At the SAPPHIRE NOW conference last month, we heard Satya Nadella, Microsoft’s CEO, chatting with Bill McDermott, SAP’s boss, about how technology is shaping non-tech companies and leading to new ideas, new capabilities, and new cultures. They discussed how companies are using technology to create new digitally driven businesses, rather than just consuming technology to make yesterday’s business models more efficient. It is precisely this topic, the opportunities and challenges associated with new digital business creation and transformation, that a new study from the Economist Intelligence Unit (EIU) focuses on.
In the study, Digitizing IT, SAP worked with the EIU to survey more than 800 C-level business and IT leaders at major international organizations across Europe, North America, Latin America, and Asia-Pacific. The goal was to understand how enterprise-wide and IT-department contexts, attitudes, and intentions drive and/or hinder the transformation of digitally driven companies.
The study really highlights how the worlds of business and tech are blurring, and how in the next five years the level of disruption of business as usual will amplify, that teams will need to work much more closely and cross-functionally to succeed, and that digital-business laggards will be at tremendous risk.
The good news here is that almost half of non-IT executives are aware that these shifts are happening, and more than a third are turning to IT to increase support for digital business and opportunities for innovation.
The bad news is that while IT has developed new capabilities and brought in new technologies, its current mandate (manage tech vendors, maintain legacy, and service the business) is not providing the support of new ideas and methodologies or the culture change needed to transform organizations. Only seven percent of business leaders say IT leads their organization’s attempts to identify innovation opportunities, and only 15% of IT leaders have adopted key methodologies like DevOps and agile software development.
Despite the fact that IT is the most likely group to take ownership of digital transformation (in more than one-third of surveyed firms), the lack of strategic coordination for digital remains a hindrance. Unfortunately, the CEO- and board-level wake-up calls have yet to sufficiently shock the system, as only one in five companies have an enterprise-wide digital transformation strategy. While the majority of companies do have a wide variety of initiatives underway – improving products and services, improving the way their organization uses real-time data and information, and boosting the customer experience – this change is only happening in pockets led by lines of business (29%) or within dedicated digital units (24%), and the transformation lacks central coordination.
The silver lining here for IT is that stepping up and taking ownership for what we call Digital Business Innovation pays off. The study shows that returns from investments in digital initiatives are 50% greater for those companies that have implemented organization-wide digital transformation strategies, which means that they have begun to change culture to become more agile, cross-functional, and systematic about managing innovation.
To be successful, CIOs need to manage up (to ensure board, CEO, and C-suite digital coordination), across (to present their C-suite peers with a compelling approach to collaborate cross-functionally), and within (to free themselves from the burden of keeping the lights on) to make room to become digital business innovators.
This is much easier said than done, but, as the study and most experts point out, the only thing riskier than innovation – which includes many swings along the way to hitting it out of the park – is choosing not to innovate. The stakes for digital business innovators have never been higher, as in every industry 40% of today’s top 10 firms are likely to lose their place in the coming years.
For more insight on this survey and the topic of digital transformation, watch the video below.