What Makes Digital Leaders: A Full C-Suite Perspective
Based on the 2016-2017 installment in CSC’s ongoing series of IT executive surveys, What Makes Digital Leaders: A Full C-Suite Perspective explores the links between digital technologies and strategic success, current investments in IT and plans to use digital technologies going forward.
Conducted by the Economist Intelligence Unit (EIU) and commissioned by CSC, the survey reveals the views of more than 500 global business leaders – both senior IT management and non-IT executives – on what IT is getting right as companies move down the path of closer alignment between business strategy and digital technologies, how companies are managing IT, and the expectations for IT’s role in driving business success.
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This story appeared in the January 2017 issue of CSC World.
How Digital Technologies Are Translating into Strategic Success
So what, exactly, makes an enterprise a digital leader? A 2016 survey by the Economist Intelligence Unit (EIU), sponsored by CSC, canvassed more than 500 CIOs and other senior executives at companies around the world to better understand the links between digital technologies and strategic success.
While the study shows that investments in technologies such as cloud and mobility are escalating, only a select few companies have begun to unlock the full business potential that lies in today’s information technologies and have become fully digital across all major functions. These digital leaders, the survey shows, report better financial performance than their competitors. They’re also better equipped to deliver on those key value disciplines.
37% of digital leaders reported fiscally outperforming competitors. Only 11% of other companies reported the same.
Characteristics of digital leaders
As the survey reveals, companies report a wide range of progress on the digital journey. While many factors can be counted, three elements have a clear influence: who controls IT and its budget, how IT is perceived in the organization, and the specific investments a company has made over the years.
At digital leaders, a larger share of CEOs set IT strategy. In the survey, 44% of respondents from companies categorized as digital leaders indicated that the CEO is the primary driver of IT strategy, suggesting that these companies place additional emphasis on the importance of technology in achieving business goals.
Another clear indicator is the regard that digital leaders have for IT’s contribution to the business. At a rate of two to one (51% to 25%), respondents at digital leaders — versus at other companies — said IT is crucial to meeting business goals.
IT budgets are a different matter. Control of the IT purse strings seems to be in flux. Currently, IT has more control over its budget at digital leaders than at the average company, which may signal a more unified digital strategy. But even among digital leaders, IT budget control is waning, as business units purchase a larger share of cloud solutions, Software as a Service (SaaS) and other resources without involving IT.
Digital leadership breaks down barriers and penetrates silos, leading to a greater degree of corporate integration and collaboration. While companies in this survey report greater collaboration as a whole, more than three-quarters continue to struggle with internal barriers to communication and information sharing.
Digital leaders excel at using IT for improved collaboration in areas such as organizational integration, information sharing and digitally driven operations because their functions are entirely digital. Results show that they outpace other companies on organizational integration (28% say these functions are somewhat or entirely integrated) and collaboration (93% share information somewhat or very effectively).
“We’ll see more change in our industry in the next 10 years than we’ve seen in probably the last 100.”
– Chris Baker, CIO, San Diego Gas & Electric and Southern California Gas (affiliates of Sempra Energy)
Progress made, but work remains
Digital technologies and business strategy are aligning in virtually every company, and most expect to become more globally integrated and better at information sharing over the next 3 years, the survey shows. But even among digital leaders, technology investments alone won’t make a company digital or sustain its digital edge. A number of obstacles remain.
Among the chief concerns companies have, whether digital leaders or not, is the issue of talent. Companies at all stages of digital transformation need to find people with the right IT skills, especially in areas such as big data (38%) and application modernization (37%). Demand for these skills underscores their critical role in the enterprise. Data analytics serves a broad range of needs, from identifying new markets and product opportunities, to serving customers more effectively and flagging potential risks. Modernizing applications reflects the need that companies have to transition core applications onto today’s more flexible infrastructure.
Despite the talent shortage and other familiar challenges such as budget, digital leaders are very confident that their IT function can deliver business results — far more so, in fact, than their counterparts at other companies. By a margin of 88% to 55%, digital leaders believe in IT’s ability to deliver critical business results.
From one perspective, many companies still view IT as a tactic to trim costs. In the EIU survey, 54% of respondents viewed IT as a way to improve day-to-day efficiencies, compared to a quarter who view digital technologies as a way to compete with new all-digital companies.
1 in 7 respondents indicate their companies will reduce the use of on-premises servers.
On the other hand, many companies are clearly transitioning from legacy technologies to emerging ones. Mobile and cloud investments will rise, while money spent on PCs and on-premises servers will fall. Proprietary software, once considered a competitive difference maker, is being supplanted by cloud-based solutions that companies now consider a basic need.
The upshot is this: Companies are going all-digital, whether by design or default.
Those who view IT strategically are among the digital leaders. Digital leaders see broader opportunities, prioritizing investments in the public cloud, in collaboration software and in cloud-based application services. Further, 63% of digital leaders indicate that they plan to increase their overall IT spending somewhat or significantly in the next 3 years, compared with 52% of other companies.
“Implementing mobility wherever possible is one of the main pillars of our IT and business strategy.”
– Tayfun Küçük, CTO and assistant general manager in charge of IT, business solutions, direct banking and transactional banking, Odeabank
This statistic seems to point out another important, if subtle, defining characteristic of digital leaders. In addition to their ability to deliver on key values, digital leaders also have a positive outlook on their company’s role in its industry and on its ability to compete effectively.
Digital leadership, it seems, is also the key to confidence.
Industry Focus: Insurance
Insurers now have the opportunity to harness new technologies and vast amounts of data to better serve customers, tap new markets and attain greater levels of efficiency. Indeed, the success of direct-to-consumer insurers with digital models has forced other personal lines companies to respond. Life insurance companies are using digital tools to introduce more opportunities for customer engagement between the time a policy is sold and when a claim is made. Ultimately, both personal and commercial lines companies are recognizing the value that technology can provide in allowing them to underwrite more effectively and to operate more efficiently.
Over the next 3 years, insurance executives say they expect to be entirely digital in greater numbers than other respondents in functions such as strategy, finance and customer service. Budget constraints are the largest barrier to meeting their IT goals, followed by a perceived lack of vision at the corporate level about IT’s role in meeting strategic goals. Still, insurers are overwhelmingly confident in IT’s ability to support business strategy in the coming years, with 88% of them confident in IT’s ability to deliver on both technologies and capabilities.
Industry Focus: Healthcare
In the face of myriad changes in the healthcare industry, executives recognize how crucial digital technologies will be. Healthcare organizations more often than other companies indicate that they will increase IT spending somewhat or a lot in the next 3 years (62% versus 52%) — supporting the finding that IT is a cost of doing business, not a differentiator. Investments are expected to include building capabilities and technologies to enable operations through the use of new software development platforms, greater mobility and attention to cybersecurity.
Consumers’ demand for more transparency and better service is driving investment in apps and online tools. As new technology-enabled care delivery causes further re-examination of business models, executives will need to invest in platforms that can support practitioners and patients alike. Healthcare organizations must make these investments and others just to keep pace with market forces.
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