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Disruptive decade increases the stock of digital leaders

Mark Chillingworth Profile picture for user Mark Chillingworth October 30, 2023
Summary:
CIOs from financial services, FMCG, utilities, and healthcare discuss the Nash Squared Group annual Digital Leadership Report

Digital skills gap in the human workforce concept © LeoWolfert - Shutterstock
(© LeoWolfert - Shutterstock)

The trend of difficult times boosting the role of technology and therefore digital leaders continues, according to the numbers presented in the 2023 Nash Squared Group Digital Leadership Report. This annual temperature check of the global business technology leadership community is always reliable, and for 2023 reveals that despite yet more macroeconomic challenges, organizations continue to invest in technology, technologists and technology leaders. 

Despite conflicts, reports of recession in some European countries and geopolitical tension between China and the USA, technology budgets are not only increasing, they are focused on helping businesses grow. The average budget increase is 10%, with 27% of firms increasing the budget by 20%. Those organizations that are cutting the technology budget are doing so by an average of 10%. Sectors getting the highest increase in technology budget include manufacturing and utilities, two sectors that could be considered digital laggards. Retail and financial services - leaders in digitisation - have less reason to boost the budget. 

That increase in budget is being prioritized on improving operational efficiency, developing new products and services and improving the customer experience - the top three priorities of CIOs and their organizations, according to the study. UK General Insurance CIO at Aviva Femi Bamisaiye says of this: 

It's a blended picture; on the whole, budgets are increasing. At Aviva, there is investment in simplification, eradication of legacy, and the cybersecurity budget is going up by 10% year-on-year. We are now seeing less funding for legacy, so we can drive up more to the growth investment.

Chief Digital Officer Heena Mistry is not surprised to see a focus on the customer experience in this year's findings: 

Customer experience has become so critical to how the customer feels about the organization, and that is often through technology. If an organization can engage with the customer, that makes a really big difference.

PZ Cousins IT Director Colin Simpson verifies the Nash Squared findings on customer-facing technology: 

Our recent foray into the Consumer domain underscores a pivotal evolution for our Technology function, which was previously more inward-focused. Engaging in this space is necessitating careful organizational navigation, particularly around functions like sales and marketing.

Breno Gentil, Senior Director Digital and Technology for Euope at beer makers Heineken, is one of those CIOs in manufacturing receiving a budget increase: 

We have an increase of about 13%, driven by digitization. This is because there is more usage of our solutions and new solutions; 60-70% of this goes into operational efficiency and then the customer-facing technologies followed by new products and services.

Insurance CIO Nidhi Howell says that inflation of technology licence costs is also driving up budgets, increasing pressure on both capital and operational expenditure in many organizations. 

PZ Cousins' Simpson is one of those with a budget cut, but it's not all bad news, he says: 

Our recent successes in IT transformation have facilitated a budget reduction, marking the lowest since 2017. This has unlocked opportunities to shape business cases, especially in the data and digital sectors.

Back on board

With increased budgets and a mission to improve business growth, perhaps inevitably, the number of business technology leaders with a seat on the board table has risen (68%). Nash Squared says in its report: 

Technology leader influence tends to grow when there are new technology challenges emerging.

Carolyn Brown, CIO for the British Medical Association, is amongst those glad to see this improvement: 

You just have to have that view to understand the organization and to have a level of influence, as what we are doing in technology is so pervasive.

Gentil at Heineken agrees: 

It is also about making sure that peers on the board, such as the CMO and CFO, take responsibility for digital transformation.

Simpson agrees: 

This surge can be attributed to organizational intent. A seat at the executive table signifies the weightage and strategic significance of technology in shaping the organization's trajectory. With a CIO in the executive echelons, there's a seamless translation of overarching organizational goals down to team-level contributions.

If technology is not on the board but responsible for a digital transformation, it can all too easily become the old-fashioned problem of IT doing change to the business, rather than IT being with business lines as they transform. 

One statistic about CIOs in the boardroom highlighted an entrenched problem. CIOs are more likely to be board members if they are male. Diversity of digital leaders and technology teams remains poor, especially when compared to data teams and small, pure digital businesses. 

Fourteen per cent of digital leaders are female, so no change in the last year. Within technology teams, the percentage of female staff is 23%, but the USA is performing slightly better at 27%. The report highlights the correlation between flexible working and improved diversity, which CEO of Nash Squared Bev White says business technology leaders must respond to: 

Women are still the major carers for kids or the elderly in families. So women are voting with their feet, or they will just get out of tech. Organizations need to stop being so rigid and learn the lessons of the past; if you go back to pre-COVID ways of working, then the poor diversity that existed will re-emerge.

CIOs are frustrated with these findings. Insurance sector CIO Nidhi Howell says: 

The gender pay gap is very worrying. Also, it is a real challenge to find women, but once you get them, then you can think about the pipeline.

Bamisaiye of Aviva adds: 

First and foremost, as an organization, you have to face into this. Aviva has targets for gender and ethnicity, and that drives the right behaviour, and you link them to an outcome which is bonus impacting, so it focuses the mind. In turn, that makes sure that you are receiving balanced shortlists. That does mean it takes longer to fill a role.

Brown of BMA says when recruiting technologists, leaders need to think beyond technology. CEOs are not expected to be experts in every facet of the organization; they are recruited on a wide range of skills and experiences, and technology recruitment needs to follow similar lines, she says: 

We have a responsibility to challenge ourselves in recruitment and take a leap of faith sometimes.

Both Mistry and Gentil believe there is still more to be done to improve diversity in technology education, which Gentil describes as the base of the pyramid. 

Interestingly board-level CIOs have a 24% advantage in recruiting and retaining talent, which Mistry says is a demand she sees during the interview process: 

Recruits want to know that their voice is going to be heard.

Gentil at Heineken adds: 

Having the CIO on the executive committee is a sign that the company is serious about digital transformation, and that reflects on the ability to be involved in exciting projects.

The report finds that 50% of organizations expect to increase their technology headcount. Nash Squared found an increased focus on retention and reskilling existing teams. CEO Bev White says of this focus: 

There has been an increase in salary demands, and organizations are realizing that they cannot afford to lose someone, so the salary goes up. Organizations are therefore squeezed by higher wage bills. Recruitment remains every bit as challenging as it ever was.

The report finds that 65% of business technology leaders cite the cost of living is still increasing salary demands. Data is, unsurprisingly, the most in-demand skill set, followed by enterprise architects and cybersecurity practitioners, something Brown at BMA raised: 

There will be a growth in cybersecurity headcount as there has been a growth in the attack vectors.

And CIOs cannot just look for skills in other geographies, according to Howell: 

Anywhere we have been recruiting, the demand is high, and there is a lot of turnover. The mix of business and technology acumen is hard to find.

Gentil at Heineken has had the same experience: 

We have been investing in Poland, and we are finding it more and more challenging. So we are offering more and more mobility and working on the employee proposition.

Local geography also adds to the challenge, as Colin Simpson, Global IT Director at PZ Cousins, reveals: 

Competition from other premier North West-based organizations, like Kellogg's, Barclays, AstraZeneca and MBNA, has intensified. Given our extensive reliance on outsourcing, our selection process has become more challenging.

No avoiding AI

With AI dominating headlines and debate, the technology, of course, featured heavily in this year's Digital Leadership Report and CIO discourse. Over a quarter (28%) report that AI has generated a return on investment (RoI) in the last three years. As Nash Squared says in the report, this is remarkable when only one in ten CIOs has a large-scale AI implementation in place. Of more concern is that only one in four CIOs say they are very or extremely effective at using data insights in their businesses. As the report says: 

Some organizations appear to be stuck at the stage of refining a basic data strategy.

CEO White sees positives in the statistics, though when looked at through the lens of business complexity: 

The reality is that this is not surprising; organizations have merged, entered new vertical markets, and in business, there are many different imperatives, so the data has not always been thought about.

Bamisaiye recognizes the data challenge:

We see more organizations realizing that they don't have the data to do what they want to do with AI. We have a Chief Data Officer in the customer markets space to look at data more holistically.

CDO Mistry adds: 

A lot of organizations have a lot of data, and they are struggling to see what the value of the data may be. But the minute you see data as an asset, then there is the opportunity to drive decision-making. AI will create value, but it will work on the data you have, so it will show you the wrong answer faster, so it is all about the quality of the data.

Brown at the BMA connects the AI opportunity to the skills change that business technology leaders are pursuing: 

Data science will continue to grow, as well as user experience (UX) design.

She adds that the adoption of AI, like digital transformation, cannot just be led by the CIO and IT: 

AI is business-wide; technology is there to be a translator and to explain the opportunities. When we write an AI usage policy, it needs to be owned by the CEO, and as CIO, I want to be a contributor.

In last year's report, 43% of CIOs said technology has a role to play in making businesses more environmentally sustainable. A year on, 47% recognized the role tech plays, so a small improvement, however, 46% said their firm had no plans in place to reach net zero emissions. 

Cybersecurity is in a better place, with less than a quarter (23%) reporting a major attack in the last two years. The majority believe the greatest threat to their businesses is foreign powers. The full Digital Leadership Report is available from Nash Squared.

My take

The 2020s look set to be one of the most disruptive decades of recent history. Following a pandemic, few would have thought that two major conflicts would break out on the borders of the Western world. Look east, and there is tension over trade, technology, human rights and the center for chip fabrication. All of this has led to a workforce that has different motivations. And let's not forget the workforce is significantly smaller following the pandemic. The economy has stalled following an initial recovery, and the climate emergency is hitting the bottom line of many sectors. 

As a result, technology and technology leaders have continued to rise in value during this tumultuous decade. The Nash Squared Digital Leadership study reveals business technology leaders to be in a good position, but they face challenges. Much more needs to be done to tackle diversity and to develop the skills the entire community needs for the future. AI provides yet another opportunity for CIOs, but only those who take a holistic view of the impact of AI on consumers, employees and society. A disruptive decade requires digital leadership. 

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