4 things successful CIOs know about digital transformation

IDC estimates spending on digital transformation will exceed $2 trillion in 2019; 40 percent of all technology spending will be for digital transformation technologies.

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2017 was a tumultuous year: From Amazon acquiring Whole Foods to Tesla accepting orders for its new fully electric Class 8 truck, it is evident our world is changing quickly. Within IT, a domain where change is something we live with every day, even we are struggling with what is coming at us! 

The pace of change is such that 75 percent of the companies that are currently in the S&P 500 will probably not be independent entities listed within the S&P 500 in seven years. Not that long ago, companies on the S&P 500 stayed there 50 to 60 years; by 2025, the average duration on this list will be under 25 years. 

Companies worldwide are aggressively consolidating their data centers, implementing new data models, and shifting development to agile, mobile-first, cloud-based models. They’re exploring new leadership strategies and business processes, and adopting new customer engagement models, information and data models, and operating, staffing and sourcing models. They require new ways to measure their outcomes and understand the progress — or lack of it — that their organizations are making.  

Here are four ways IT executives are leading this global transformation — and what will happen to those who don’t.

1. Changing priorities

Recent research by IDC demonstrates that in 2017, the top two priorities for IT executives were “focusing on improving customer experience and creating new engagement models” (64%) and “creating new business models and developing new digital revenue streams” (62%). IT leaders now understand that IT will remain relevant only if IT is innovating, and they are exploiting the wealth of data and capabilities within their organizations to become customer- and product-focused. 

Organizations that don’t move in this direction will find themselves left behind by nimble business organizations that will circumvent IT to get their needs fulfilled.

2017 was a tumultuous year: From Amazon acquiring Whole Foods to Tesla accepting orders for its new fully electric Class 8 truck, it is evident our world is changing quickly. Within IT, a domain where change is something we live with every day, even we are struggling with what is coming at us! 

The pace of change is such that 75 percent of the companies that are currently in the S&P 500 will probably not be independent entities listed within the S&P 500 in seven years. Not that long ago, companies on the S&P 500 stayed there 50 to 60 years; by 2025, the average duration on this list will be under 25 years. 

Companies worldwide are aggressively consolidating their data centers, implementing new data models, and shifting development to agile, mobile-first, cloud-based models. They’re exploring new leadership strategies and business processes, and adopting new customer engagement models, information and data models, and operating, staffing and sourcing models. They require new ways to measure their outcomes and understand the progress — or lack of it — that their organizations are making.  

Here are four ways IT executives are leading this global transformation — and what will happen to those who don’t.

1. Changing priorities

Recent research by IDC demonstrates that in 2017, the top two priorities for IT executives were “focusing on improving customer experience and creating new engagement models” (64%) and “creating new business models and developing new digital revenue streams” (62%). IT leaders now understand that IT will remain relevant only if IT is innovating, and they are exploiting the wealth of data and capabilities within their organizations to become customer- and product-focused. 

Organizations that don’t move in this direction will find themselves left behind by nimble business organizations that will circumvent IT to get their needs fulfilled.

2. Skyrocketing digital

In 2016, IDC research showed that IT executives saw only 27 percent of their current business coming from digital and expected that to increase to 33 percent by 2019. Today, they indicate that digital business is 30 percent of the total business and anticipate that it will reach 40 percent by 2020. With this acceleration, organizations must move past initial digital transformation phases. 

IT leaders who have not fundamentally changed their organizations to focus on digital will find that their business colleagues will turn to outsourcing to handle development needs.

3. Embracing agile

As thriving IT organizations shift their cultures and focus, they find that the best way to reach their goals is to adopt agile development. In 2016, 48 percent of organizations were using agile for “innovation projects only.” This has now dropped to 23 percent, and the organizations using agile as their “primary development path” has increased from 32 percent in 2016 to 45 percent in 2017. These increased rates of adoption of agile development are happening in organizations that are successfully navigating the waters of digital transformation. 

4. Strengths and challenges 

Now, compare IDC’s 2016 and 2017 findings related to the strengths and challenges of IT executives. IDC data shows that most IT executives believe they have the right vision and leadership to get their organization through the turmoil of digital transformation; they report this as the top strength in both 2016 and 2017. However, we are seeing interesting shifts in executives’ ability to influence their stakeholders and to meet the challenge of finding and retaining the right IT talent. 

CIOs who are most successful at digital transformation have found themselves able to influence their stakeholders — with the ability to sell the negative ROIs that are often necessary to drive the digitally transforming enterprise. They have also changed their culture to offer an environment that draws millennials and engages their existing workforce. These “thriving” executives report their “ability to attract and retain talent” as their second-greatest strength. 

Joseph Pucciarelli is  group vice president and IT executive adviser at IDC

This article originally appeared in the Winter 2018 issue of the CIO Digital Magazine

This story, "4 things successful CIOs know about digital transformation" was originally published by CIO.