10 ways how digital leaders outperform their competition

10 December 2015 Consultancy.uk

Investment in digital innovation remains a key priority for many businesses. Recent PwC research shows that revenue growth, improving customer experience and increasing profits are the biggest motivators for companies to invest in digital. Investing is not enough, however, to book stronger financial results. As part of the research, PwC identified 10 key areas in which top performers outperformed laggards, finding that solid CEO leadership and vision on digital integration, coupled with strong implementation through the C-suite, management and awareness within the wider organisation are correlated with an improved bottom line.

PwC’s seventh edition of the ‘Digital IQ’ survey continues to explore what actions leaders can take to confirm that their digital investments deliver and sustain value. The survey involved 1,988 respondents, evenly divided between business and IT leaders, from 51 countries, aggregated into ten industries. 21% of respondents work in $1 billion plus organisations and 52% have revenues between $500 million and $1 billion.

Investing in digital
The need for investment in digital technology to stay competitive seems to be taking hold at a considerable number of businesses. The survey highlights that 31% of companies are investing more than 15% of their revenues into digital technology. The returns expected on their investment, as reflected in the answers to the question ‘What value do you expect from your digital enterprise investments?’, vary. The largest proportion of respondents (45%) selects revenue growth first, followed by improvements to their customers’ experience (25%). Increasing profits is the motivation for 12% of those surveyed, while 5% sees it as a means to innovate products. The results highlight that digitalisation is predominantly aimed at growing today’s business, rather than creating new disruptive models – which only 1% indicate. Interestingly, improving decision-making through big data and analytics also falls out near the bottom of this survey, at 2%.

Return on digital investment

Top 10 Digital IQ
The research considers 25 factors related to digitalisation – spanning strategy, innovation, and execution – and identifies 10 that are the most highly correlated with improved financial performance of the surveyed companies. These 10 contribute to the overall ‘Digital IQ’ score of companies. The consulting firm finds that those companies in the top quartile are twice as likely to achieve rapid revenue growth and profit growth as the laggards in the study.

1. CEO Champion
One of the most important features in the study is the role of the CEO in championing the need for digitalisation, which has been correlated with improved financial performance. The CEO is also the natural leader in shifting company focus from operational efficiency to growth. When asked ‘What value do you expect from your digital enterprise investments?’, the role of CEOs in prioritising disruptive development is the highest among the surveyed groups at 16%, with the CIO as the next closest at 8%. The CEO too believes that the introduction of digital features into the enterprise will create financial returns, at 54%, although the CDO is the most positive at 67%. 

CEOs have disruption and financial value in mind

2. Digital leaders set strategy
While CEOs are the tone and vision setters, the operationalization of digital strategies is handed down to the CIO or CDO, which are instrumental in setting high-level business strategy. Effectiveness in setting the strategy, especially in companies where digital leaders are responsible for a significant share of the business, is best achieved in many organisations through digital councils that bring together the company’s CIOs and CMOs. True effectiveness, according to the analysis, is born from being collaborative and cross-functional, made up of those in both IT and business roles.

3. Executive team engaged
Engaging the whole C-suite within the strategy, in terms of both strategy and buy-in, is another important factor in successful organisations. Working from the ‘proverbial same-page’ means that there is greater likelihood that cross-disciplinary issues are identified and unexpected surprises are avoided. Having a harmonised executive team has been identified as essential for strong performance, particularly the CIO and CMO relationship need attention in many organisations. This relationship is rated as strong by 54%, in comparison: a strong CIO-CEO relationship comes in at 70%.

4. Strategy-sharing across the organisation
The final aspect of strategy is to have organisation-wide engagement. However, the uptake of the strategy and digital tools within organisations is not always occurring seamlessly. ‘Only’ 69% say that their digital strategy is shared within the wider enterprise, which, while up from 55% last year, still reflects that there is some way to go at many organisations. High performers tend to use technology to get the word out within the employment base, from creating short clips, to social media, to leveraging smartphones, leaders create a dialogue about how it affects their employees.

Tech advances most influential

5. Outside-in approach
Top performing companies tend to invest in an ‘outside-in’ approach when it comes to being innovative, using the knowledge base of other innovators, such as vendors or customers, to uncover and apply new ideas for using technology. High performers also tend to evaluate emerging technologies more often, with adoption characterised as technology-driven by 69% vs. 50% for other companies. In addition, they are more likely to be innovative in terms of business models and to be among the 8% of companies looking to disrupt their own or other industries.

6. Driven by competitive advantage
High performers are more interested in learning from outside sources from which to create opportunities for market differentiation. According to PwC, the top emerging technologies on company shortlists listed as ‘strategically important’ over the coming decade are cyber security, data mining and analysis, data visualisation, digital delivery, and private cloud.

Digital roadmap

7. Effective use of business data
Using data to make strategic decisions is considered a higher priority for high performing companies, although it is seen as a difficult task by executives across the board. Issues range from poor data quality to the skills required to leverage it for actionable insights. Top-performing companies see more potential in making use of their data than lower-performing ones. They see the most promise in third-party data (78%), cloud application data (70%), social media data (69%), and location-aware data (64%).

8. Proactive cyber security
Cyber security remains an on-going concern among organisations. Proactivity is the course of action seen at top-performing companies, with most having policies in place to evaluate and plan for security and privacy in digital enterprise projects. They also feel more prepared to manage these risks (80%), compared with lower performers (64%).

Skills gap

9. Digital roadmap
Creating a long-term digital road-map is a means of holding together the strategic development of digital capabilities, while balancing them against the year-to-year priorities that always arise in the annual planning and budgeting process. Although the long term benefits of such plans have been shown, today 53% of companies have a comprehensive roadmap that includes business capabilities and processes, as well as digital and IT components. Four years ago that figure was at 63%. The highest percentage of companies with such a plan is in Asia (59%), followed by the US (57%) and Latin America (54%). The skills piece of the roadmap is a serious challenge for many companies. Just 55% of executives said their organisation has all the technology skills needed to deliver on their enterprise vision.

10. Consistent measurement
Seeing the return of investment within the numbers is also a key priority for successful companies. The demonstration of success requires a combination of traditional metrics (like ROI) to track against growth goals, as well as newer ones for measuring more disruptive investments.

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