PwC identifies five behaviors that accelerate value from digital investments; Organizations that excel in these are twice as likely to be top performers in revenue growth, profitability, and innovation
Strong CIO-CMO relationship is critical to boosting Digital IQ
NEW YORK, March 27, 2014 – Though many organizations lay claim to being a digital enterprise, only a minority – 20 percent – are truly there, according to the 6th Annual Digital IQ Survey report released today by PwC US. In the report, PwC explores organizations’ acumen at understanding, valuing, and weaving technology throughout the enterprise—their Digital IQ.
In this year’s study of nearly 1,500 executives—split equally among business and IT executives—PwC identified the actions and investments that are integral in high-performing digital enterprises today. Companies that demonstrated these 5 digital behaviors, as described below, were more than twice as likely to be top-performing companies in revenue growth, profitability, and innovation.
“Today, all roads lead to digital. From business strategy to execution, digital technology has become the foundation for everything we do,” said Chris Curran, PwC Advisory principal and Chief Technologist. “Simply put, you can’t afford to underestimate digital. Through all of our research, CEOs have made it clear that they see both the promise and the peril of digital technology and we believe that charting their company’s course in the digital age is the number-one challenge business leaders will face in 2014.”
According to PwC’s 17th Annual Global CEO Survey, 81 percent of global CEOs reported that technological breakthroughs would be one of the most important impacts on their business in the next five years. As noted above, the following five behaviors enable organizations to accelerate value from their digital investments, exploiting their virtual value chain to alter business models and capture new markets:
Behavior 1: CEO actively champions digital
A digital CEO sets and steers the company’s digital vision and tackles the inevitable challenges that come with new ways of doing business. PwC’s analysis revealed that 81 percent of top performers say their CEO is an active champion in the use of IT to achieve business strategy, compared with 68 percent of other companies.
Company leaders need to consider the digital dimension of everything the business does—its products and services, partnerships, marketing and customer engagement, talent acquisition and retention, operations and more. For every strategic question, the CEO must ask: What are the digital opportunities here? Does digital introduce new challenges? CEOs will be the ones to pose the questions, but to answer them will require the collective knowledge and insight from other functional leaders.
Behavior 2: Strong CIO-CMO relationship
According to the survey, the CIO-CMO relationship has become critical: 70 percent of top-performing companies say they have a strong CIO-CMO relationship, compared with just 45 percent for non-top performers. Across the board, the CIO continues to be internally focused and there has been virtually no change in involvement around customer and product innovation during the last six years PwC’s Digital IQ study has examined this issue. The CEO needs to ensure that marketing and development teams engage the CIO in early discussions around product, service, and customer innovation.
“Failing to involve the CIO in market-facing innovation—where digital technology is a primary driver—is counter-intuitive,” added Andrea Fishman, a PwC Advisory principal. “Don’t leave any room for interpretation when it comes to market-facing digital technology like consumer apps, websites, or customer analytics. Get explicit agreement between the CIO and CMO on who owns the initiatives, the role each leader will take on, and when and how they are expected to work together.”
Behavior 3: Outside-in approach to digital innovation
Top performers in PwC’s study were more likely to look to outside sources such as - industry analysts, vendors, universities and labs- to fill their idea pipelines, in addition to internal sources. But all companies tend to rely most heavily on traditional sources like internal planning sessions and workshops.
“A better approach is what PwC refers to as ‘outside-in’ innovation because it embraces new ideas and experimentation that comes from unlikely sources and industries. The outside-in approach can even be applied inside the company, where companies can seek out hidden innovators, such as enthusiasts of the maker movement who might work in operations or customer service,” added Curran.
Behavior 4: Significant New IT platform investments
While investing in disruptive technology is crucial for innovation, top-performing companies realize they need to think bigger. They are innovating how they think about IT and remaking it to better meet the needs of the business. PwC refers to this model as the New IT Platform -- a thorough approach, addressing how IT’s mandate, processes, architecture, organization, and governance must change to keep up with the business.
“The IT organization’s role should be established as a services orchestrator, instead of a centralized authority that aims to control and own all IT,” said Mike Pearl, PwC Advisory principal. “The new model takes in to account the dynamic business environment and supports a broad architecture, also called a secure integration fabric, which gives companies the flexibility to add whatever digital technology they need at a given time.”
This includes effectively dealing with new business services, constantly evolving devices, emerging cyberthreats, third-party data sources and ever-larger volumes of data, business analytics, and whatever promising technology comes next.
Behavior 5: View digital as an enterprise capability
PwC suggests organizations should begin broadening how they think about their digitally-savvy resources, realizing that it is becoming essential to have an IT capability that is woven throughout the business rather than only centralized in a single function.
With a balanced digital capability that spans the business, what matters more than where the specific skills or resources are located is having a shared understanding of how it all fits together to accomplish the organization’s goals, who is responsible for each aspect, and a way to keep everyone in the loop. Achieving this level of collaboration requires that IT fully understands all aspects of the business—and business understands IT equally well.
“Companies that demonstrated these five behaviors were twice as likely to be top-performing companies, in revenue growth, profitability and innovation,” concluded Curran. “With digital at the top of the agenda for nearly every company, the question now becomes: How do we use digital technology to improve products and services, create new ones, or change our business models before competitors do?”
For a full copy of PwC’s 6th Annual Digital IQ Survey, please visit: http://www.pwc.com/us/digitaliq
NOTES TO EDITORS
PwC’s 6th Annual Digital IQ Survey included 1,494 respondents from 38 countries. Answers were aggregated into five regions and 11 industries. Respondents were evenly divided between IT and business leaders. Two-thirds of respondents work in organizations with revenues of $1 billion or greater and 37 percent have revenues greater than $5 billion.
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