Top ten digital transformation actions from PwC

Profile picture for user slauchlan By Stuart Lauchlan September 30, 2015
Summary:
In its latest Digital IQ study, PriceWaterhouseCoopers comes up with a top ten list of actions for digital transformation.

artificial intelligence. Image shot 2008. Exact date unknown.
At a time when every industry conference is compelled to feature the inevitable ‘how to avoid being Uber-ized’ warning, it’s interesting to note that according to one major study of C-suite execs, disruption is top of mind, but bottom of budget priorities.

According to the 7th annual Digital IQ Survey from PriceWaterhouseCoopers (PwC), which polls over 2,000 business and IT executives across 51 countries, while there’s plenty of talk about digital disruption, but there’s not the money to put where the mouth is!

Only one percent of respondents to the PwC study said that disruption to their own or other industries would be the result of digital investment.

Predictably enough the top priority (45%) is to grow revenue through digital enablement, with digital tech being viewed by a quarter (25%) as a way to create a better customer experience and 12% seeing it as a way to increase profits.

PwC sums this up as:

In short, digital is a way to grow today’s business, not necessarily tomorrow’s.

With that in mind, the Digital IQ study sets out to isolate critical executive actions that will deliver this objective. PwC’s methodology was to isolate an 25 initial factors across strategy, innovation and execution, and then pare that down to ten digital transformation attributes that it says correlate to stronger financial performance.


The Top Ten

  1. The CEO is a champion for digital.
  2. The executives responsible for digital are involved in setting high-level business strategy.
  3. Business-aligned digital strategy is agreed upon and shared at the C-level.
  4. Business and digital strategy are well communicated enterprise-wide.
  5. Active engagement with external sources to gather new ideas for applying emerging technologies.
  6. Digital enterprise investments are made primarily for competitive advantage.
  7. Effective utilization of all data captured to drive business value.
  8. Proactive evaluation and planning for security and privacy risks in digital enterprise projects.
  9. A single, multi-year digital enterprise roadmap that includes business capabilities and processes as well as digital and IT components.
  10. Consistent measurement of outcomes from digital technology investments.

It makes the bold claim that companies responding to the Digital IQ survey with the highest scores across the 10 attributes are 50% more likely to achieve rapid revenue growth and twice as likely to achieve rapid profit growth. Chris Curran, PwC advisory principal and chief technologist, argues:

Everyone talks about digital, but few understand the specific leadership behaviors that drive performance. We are seeing signs this is changing, with leading digital practitioners looking to how today’s investments can improve tomorrow’s business results. This is a critical mindset, especially as digital technologies become more pervasive.

From the top

It all starts at the top with the CEO as a champion for digital and here at least there’s seemingly positive findings. Some 73% of respondents reckons that their CEO ias a champion for digital, a significant increase over the 57% who said the same two years ago. PwC notes:

The CEO is the natural leader as the focus on technology has shifted from operational efficiency to growth, and the stakeholders and conversations have changed. CEOs have ambitious expectations for digital, prioritizing disruption much more highly than the rest of the executive team.

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But it can’t just be left to the CEO to deliver the digital leadership needed. While he or she can pitch the broad vision, operational execution is going to fall to the CIO or the Chief Digital Officer.

The changing nature of the CIO’s responsibilities continues to be reflected int the study findings. While today, the CIO is seen by many as leading all internal and external digital efforts today (40%), in three years time that number will have dropped off (35%), with over two-thirds of respondents (65%) seeing CIO responsibilities limited to all internal IT efforts or all internal IT efforts in combination with innovation.

Whatever the case, there’s a perceived need for greater collaborative and cross-functional co-operation when it comes to digital strategy. PwC’s report cites a case in point:

For some organizations, one effective way to foster co-development of strategy is through new organizational structures. A global healthcare company, for example, created a digital council that brings together the company’s dozen CIOs and CMOs. Instead of tackling issues in their respective business units, they work together on both digital strategy and execution.

When digital strategy is agreed upon and shared in this way, there’s a greater alignment among senior managers across the organization. PwC notes:

Being on the proverbial same-page means there’s greater likelihood to maximize investments, enabling the organization to identify areas of overlap and bring to light any resource gaps that could derail efforts.

With an aligned strategy and objectives in place, communication of goals and sharing of plans is vital. This is an areas in which there are clear signs of improvement, with 69% of respondents saying that business and digital strategy are shared enterprise-wide. Last year that figure was 55% and in 2013 it was 50%.

It’s important that digital strategies don’t become too inward-facing. PwC’s study highlights the importance of an ‘outside-in’ approach that taps in to external sources for ideas, guidance, lessons and warnings. Sources include actively engaging with industry analysts (63%), customers (46%), and vendor ecosystems (44%).

For those companies that do have digital disruption ambitions, this is particularly true. According to PwC’s findings, such companies have:

a broad view of innovation and continually look for opportunities to digitize the business. Seventy-one percent of digital disruptors do this, compared with 63% of other companies.

Outside view

By engaging with external sources, it becomes easier for organisations to establish competitive advantage though canny investment in technology.

Spending responsibility is shifting as well, with 68% of digital budget coming from budgets outside of IT’s allocation, a significant increase from 47% the prior year. The executive responsible for digital investment continues to shift, with the CIO (27%) and the CDO (14%) sharing the load with the CEO (34%) and CFO (13%). Interestingly Gartner’s fabled CMO as IT budget holder doesn’t seem to be in evidence.

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The most strategically important tech spend over the next 3 to 5 years is seen to be around cybersecurity, data mining and analysis, data visualization, digital delivery, and private cloud. The focus on data is encouraging as there remains a need to get on top of mining value from it.

Top-performing companies in the PwC study see more potential in making use of their data than lower-performing ones. They see the most promise in third-party data (78%), cloud application data (70%), social media data (69%), and location-aware data (64%).

With cybersecurity also identified as a priority spend, what’s emerging now is a need for more proactive approaches to security and privacy. The PwC study finds that top-performing companies are more likely to proactively evaluate and plan for security and privacy in digital enterprise projects. As a result, the also feel more prepared to manage these risks (80%), compared with lower performers (64%).

Proactive evaluation and planning for security and privacy risks in digital enterprise projects. As companies add new technologies, customers, partners, devices, and data, there are ever more interdependencies and risks to address. That’s the baseline today. What’s different when it comes to Digital IQ is the level of proactivity required. Businesses need to consistently think about how their cybersecurity strategies can help build brand, competitive advantage, and shareholder value.

It’s important to play the long game and keep the longer-term strategic roadmap at the forefront of planning when it comes to making short-term tactical decisions. This ‘keeping hold of the long term vision’ is something that’s slipping, according to respondents. Today, 53% of companies have a comprehensive roadmap that includes business capabilities and processes, as well as digital and IT components, whereas four years ago 63% of companies did.

Finally, know how to consistently measure the return from digital investments. combining traditional metrics (like ROI) to track against growth goals, as well as newer ones for measuring more disruptive investments. Top-performing companies lead lower-performing ones here again (79% vs. 72%). PwC points to a shift from:

solely risk-based metrics to more broad-based “cybermetrics,” homing in on the 10 to 15 most meaningful for the company, such as trends identified as a result of data capture activities impacting company strategy.

My take

On first reading it’s tempting to read the lack of focus on digital disruption as short-sightedness on the part of respondents. But then I wonder how far we’re all getting conditioned to fear ‘Uber-ization’ to an almost paranoid degree when we ought perhaps to be looking to the more pragmatic disciplines of digital enablement for revenue and profit growth.

The increase in CEO engagement is undoubtedly to be welcomed, but again it’s important that this has follow-though and isn’t just a token ‘we must do this’ response by the CEO to one more report from PwC or Gartner or Accenture or whoever. ‘We must do this’ needs to be followed up by ‘and here’s how I’m going to help to do it’.

The findings of the study make - as ever - for interesting reading. There’s probably nothing radically new in the findings, but it’s good to see the direction of travel is heading the right way. And it’s a useful ten point check list against which to benchmark your organization.