Digital leaders drive innovation, while the mob wants stability. In blunt terms, that’s the difference between how leaders and followers treat transformation, according to this year’s global Harvey Nash/KPMG CIO Survey.
Now in its 21st year, the survey is one of the largest of its kind in the world. The subsequent report, entitled “A Changing Perspective” sought the views of over 3,600 senior executives in 108 countries, with a combined IT spend of a quarter of a trillion dollars.
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With consumer trust re-emerging as a competitive battlefield, it is no surprise that the architectural underpinning of that trust — cybersecurity — rates highly at board level.
According to the authors of the report, “Digital leaders distinguish themselves as being more outward-looking, using technology as a means of breaking into new markets, engaging with customers and gaining market share. They also tend to have different operating models that focus on the business owning and leading aspects of technology delivery in collaboration with IT.”
In contrast, when the overall results of all respondents are considered, delivering stable and consistent IT came out on top as the most recognised priority for the global average.
It is also a priority for digital leaders, just less so.
However, the authors also suggest that as the IT estate becomes more complex, and enterprises become more reliant on technology, maintaining a “steady ship” becomes more important.
Trust by design
A clear majority (56 per cent) of respondents list cybersecurity as a board priority this year, compared with 49 per cent last year. The rationale outlined in the study is that company owners and executives are putting customer trust at the centre of their strategy. This in turn makes protecting data and systems from cyber threats paramount.
“Our research shows that technology leaders feel the impact of data security on their ability to innovate; a whopping 83 per cent feel that it limits it to some extent, and 14 per cent feel that burden significantly.”
Interestingly this view reflects the findings of a separate study by the Warwick Business School in the University of Warwick in the UK, exploring the impact of data breaches on companies.
Released earlier this year, that study found that companies on the receiving end of a significant breach not only take a short-term hit to market capitalisation, but they tend to pay out smaller dividends over time. They also spend less on R&D in the years after the breach, as resources are diverted away from innovation and other growth drivers, and back into basic infrastructure hygiene issues.
And they pay their CEOs more after such breaches.
According to Daniele Bianchi, Assistant Professor of Finance at Warwick Business School, “Firms that suffer a data breach do not typically respond by firing the management, but by investing more in the existing CEO. At first sight, these results may look puzzling.
“However, they are consistent with the idea that the average response is to invest more in the management to address possible structural flaws, as well as maintaining the integrity of the firm in response to the reputational damage it has suffered.”
“In the long run, security breaches appear to have a more significant impact on firms’ strategies and policies than their cash flow.”
The Harvey Nash/KPMG study argues that technology leaders need to consider placing trust and security at the heart of their development and design.
“For many, factoring this in may actually help progress innovation and improve speed to market. Technology leaders tell us that involving cyber and data specialists early enough helps create ‘trust by design’ and saves the costs associated with retrofitting these factors at a later stage.”
Of course, there is much more to building trust with consumers than architecture — a point we raised with Harvery Nash Australia Managing Director Bridget Gray.
In her response, she told Which-50, “In my recent interactions with board members, I find that they are increasingly interested in talking about the entire ecosystem surrounding cybersecurity, including all the related elements of building a trusted business brand.”
Trust is no doubt the currency of the future, according to Gray, who said CEOs are driving the discussion around how to create and retain this with their community. “All you need to do is speak to a board member who has endured a data breach or high profile scandal, and rebuilding trust becomes very much central to a majority of their decision-making going forward.”
The study also revealed that digital leaders are better at leveraging data than their peers, and that they do this by “… hunting, harvesting and curating data that can be used to teach machine-learning models, advance AI adoption, and monetise new assets.”
Digital transformation remains a key issue for many with almost half (44 per cent) of the executives surveyed revealing their businesses are undergoing some kind of major digital change that will fundamentally impact their organisation.
This includes introducing new products and services or — more radically — fundamentally changing their business model. That said, only six per cent say they are moving from selling products to selling services — a strategy reform beloved by consultants pushing a “subscription economy” agenda. “A further 41 per cent of organisations will be introducing new products and services to supplement existing ones.”
Not surprisingly, the organisations most affected by transformation are those whose products are easily digitised.
In sectors like telecommunications (57 per cent), broadcast/media (57 per cent) and technology (56 per cent), the majority say they are experiencing either “major” or “radical” transformation.
However, even in less-easily digitised sectors, such as manufacturing, awareness of the importance of transformation is growing, according to the study.
And that transformation imperative is independent of the size or age of organisations. “Small, young enterprises are just as likely to be transforming as older, larger ones. However, those organisations that report having a shorter time to market for products than their competitors are more than twice as likely to be expecting radical transformation.”
All in the timing
The results of the survey also suggest it’s an excellent time to be a technology leader (which is not something you hear every day).
“Job fulfillment is up, budgets have grown, salaries have been raised,” the study reports.
However, these new conditions — and the demands of the job — require an appetite for change, since technology is also disrupting the role of the technology leader, say the authors.
Executive board membership, for instance, is actually down. And there is competition for prestige and resources from chief data officers and chief digital officers, among others.
Instead, the authors say, “Successful leaders are swapping control for influence, and stepping up how they partner with the business. For many organisations, the concept of a ‘traditional’ IT department is anathema to them.”
And the sun is set to shine on into the future despite concerns over the economic outlook. The study reports, “If there is a sense of nervousness in the world economy, it won’t be found in technology investment. Over the past year, more technology leaders reported budget increases than at any time in the last 15 years. And the jump in those reporting increases (from 49 per cent to 55 per cent) is the largest we’ve seen, with the one exception of 2010, when organisations were still clawing their way out of the global recession.”
The optimism of technology leaders extends into the future: 52 per cent say they expect a budget increase next year, and 51 per cent are planning on growing their headcount.
We also asked Gray how the changing priorities for business are reflected in the kinds of technology executives they are seeking.
“Executive and management staff are becoming more literate in the value and benefits of technologies including cloud and the commercial and productivity of AI, RPA and Blockchain. As a result we are seeing a less conservative view, perhaps even curiosity and excitement from the leaders outside the technology and digital domain,” she said.
“The digital executives in demand are those who are deeply immersed in the fast-paced, ever-changing landscape of what is possible, and curious to keep current. Yet they balance this with what they know is right for the business — be that technologies, practices, toolsets or strategy.”
Gone are the days where organisations were seeking out the high-profile, newsworthy, unpredictable “disruptor” appointment. “These organisations still need to drive business model change, underpinned by the emerging innovative application of technology. But they now desire a more positive disruption, in a more sustainable, positive way.
“These findings show us that digital leaders in organisations are appointed to prioritise and utilise digital technologies to advance the business strategy, as opposed to just keeping things stable and safe — these things are now a given. These digital leaders are seen as core and critical to the strategy and success of a business, and their leadership as a driving force for optimal business performance through technology.”
Note: This week’s cover story was delayed to comply with an embargo on the release of the study.