Are CEOs understanding the importance of digital transformation? If digital transformation is a journey, then how many organizations have started it and can we infer how far industries are in their transition to become digital businesses? What are some of the benefits being realized by those that have delivered outcomes from digital transformation?
If digital is a strategic priority, are CIOs stepping up to their new leadership role, digital charter, and added responsibilities to grow digital business and improve customer experiences? Have business leaders changed their expectations of IT and partner with them on growing the business? Have CIO successfully changed the mindset, culture, and skills of IT to be more customer focussed, digitally savvy, and analytics driven?
I decided to scan some recent industries surveys to develop some insights.
Business leaders ahead of CEOs in driving digital business
Gartner’s recent survey of 388 CEOs suggest that they are beginning to grasp how important digital business is to their growth and customer relationships. “Forty-seven percent of CEOs are being challenged by the board of directors to make progress in digital business, and fifty-six percent said that their digital improvements have already improved profits.” In response, forty-two percent of these CEOs have started digital business transformation and thirty-one percent recognize IT-related priorities as one of their top three in 2017. In addition, fifty-six percent said that digital improvements were improving profitability and twenty percent are taking a “digital-first” approach to business change.
This data suggests that overall, we’re probably about one-third to one-half of the way through the digital transformation journey as there’s still another half of CEOs who haven’t started. About half the ones that have started the journey have delivered business outcomes and about a quarter have recognized the business and cultural changes need to be digitally driven. This suggests that digitally driven initiatives have delivered value, but the overall transformation to a digital business is a work in progress.
Fujitsu’s recent survey of 1600+ business leaders is more optimistic. They cite eighty-nine percent that have started digital transformation initiatives with thirty-four percent of them having already delivered business outcomes. The good news is that outcomes of their digital transformation efforts are hitting the key focus areas including improvements in customer relationships, strengthening products, and business growth.
This suggests that business leaders still have to develop their relationships and business cases around digital transformation with their CEOs. The CEOs pursuing digital transformation may be in industries like media, financial services, retail, or healthcare where there is a stronger urgency and board mandate to enable digital experiences and drive efficiencies through automation. Business leaders, including CIO need to help the other fifty-three percent of CEO that haven’t started digital transformation programs understand its strategic importance and can now leverage example outcomes from other industries to develop business cases.
CIO digital execution is lagging intent
Deloitte’s survey of 1200+ global CIOs suggests that most CIO have responded to new digital priorities but business alignment and IT execution is lagging behind. Respondents listed customers and growth as higher business priorities over performance, cost, and regulatory priorities, but listed improving business processes, reducing costs, and maintaining IT systems as the core expectations from the business of IT and the CIO. CIOs need to recognize whether this alignment gap exists in their organization and must better demonstrate capabilities that drive customer and growth outcome to their business leaders.
Fifty-eight percent of CIOs listed execution as an essential capability but twenty percent acknowledged that either this capability is being developed or does not exist. CIOs also acknowledged that the IT organization’s view on the end customer is more aligned today to building technology platforms rather than designing products or delivering customer experiences. The good news here is that many CIO recognize the importance of execution and changing the the IT mindset, so these numbers should improve over the next few years.
Going deeper into this survey, CIO listed digital and analytics as the technology areas that will have the most business impact over the next couple of years, but listed them fourth and fifth in their current investments behind legacy modernization, cloud, and cybersecurity. CIOs expect to prioritize more budget to digital and analytics over the next two years, but their focus is on operational analytics over customer data and customer engagement over innovation, marketing, and new product development. This is another gap as it will be difficult to realize growth through digital transformation if IT’s digital and analytics priorities are more operationally focussed.
Early stages of digital transformation
My conclusion is that overall, the industry is still in early stages of the digital transformation journey. CEOs have to recognize the level of digital disruption in their industry and take a more active leadership role by driving priorities and empowering people. CIOs are leading digital transformation in diverse areas, but execution is lagging and IT leaders may want to consider adding these goals to their digital transformation programs. For CIO that are just starting their digital programs, they should consider what to do in the first hundred days of leading digital transformation.