Kathy Gibson reports from Gartner Symposium in Cape Town – Business leaders are taking the move to digitalisation seriously.
“Leading CEOs know they must take digital to the core of their businesses,” says Mark Raskino, vice-president and Gartner fellow. “And we are taking digital right into the product proposition itself. It’s no longer easy to understand what is the product and what is the digital position.
“It’s about blurring the boundaries between physical and virtual.”
Even companies like MacDonalds are putting self-service terminals into 35 000 restaurants around the world. “Macdonalds sells fast food,” Raskino says. “And this is the fast bit.”
The top business priorities for CEOs are growth, customers, workforce, corporate and IT-related issues.
“Business leaders really are focusing on technology – they understand that it is material.”
CEOs targets are profit improvement, cost management and product improvement.
“The blending of the physical and the virtual is what’s interesting CEOs, because it’s what their customers are interested in.”
CIOs should be helping business leaders to deepen digital business penetration to combat the current so-called earnings recession. “So CEOs are having to push harder to increase earnings,” says Raskino.
And they expect digital to have a positive impact on profitability. Retail and media are particularly bullish about the positive effects of digitalisation, followed by services, manufacturing, wholesale and transport, and healthcare.
CEOs also expect digitally attributable revenue to grow substantially over the next couple of years.
“CIOs should help CEOs to prepare for or pre-empt digital business industry disruption,” Raskino says.
“Disruption is a real feature; and boardrooms are really concerned about it.”
For instance, Dominoes Pizza CEO Don Maij has promised to be delivering pizzas with drones before year-end. “And why shouldn’t he?” asks Raskino. “Should he wait for Amazon to disrupt his industry by doing it instead?”
In fact, 43% of CEOs are expecting to see moderate industry transformation, with about the same number expecting significant disruption.
Importantly, CEOs have a number of options – and digital is just one. “CEOs have big strategy options they could play and digital is just one of them. They can’t do them all; you can’t change in all directions all the time – you have to make choices.”
There is a school of thought that believes digital should be the most critical focus, with the threat of new competition from the likes of Google and Amazon coming on the horizon.
“The digital giants can get between you and your customers,” Raskino says.
There is a huge change of thought coming from business leaders, with digital transformation very much on the agenda. “For years we were telling the business that technology is important – and now CEOs are realising that digital is really important.”
Raskino adds that CIOs should develop the corporate capabilities to digitally remaster the business processes.
“Every product and every service can be re-imagined,” he says.
CEOs see customer-perceived digital value of their products increasing. It has risen substantially in just the last year across all industry sectors.
“More and more of what customers want is the digital stuff,” Raskino says.
He adds that productivity is the next big priority that CEOs will have to tackle.
Over the last five years, Gartner has recognised that there has been a rise in the keyword “employee” rather than “talent”
“Now, in many economies, it is not so easy to get the people you want. So you are having to give people more in terms of wages and employment conditions. This is starting to weigh on CEOs’ minds.
“Talent improvement, retention, benefits and engagement, and training and development are on their minds,” he says. “But efficiency and productivity is still quite low on their list of priorities.”
Raskino thinks the problem is that CEOs are worried about productivity but don’t quite know what to do about it.
The relationship between digital investment and improved productivity is not really clear to CEOs. In fact, it’s general concern at national and even global level – for instance, CEOs are asking why GDP is as low as it is, and productivity not higher.
Asked what they can do about it, the results are very fragmented, with no clear direction. Even the 26% of CEOs who think technology could help are very vague about how it can be used.
CIOs should help start initiatives to redefine productivity for the digital age, Raskino says, helping CEOs to explore new measures.
Of course, increasing digitalisation means that more of the business will become exposed to cyber-security issues. “We know there is a safety cost to doing business in the real word. If we do work in cyberspace then people must expect that they will be lectured about safe behaviour.” However, half of CEOs still believe the technologists can somehow overcome this.
So CIOs must reset the default security policy to a business responsibility.
Interestingly, CEOs are now taking responsibility for leading digital strategic changes – with the CIO coming in at second place. “CIOs are coming back into orbit for this – because CEOs understand it is a complete issue, through the whole business.”
CIOs should help their CEOs personally develop and learn about the digital business world, Raskino adds.
“The need help to learn about this stuff and it’s the CIO’s responsibility to help them.”
The next important skills that CEOs should develop include a range of things – and CIOs can help them with many of them, including digital and IT, technology, innovation, agility and trend analysis.
“The problem at the moment is that they are not doing that. Only 3% of CIOs get information from their CIOs. So this needs to improve; CIOs need to be very proactive.”
Raskino summarises the actions that CIOs should take to help their CEOs to achieve their business goals as:
* Help CEOs to deepen digital business penetration.
* Help CEOs to pre-empt digital business industry disruption.
* Develop the capability to digitally remaster products and services.
* Help to start an initiative to redefine productivity in the digital age.
* Reset security culture to a business responsibility by default.
* Personally develop the CEO’s learning about digital business.
These findings are from Gartner’s annual CEO survey and wider business research exploring some of the most important trends in business leader thinking.