Concern about digital disruption is high, but few are adequately prepared to address it.
Just as Amazon changed how we buy things and Netflix transformed how we consume videos, companies like AirBnB and Uber have shaken up the hotel and transportation industries. With new disruptive technologies, products, services and business models being introduced almost daily, CIOs need to take charge of their organization’s response now to secure long-term business success.
A recent global survey of KPMG International member firms’ advisors who work closely with end-user organizations found that the majority of clients profiled are concerned about digital disruption – but few are adequately prepared to address it.1
While digital disruption may threaten current businesses, it also creates opportunities for those organizations that embrace change. Organizations that don’t dive in stand to lose, and will find it ever more difficult to catch up as technology advances. Understanding the impact that digital disruption will have on a firm’s products, services, and business model is the first step. Developing a digital business strategy, acquiring the necessary digital skills, and getting the organization to buy into the required changes represent the next steps. Additional data from the survey reveals that this will not be easy.
The majority of CIOs (58 percent) and almost half of the CEOs (43 percent) are involved or very involved in their firm’s digital business strategy, but only a small number are actively leading the effort. This low rate of leadership is troubling. Given the magnitude of the impact that digital disruption is likely to have and the significant organizational change effort required for transformation, the absence of strong executive leadership is likely to present a greater risk to success.
Responding to digital disruption involves mastering and implementing new technologies that require new skills. Many of these new skills are in short supply, and this will only get worse as more organizations undertake digital business initiatives. A strong majority of respondents cited a lack of critical skills and the limitations of existing IT systems as their biggest challenges.
There are no easy or quick solutions to the challenges created by digital disruption. However, without a clear vision, it is impossible to tackle the other challenges. CIOs should work with the business to define what ‘digital disruption’ specifically means to the organization at all levels – enumerating its threats and opportunities and identifying ways to meet implementation challenges and requirements. Once the vision is in place, a clearer picture of the required skills and systems changes will become apparent.
High on the CIOs’ agenda is acquiring new skills and capabilities as well as improving the maturity and performance of existing capabilities required for digital transformation.
Some of these improvements will come from developing existing IT staff and recruiting internally from other departments, but some will require acquiring capabilities from external sources whether through direct hiring, or from outsourcing/contractor relationships. Either way, this will be challenging given that demand for these capabilities is very high while the supply is thin.
What can organizations do? To help transform the enterprise into an agile digital business, CIOs need to tackle three areas in particular:
1. To optimize the value from their investments clients need to develop a digital business strategy at the enterprise level with sub-strategies that account for varying needs across business units, geographies, functional areas and for different classes of employees, customers and business partners.
2. By taking a more active role in defining and driving the implementation of their digital business strategy, CIOs can reduce risk and increase the likelihood of success.
3. CIOs need to shift from ‘big bang’ IT projects to the use of agile development processes, which see IT and the business working together on discrete digital initiatives in an incubator or lab-type environment. This allows the organization to move ideas from design to testing to reality much more quickly.
CIOs’ unique vantage point gives them a window into the technological and information needs of each part of the organization. By combining this perspective with knowledge of current and emerging technologies and a comprehensive digital business strategy, CIOs can drive value for the company and evolve their role from IT service provider to digital business strategist.
1 The CIO Advisory Pulse survey polled 118 KPMG advisors globally in all major markets.