Despite many organisations laying claim to being a digital company, only a minority (20%) are truly there, according to the sixth Annual Digital IQ Survey report released by PwC.
“Today all roads lead to digital. From business strategy to execution, digital technology has become the foundation for everything we do,” says Johan Potgieter, PwC Technology Industry Leader for Southern Africa.
“Simply put, you can’t afford to underestimate digital. Through all of our research, CEOs have made it clear that they see both the promise and the peril of digital technology; and we believe that charting their company’s course in the
digital age is the number-one challenge business leaders will face in 2014,” adds Potgieter.
Each year, PwC carries out a study on how well business and IT leaders understand, value and weave digital technology into the fabric of the business. This is what is known as their ‘Digital IQ’, explains Potgieter.
In this year’s study, PwC identifies the five key behaviours that make for high digital IQ. “These five behaviours are what give companies the edge, enabling them to maximise their use of digital technology across the business and position them for better performance,” says Potgieter.
Those businesses in the study that have a strong digital IQ were 2,2-times more likely to be top-performers in revenue growth, profitability and innovation.
The five digital behaviours look at the chief executive’s role, and how the chief information officer (CIO) and chief marketing officer (CMO) work together, how the company learns about innovation, how it invests in IT, and how it develops its digital capabilities.
The survey was carried out among 1 500 business and IT executives across Asia, Africa, Latin America, North America, and Europe.
The following five behaviours enable organisations to accelerate value from their digital investments, exploiting their virtual value chain to alter business models and capture new markets:
* CEO actively champions digital – the implementation of the five digital IQ behaviours begins with the CEO. A digital CEO sets and steers the company’s digital visions and tackles the inevitable challenges that come with new ways of doing business. The study discloses that 81% of top performers say their CEO is an active champion in the use of IT to achieve business strategy, compared with 68% of other companies.
When it comes to looking at the behaviour by industry, healthcare had the highest level of active-champion CEOs, which is not surprising given that the focus on technology to transform patient care and reduce costs has been a key focus there for more than a decade.
“CEOs need a digital strategy that considers the dimension of everything the business does – its growth and cost goals, products and services, partnerships, marketing and customer engagement, talent acquisition and retention, operations and more,” says Potgieter. For every strategic question, the CEO must ask: ‘What are the digital opportunities here? Does digital introduce new challenges?’ “CEOs will be the ones to pose the questions, but to answer them will require the collective knowledge and insight from other functional leaders.”
* Strong CIO/CMO relationship – according to the survey, the relationship between the Chief Information Officer (CIO) and the Chief Marketing Officer (CMO) has become critical: 70% of top-performing companies say they have a
strong CIO-CMO relationship, compared with just 45% for non-top performers. The CIO continues to be internally focused and there has been virtually no change in involvement around customer and product innovation during the last six years.
“The CEO must ensure that marketing and development teams engage the CIO in early discussions around product, service, and customer innovation.
“Failing to involve the CIO in market-facing innovation – where digital technology is a primary driver – is counter-intuitive,” adds Potgieter. “Don’t leave any room for interpretation when it comes to market-facing digital technology like consumer apps, websites, or customer analytics. Get explicit agreement between the CIO and CMO on who owns the initiatives, the role each leader will take on, and when and how they are expected to work together.”
* Outside-in approach to digital innovation – the top performers in the survey are more likely to look to outside sources such as industry analysts, vendors, universities and labs, to fill their idea pipelines, in addition to internal sources. But all companies tend to rely most heavily on traditional sources like internal planning sessions and workshops.
“A better approach is what is referred to as ‘outside-in’ innovation because it embraces new ideas and experimentation that comes from unlikely sources and industries. The outside-in approach can even be applied inside the company, where companies can seek out hidden innovators, such as enthusiasts of the maker movement who might work in operations or customer services,” adds Potgieter.
* Significant new IT platform investments – while investing in disruptive technology is crucial for innovation, top-performing companies realise they need to think bigger. They are innovating how they think about IT and remaking it to better the needs of the business. The study refers to this model as the New IT Platform – a thorough approach, addressing how IT’s mandate, processes, architecture, organisation, and governance must change to keep up with the business.
Surprisingly, when it comes to which technologies they are betting on, all companies in the study agreed that mobile customer technology, private cloud, data mining and analysis, externally-focused social media, and cyber security would be of the most strategic importance in three to five years.
Companies in Asia and Africa were more likely to use agile processes than their regional counterparts, possibly contributing to more success in delivering in IT projects.
* View digital as an enterprise capability – the study suggests that companies begin broadening how they think about their digitally-savvy resources, realising that it is becoming essential to have a digital capability that is woven throughout the business rather than only centralised in a single function. The survey found that top-performing companies were more likely to have stronger skills in crucial areas like digital architecture and user experience design.
Potgieter concludes: “Our study revealed that the five behaviours make the difference in enabling a business to realise sustained value from digital technology. Company leaders ready to ramp up their digital IQ and develop these interlocking capabilities will find that as they add each behaviour, they will be better positioned for high performance. Those who do not are destined to fall behind.”