. Although the school is often cited as a reference, it is a private initiative, which has long been viewed with circumspection by the educational authorities... As for the "Grande Ecole du Numérique", it is only a labelling agency. Given these limited initiatives, it is therefore hardly surprising that France occupies 17th place in the European Commission's DESI (Digital Economy and Society Index) barometer on the digital transformation of businesses.

4. Short-termism induced by financial markets Finally, we must denounce a certain short-termism, largely induced by the financial markets. A CEO of one of the largest companies in the CAC40 conceded to me that four or five billion dollars of investment would be needed to enable his company to achieve a successful transformation. He added, however, that if he undertook to implement such a strategy, the sanction of the financial markets would be such that he would probably be quickly fired. This point is all the more compelling since it is difficult, if not impossible, to predict the outcome of a digital transformation plan. The latter is often largely iterative by the very fact that the new digital organizations generate many disruptive innovations, which are in essence impossible to predict. While in the field of the automobile and its equipment manufacturers, the technical challenges (autonomous vehicle, carpooling and car sharing) are more or less identified, this is considerably less obvious for business real estate, industrial equipment or the energy sector. When in doubt, the financial world bets on what it knows and will always prefer a clear outlook for the next few quarters to a bet on the company's potential in the medium term. Such an observation is by no means anecdotal: it merely highlights the difficulty that the traditional economy faces when it faces a new paradigm for which it has not been prepared. Obviously, the latter affects much less medium and small enterprises, which have little means of getting into debt anyway. In the case of the latter, it is rather the syndrome of the order book and administrative management that is at work: working capital is so tight that business leaders are constantly chasing orders or spending too much time managing administrative constraints, with little interest in what they perceive as a longer-term issue. This factor, probably due to the importance of fiscal and regulatory pressure, is probably as significant as the tyranny of financial markets can be.