Transforming for the future | KPMG | CA
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Transforming for the future

Transforming for the future

CEOs are saying all the right things about transformation and disruption, but are they going far enough or being bold enough to ensure their organizations are the disruptor as opposed to being disrupted?

Canadian CEOs are overwhelmingly optimistic about change. The vast majority – 96 percent – say they view technological disruption as more of an opportunity than a threat; in the same survey last year, just 74 percent of CEOs were as positive about disruption. Intense competition facilitated by emerging technologies and platforms have created the imperative for CEOs to embrace change. Only 4 percent currently think they are struggling to keep pace with the rate of technological innovation in their sector.

Our survey suggests that Canadian companies don't just feel they are embracing disruption, they feel they are creating it. And they are much more likely to consider themselves disruptors than their global peers. Ninety-six percent of Canadian CEOs say – rather than waiting to be disrupted by their competitors – they are actively disrupting the sector in which they operate. Compared to the 54 percent of non-Canadian companies that said the same, this data would suggest our companies should be world-leading. That being said, CEOs may be increasing their focus on incremental innovation as opposed to business model innovation which will ultimately help future proof an organization against being disrupted.

Canadian CEOs also seem remarkably confident about their transformation efforts and journey. Most feel they understand how to calculate the expected return on investment (ROI) from their overall digital transformation programs, and the vast majority expect to start seeing returns from their investments in digital transformation within the next three years.

Being able to calculate and then work towards a clear ROI on transformation is critical to managing investment and costs. But CEOs and their Boards also need to recognize that innovation, disruption and transformation all require some risk taking and a willingness to fail.

Understanding return on investment

I recently explored this data with Graham Cunliffe, Senior Vice President of Business Affairs and Operations for FingerFoods Studios, a Vancouver-based technology 'problem solver' and a KPMG in Canada strategic alliance partner. Like me, Cunliffe worried there may be a 'gap' in the definition of disruption in the Canadian marketplace.

"For me, disruption is about fundamentally changing the way you approach challenges and opportunities within your business," he said. "You need to be comfortable knowing some ideas will fail and – when they do – you learn everything you possibly can from that experience. At the end of the day, if you really want to be disruptive, you need to invest in order to realize results with exponential value."

While some failures in innovation might be acceptable in the drive to transform, failures in the 'business as usual' operations of an enterprise are not. And herein lies a key challenge for many CEOs: how to transform at speed without disrupting normal operations. More than a quarter of Canadian CEOs say they are already struggling to run parallel processes to transform the digital and non-digital aspects of their business.

Organizations disrupting the sector

In order to drive innovation, organizations need to create separate teams which are cross functional and bring a diverse and different skillset from what we are used to today. Organizations need to do differently and think differently around the objectives and performance measures for innovation, which are different from normal operations.

On the one hand, organizations can't just leave their business as usual operations stagnant; they need to continuously raise their game and improve their existing business. At the same time, they also need to be driving long-term innovation and transformation within their organizations, and the two skill sets are not necessarily the same. Creating the right sets of capabilities – and ensuring they are collaborating together on the bigger picture – will be a difficult challenge for many CEOs as they work towards transforming the enterprise. Technology is not a 'one-time' event and innovation never stops so companies that continually work to push the boundaries in these areas are poised to win the transformation race.

*All statistics result from the 2018 Canadian CEO Survey.