ORLANDO, Fla. — CEOs are finally asking to see the return on years-long digital investments. It's been a slow-crawl for modernization efforts, such as cloud migration, to show its worth. And the value, while revealing itself, still has a ways to go.
"It is time for us to collectively show digital value," Mark Raskino, distinguished VP analyst at Gartner, while speaking at the Gartner IT Symposium/Xpo in Orlando, Florida Wednesday. Returns are "stuff [CEOs] can talk about, stuff that impresses investors."
Before "digital" became a business imperative — and before the 2008 recession — businesses were pursuing "e-business" goals, said Raskino. By 2009, a year into the recession, businesses were too frightened to even talk about any investments.
But in 2012, "digital" took the forefront and it's not going away.
Investments in digital — which includes data science, cybersecurity, user experience design and cloud migration, among others — are all pursued "in hope of a glorious future," he said. Companies are just now seeing the ROI, though it feels minimal.
CEOs are asking for that return to show itself because "we're in a softening economic world," and that is only one of the top three concerns CEOs have:
|CEO concerns||CIO solutions|
|Economic slowdown||Focus on productivity|
|Digital dithering||Three-horizon digital strategy|
SOURCE: Mark Raskino, distinguished VP analyst at Gartner
Digital strategies have been shrouded in bureaucracy and used in superficial manners, said Raskino. But when CIOs are able to counter CEO concerns and craft multiple transformation steps, a "deep digital" strategy is possible.
Reglobalization and geo-flexibility
Current trade wars are only a fragment of the nationalistic approach the U.S. is taking when it comes to business. Businesses are forced to react to temporary de-globalization. When globalization remerges, as Raskino predicts, companies will have to readjust to the "reappraisal" of economics.
Right now, technology's role in the hyper-local approach to business is testing the boundaries of business.
The geo-flexible CIO is able to apply data science to "outwit competitors" in finding ideal locations for necessary business needs, like talent. As companies have been "cloudifying" their architecture over the years, they have increased their strategic value in terms of APIs and applications in varying geographies.
Raskino recommended CIOs "exploit geographic moves as greenfield opportunities." There are geographic locations that can accommodate and better nurture academic, venture capital or small TSP relationships.
Economic slowdown and productivity focus
As CEOs grapple with an impending recession, readjusting and slashing technology budgets is not the way to endure. History shows that innovative companies survive recessions.
It's "corporate suicide" to kill digital transformation efforts due to recession fears, said Raskino.
Growth is the primary business priority for the rest of 2019 and into 2020 for 53% of CEOs, followed IT-related priorities for 32% of CEOs, according to Gartner. "Technology is a big deal for CEOs in the moment," said Raskino.
Talent hiring, training and retention have taken a backseat as prices soften with an impending economic downturn. It's possible that CEOs feel, talent-wise, they've done enough in the workforce area, he said. Margin pressure and profitability are always top of mind.
GDP in 2019, when compared to 2018, is down across the globe, but the U.S. has yet to feel that impact and it will likely be last, according to Raskino. In preparation, CEOs have a plan A, a plan B and "half a plan C" for how they plan on riding out a recession.
About half of CEOs are banking on technology for productivity and efficiency improvements. "This isn't just about tuning up productivity," said Raskino, this is an opportunity for CIOs to meet CEOs at a recession-focussed imperative and restructure efficiencies.
CIOs have the chance to make a case for digitalization as long as they approach their CEOs with caution. "Do not mention cost-cutting, they will cut you," he said.
Traditional methods of productivity hurt the potential of future returns. Raskino advises CIOs to present their CEOs with the concept of sales productivity and apply digitalization to virtually any business capability to drive breakthroughs.
First, however, identify the most important practice in need of a productivity boost and dedicate resources and time to improving it.
Digital dithering and the three horizons
Tech companies love to throw their weight around, touting the influence they have on industries. Some claims — such as Amazon's — are fair and backed by evidence.
Others claim their influence with little to substantiate it. A good example? WeWork, said Raskino.
With companies piling on other competitors, it's easy for CEOs to question their digital change and lose confidence.
"Digital dragons," in particular, are the companies CIOs compete with but also rely on for tools. Amazon, Alibaba, Google and Facebook are a player in the same market as 64% of CEOs. Nearly one-fifth of CEOs say the dragons have a halo effect on their industry, the same amount, 18%, also say the dragons present more opportunities in their respective industries.
The dragons are likely to influence investors as much as other aspects of a market. In response, 82% of CEOs in 2019 made digital a corporate initiative or transformation program, up from 62% in 2018.
"You can't escape it, it's still currency," said Raskino, but "it's confusing what good looks like." So much so, CEOs and their CIOs have a severely uneven view of digital results.
Only 6% of CIOs say they are "very" effectively harvesting digital results, whereas 23% of CEOs say the same thing. "You're even more negative than your chief executive," said Raskino.
Companies are likely to see more digital results when transformation is designed around a three-horizon strategy. The progress seen today is securing "tomorrow's optionality" because industry disruption is subtle — until it's not.
The three horizons, for Raskino, are the gradual steps of a digital strategy. They are defined differently for each technological initiative.
The automotive industry, for example, is gradually: connected vehicles by 2020, autonomous vehicles by 2025 and mobility services by 2030.
"It takes 20 years for a big company to fail," said Raskino, preparing for gradual disruption, over three horizons, is likely to insulate a company from failure. Capabilities with long-lasting endurance and foundational settings are the baseline to setting a three-horizon agenda.