Companies with a leadership team that champions digital initiatives and takes the lead in digital strategy are more likely to achieve rapid revenue and profit growth. These organisations, according to a global PwC report, look beyond technology that solves or mitigates today’s business issues, thinking instead about how it can position them for the future.
PwC asked survey respondents how they define “digital”. The majority of respondents define it as activities related to technology innovation. Others associate the word with business-wide tech investments, with customer-facing tech activities, or as synonymous with information technology (IT).
No matter the definition, organisations with a high digital IQ are twice as likely to achieve more rapid revenue growth when compared with other companies.
“I tell CFOs: ‘Today, we are all technology companies,’ ” said James C. Bourke, CPA/CITP/CFF, CGMA, the technology practice leader at accounting firm WithumSmith+Brown. Organisations that don’t make serious investments in digital strategy are more likely to struggle or go out of business, he said.
PwC defines a company with a high digital IQ as having ten attributes:
CEO champion. Seventy-three per cent of respondents said their CEO champions digital initiatives, compared with 57% who felt that way in 2013.
Digital leaders set strategy. Members of the C-suite, such as chief information or chief digital officers, also play a key role in setting a tone for the organisation. Thirty-one per cent of respondents say their companies are investing more than 15% of revenue into business-wide technology investments, not just IT.
Business-aligned digital strategy is agreed upon and shared with other executives. Instead of having digital strategy be the sole domain of the CIO, the initiatives are shared. PwC said this co-operation enables an organisation to identify areas of overlap and root out resource gaps. “Having that collaborative effort between CFO and CIO helps companies turn technology into a strategic asset,” Bourke said.
The strategy is shared across the organisation. Two years ago, 50% of companies shared digital strategy across the enterprise. This year, 69% of companies are doing so. Top companies are using social media to spread the word to employees about technology initiatives.
Outside-in approach. Higher-performing companies gather new technology ideas by engaging with external sources. Seventy-one per cent of digital disruptors look continuously for ways to digitise their business, compared with 63% of other companies. Bourke said it’s not enough for companies to differentiate themselves on product or service offerings. They must also offer the seamless digital experience that customers crave.
Digital investments are made mainly for competitive advantage. The focus of digital initiatives goes beyond operational efficiency into growth. The top categories for the next three to five years are cyber-security, data mining and analysis, data visualisation, and digital delivery.
Effective use of business data. Finding value in data often means understanding which segments of data mean the most. With technology making more information available, some companies get lost in their numbers.
Proactive cyber-security. Cyber-security concerns show no signs of abating, and more leaders in the C-suite and boardroom are paying attention. The difference between top companies and others in the digital sense: The leading companies are more likely to evaluate and plan for security and privacy in digital projects, and they feel more prepared to manage cyber-risks.
Digital road map. Just more than half (53%) of organisations have a multi-year digital enterprise road map, down from 63% in the survey four years ago. PwC said it was crucial to have a long-term strategic plan to balance more tactical, year-to-year priorities that come from annual budgeting and planning.
Consistent measurement. In addition to looking at a standard such as return on investment, top-performing companies are also measuring their disruptive investments. Boards are expanding their focus beyond risk-based metrics to data on the activities that affect company strategy.
Barriers to success
PwC listed three trends that could impede a company’s success in digital initiatives:
- Digital for today’s business – not tomorrow’s. Organisations are focused on applying digital strategy to grow existing business models and not to disrupt their own or other industries. PwC said this view is “cause for concern.”
- Plenty of internal disruption. Companies have shifted their spending patterns. For example, 68% of technology spending is not IT-related, compared with 47% the previous year.
- A slow-tech approach holds companies back. Organisations continue to think less like start-ups, even as technology changes quickly around them. Bourke said legacy companies that are hesitant to embrace cloud technology will be “left behind.”
Related CGMA Magazine content:
“5 Success Factors in a Strong CFO-CIO Relationship”: CFOs see the importance of working more closely with CIOs, but a knowledge gap sometimes gets in the way. A global survey shows that CFOs are paying more attention to the IT function than they did three years ago.
“5 Steps to Bringing Analytics to Life”: Business leaders need to have a clear analytics strategy that articulates key priorities and pathways to desired business outcomes. This article outlines the ingredients of a successful analytics framework and practical steps for implementation.
—Neil Amato (firstname.lastname@example.org) is a CGMA Magazine senior editor.