European companies over confident on digital, don’t invest and focus on wrong things

Profile picture for user ddpreez By Derek du Preez April 17, 2016
Summary:
A recent report from Fujitsu highlights that there is too much confidence amongst companies in their digital abilities.

ostrich-head-in-sand

A recent report makes for a sobering read for those working on digital transformation in companies across Europe.

The research covered more than 600 European CEOs and IT decision makers in Sweden, Germany, the UK and Spain and found that organisations are over confident in their digital capabilities, whilst simultaneously failing to put up the cash for investment and not prioritising service redesign as part of the agenda.

The UK and public sector were found to some of the worst offenders, taking an overly cautious approach to digital projects and equally gambling on what the outcomes will be.

Whilst all research should be taken with a pinch of salt, the use of the word ‘digital’ is thrown around too much to cover any sort of mildly successful IT project happening within a company. This piece of work serves as a reminder that there are inevitably problems lurking behind the bravado.

Confidence is key - or is it?

The report, commissioned by Fujitsu and carried out independently by Censuswide, found that there is an “overwhelming” level of confidence amongst CEOs and IT decision makers in their own capabilities and their progress in digital transformation projects.

For example, the majority (92%) said that they would class their organisations as either somewhat or extremely mature with regards to digital maturity. Furthermore, three in five respondents believe they’re on par with industry competition (?!) and one in three regard themselves as more advanced.

Overall, an astonishing two-thirds of respondents see their organisations as digital leaders.

From my dealings as a journalist with end users and from my own personal interactions as a customer with a wide variety of companies in Europe, it’s clear that this level of confidence is unfounded in a number of areas.

Sure, retail companies have some areas of excellence. Finance too has some decent mobile capabilities. And central government has made some good progress. But equally, across all these industries we see failure after failure, and from the conversations I’ve had there is certainly a great deal of confusion and stress about how to approach the broad challenge of ‘digital transformation’.

The report gets to the crux of this by stating that “over-estimating capabilities plus the inability to grasp the complexities of digital transformation is a dangerous combination that paves the way for failure”.

The bravado comes as companies understand the benefits of digitally designed services, but don’t quite understand how to get there to compete with the digital-natives and giants.

This confusion is leading to a slowdown in investment, at a time when it should be accelerating. The report notes:

Today, only a third of organizations are aligned behind the same digital priorities, while half admit to some conflict and one in 10 report openly competing agendas. Meanwhile, two in five admit that their current digital strategy is unclear and confused.

Given the uncertainty on the road ahead, it seems some organizations are slamming the brakes on digitalization. One in six report no appetite to accelerate digital adoption, a third believe their organizations already invest too much time and money in digital projects, and one in four identify a lack of board level commitment to digital initiatives as a major barrier to completing projects successfully.

The report also found, unsurprisingly, that a quarter of IT decision makers identified a lack of time and resources as a barrier to transformation, alongside a failure to prioritise digital projects correctly (31%), a shortage of the right skills (31%) and security fears (27%).

Putting the wrong foot forward

What’s equally worrying regarding the data released in the report, is that when organisations are

right-wrong
focusing on ‘digital projects’ they’re focusing on the wrong things (in my opinion). This is something I see time and time again, and I think it needs to be flagged as a red herring in the conversation on digital transformation.

Simply put, projects are too often focused on creating efficiencies within existing architectures, rather than rethinking delivery through the use of new digital tools.

For example, the report found that the objectives of digitalisation are focused on process optimisation (49%) and operational efficiency (46%) as the highest priorities. It notes that “more forward thinking, strategic applications of digitalisation” are a much lower priority - such as data management and insights (22%) or new business initiatives/innovation (18%).

The report adds:

This focus on digitalization as a technology challenge also extends to budgets. In two-thirds of organizations (69%) the IT budget is split between digital innovation and day-to-day operations. Only in 27% of organizations has a separate budget been created to support digitalization.

Currently, almost half of organizations (47%) feel they have struck the wrong balance between digital and traditional IT projects when it comes to the time and money being invested, despite the fact that 56% weight investment towards digital innovation.

My word of warning: yes, it can be easier and more comfortable to invest in a project that improves the efficiency of an existing process or technology, but just because it saves money doesn’t mean that it will improve your service delivery, better your customer engagement or make you compete with the true digital companies out there.

It slows down the ageing process, but it won’t make you avoid death.

The UK and the public sector

For a full breakdown of all cross-sections of the report, you can read it here. However, I thought it worth highlighting both the UK’s progress as a whole, as well as that of the public sector, given that these are strong areas of interest for our readers.

Worryingly, Fujitsu suggests that the approach in the UK simply seems to be “keep calm and carry on”, with organisations taking a more cautious approach to their European peers. The report found that one in three do not have an appetite to move faster towards digital adoption, whilst budgets area also weighted less heavily to digital projects.

It states:

This wary approach is reflected in the UK’s digital confidence. Almost a fifth of IT decision-makers don’t feel confident advising their organizations on the right digital choices, compared to a survey-wide average of one in 10. This reticence may be explained by the conflict over digital priorities in the UK – where only 16% of organizations are aligned behind a common vision and 21% state they have openly competing goals.

In addition, over half (58%) of public sector IT decision makers across Europe stated that the success of digital projects is a ‘gamble’ with a lack of clear strategy and competing priorities blamed.

More than a third (36%) of the public sector IT decision makers surveyed from the UK, Germany, Sweden and Spain say there is not a clear digital strategy mapped out within their organisation, while 36% state that any digital strategy they do already have in place is unclear and confused. 20% admit that their organisation does not share a common view on digital priorities and almost a third (30%) list this failure to prioritise digital projects among the top-three barriers to digital projects being implemented successfully.

getting-puzzle-pieces
Unsurprisingly, skills and attracting the right people to do the job was a top concern for respondents. This is something diginomica regularly highlights as a blocker to success in the public sector and new innovative ways to attract private sector talent - beyond salary - need to be introduced.

More than half (58%) of public sector IT decision makers admitted it’s difficult to know the right choices to make; while 51% state they don’t have the right skills to successfully deliver digital projects. When asked what hinders their ability to make confident decisions, 30% said a lack of skills to execute digital projects and over a quarter (28%) pointed to a lack of skills to plan and define digitalisation projects.

My take

A healthy reality check for those organisations that throw around the buzzwords and define digital as a silver bullet. Strategy, skills, cash and existing technologies continue to block what needs to done to achieve successful digital transformation.

It needs to be realised that digital isn’t about new technology for technology’s sake, it’s the redesign of services using new digital building blocks and data.