Digital ambivalence: The crisis facing New Zealand organisations?

Organisations must instil a culture of experimentation with IT. I suspect to do this, businesses will have to separate the corporate role of running an IT department from an RD role of assessing how new technologies can be harnessed by the businessPeter Hind, Hindsight Forum

Many established organisations in Australia and New Zealand appear to have slowed down in the move to digitalise their businesses.

This is one of the key findings from the latest HindSight Application of Technology Study (HATS), a survey undertaken by The HindSight Forum earlier this year.

This decline in enthusiasm for the potential of digitalisation was particularly noticeable in New Zealand, says Peter Hind, CEO and founder of The HindSight Forum.

The results from the 2015 HATS survey showed New Zealand IT executives were ahead of their Australian counterparts in embracing the digital world. This was not the case with the 2016 survey, Hind states.

In particular, there were several areas in the survey that highlighted this growing lack of enthusiasm for digital technologies.

When asked to define their organisation’s digital strategy, only 38 per cent in this country agreed digital technologies plus the Internet have a significant impact on the business and are key elements in the business strategy.

This contrasts with a 58 per cent response level from New Zealand IT executives to this question in the 2015 study.

Moreover, when asked to describe the top three priorities of their businesses, 81 per cent of New Zealand respondents agreed it was to do with with operational efficiency and productivity gains, (up from 67 per cent of Kiwi respondents in 2015).

Only 25 per cent saw addressing the marketplace disruption caused by digitalisation as a top priority for their business.

This lukewarm embrace of digitalisation is further reflected in those technologies New Zealand IT executives had no plans to pursue over the next five years.

More than 73 per cent of New Zealand respondents report they will not implement virtual reality in the next five years. There were similarly negative responses towards 3D printing (65 per cent), beacons (64 per cent) and wearable computing (62 per cent).

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This lack of enthusiasm for investigating these emerging digital technologies is disappointing, because New Zealand IT executives have one main advantage over their Australian counterparts – they are entrusted with greater autonomy in their budgets.

Hind says close to 4000 executives across Australia and New Zealand, from both public and private sectors, participated in the this year’s HATS survey. Research data was compiled from responses to either an online survey or printed questionnaire gathered in January to March, 2016.

The HATS survey showed the discretionary spend levels in New Zealand IT budgets are a median average of 10 per cent, which contrasts with only 5 per cent for their Australian counterparts.

“Embracing digitalisation requires an organisation to challenge conventional thinking and this entails a willingness to empower a CIO to experiment with new technologies, to see if they can help a business do things differently,” Hind points out.

“The evidence is more New Zealand IT executives appear to have the flexibility in their budgets to do such experimental work. However, they seem to be eschewing this opportunity to test the waters of digitalisation.”

Peter Hind, founder and CEO of Hindsight Forum

Harnessing the data resources will be increasingly more critical in a digital world, as it will enable marketing and client service functions to be more focused. Leveraging the data resources is not going to be done effectively, if it is just another task tacked on to all the other things a CIO needs to do

Assessing the role

In light of these findings, these are key steps New Zealand organisations can take in the next three months.

“They must instil a culture of experimentation with IT,” says Hind.

“I suspect to do this, businesses will have to separate the corporate role of running an IT department from an RD role of assessing how new technologies can be harnessed by the business,” Hind tells CIO New Zealand.

“As a corporate unit the focus will always be on doing things more efficiently and this mindset will see experimentation as unproductive, if it doesn’t produce results immediately. Yet in the long term, the very survival of many businesses will be dependent on them embracing digitalisation.

“I think there is a resignation on the part of CIOs that right now they need to be pragmatic. It takes time and money to build a digital business,” he says.

“With business revenues under threat from business models that are being undermined, time and money are luxuries that few CIOs currently possess. This means their investments in IT need to show an immediate, [that is to say under 12 months], return.

“People may talk that they are embracing digital technologies. However, my experience is in the traditional businesses, [that is to say ASX 100 and NSX 50 and their overseas counterparts], there is at best a thin veneer of digitalisation reflected in things like moving to the cloud or the use of mobile apps.

“Use of things like 3D printing in a full-scale production environment are very thin on the ground,” he points out.

“CIOs in sectors like manufacturing appreciate this is probably the way of the future, but right now they are tasked with dealing with the present. This is not my experience in new age businesses like Zappos and Spotify, where there is much more autonomy designated to the CIOs to go and test and experiment with how functionality like this can be leveraged.”

He cites in traditional businesses CIOs would probably need to go and do a business case to justify such investments, and with so many uncertainties, (for example, what will be the ROI and when), this isn’t something many want to confront.

What about data scientists?

The survey likewise notes a static trend in the growth of data scientists in organisations on both sides of the Tasman.

Hinds says this role refers to someone who “performs analysis on the data stored in an organisation’s IT systems to solve a variety of business problems, to optimise performance and to identify trends, figures and other relevant information”.

Despite one or two high profile appointments of data scientists in recent times, he states the role is still not common. Only 11 per cent of respondents reported their organisation had formally engaged data scientists.

The data scientist role is more common in the finance and business services sector and the leisure sector, (e.g. the gaming, communication and media) .

As to whether these results surprised him, he says the surprise is not that the growth of number of data scientists is small, but there was no change between the 2015 and 2016 studies.

“I had expected the growing appreciation of data being the primary asset CIOs provide the organisation, would be reflected in the presence of more data scientists in local businesses,” he says.

“IT has struggled for a number of years to find the best way to exploit its data resources. When IT had ownership of business intelligence, there was a view they didn’t know what data the business needed in areas like finance, marketing and sales.

“When the business had ownership of business intelligence work, the view was they didn’t know how to extract the necessary information from all the corporate systems.”

Hinds notes that for a time there was a concept called Business Intelligence Competency Centres, where a group of specialists sat between IT and the business to do the BI work.

“I suppose I had expected to see more evolution of this by now into the data scientist position.”

He believes data scientists have to be nurtured by a business, by investing in people like statisticians and growing their competencies.

“I don’t think you can easily advertise to fill these roles. One encouraging sign though is that business is waking up to the importance of resolving who has stewardship for data resources, as shown in the noticeable reduction in the numbers reporting data governance is an issue.

“More consideration needs to be given to the data scientist role. Especially considerations like what skill sets you need in a data scientist, where are they based in the business, how are they funded and what is their reporting line?

“Harnessing the data resources will be increasingly more critical in a digital world, as it will enable marketing and client service functions to be more focused. Leveraging the data resources is not going to be done effectively, if it is just another task tacked on to all the other things a CIO needs to do.”

Challenges ahead

The final question in the HATS survey looked at the major challenges confronting CIOs over the next 18 months.

The real standout was being a catalyst for innovation, says Hind.

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This was a challenge reported by 11 per cent of New Zealand IT executives. However, only two percentage points separated the next nine items on the list, he states.

The identified challenges were wide ranging from operational issues like insufficient resources to do the job and modernising the IT core systems and infrastructure, to strategic concerns such as a lack of time for strategic planning and dealing with corporate ambiguity.

Hind says this evidence seems to highlight the manifold and complex challenges that confront the modern CIO. “There is so much to do in so many areas and with so many business expectations to fulfil.”

“This, in my opinion, has been an especially tough time to be a local CIO.”

Hind points out in Australia it is increasingly common for CIOs to be in and out of a business in 18 months or less.

“The essence of the CIO role is to bring change management to a business and I seriously question whether you can do that in such a short period of time. This means I find many CIOs are increasingly forced to respond in often cosmetic ways to helping their business – moving SAP into the cloud, releasing some mobile app for a section of the work force.

“The tough change management challenges, for example legacy replacement or the full embrace of digitalisation, can be a task for their successor!”

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