We are now knee-deep in the digital business era, with many enterprises reimagining their business and operating models based on digital capabilities.
That’s according to Andy Rowsell-Jones, research vice president at Gartner, speaking ahead of the Gartner Symposium/ITXpo 2016 in Gold Coast next month.
Rowsell-Jones is looking at how Australian CIOs are adapting to digital transformation and the new skills required to deliver the greatest value to their enterprises.
“If you ask CIOs what percentage of their budget they spend on digital, they will universally say it will go up,” he says.
Rowsell-Jones says there was an initial flurry of interest around digital in Australia, however, boards of directors appear to now be distracted by other business priorities.
“It seems that interest in digital transformation is abating, and if anything, we’re seeing digital fatigue,” he says.
“Like many industry disruptions, the pundits overestimate the impact in the short-term and underestimate the impact in the long-term. Digital transformation is following that pattern.
“This is the most dangerous time as there’s temptation for organisations to just ignore it and go back to what they were doing before. The effects of digital are now just beginning to be felt, so they have to stick with it – it’s a multi-year journey.”
In regards to how Australian organisations are innovating in this digital journey, Rowsell-Jones says most Australian businesses are still in the early experimental phase.
“The larger businesses in Australia are not necessarily behind, but it’s hard to find those that are leading the pack and doing something completely revolutionary with digital,” he says.
“Australia is very innovative where it has scale in sectors such as health, mining and agriculture, yet in other sectors the markets are small, which makes innovation difficult.”
Rowsell-Jones says Australia and its economy are big enough that you can work alongside your competitors and still make a living. In that environment, it’s always more rational to improve the service you have than to be disruptive.
“What digitalisation looked like it was going to do was to disrupt that, but now boards are figuring out that it isn’t and that they can control competition here in Australia,” he says.
"If you can do that, then you will innovate in a much slower way, which is fine until someone comes along and steals your market.
“All you have to do is look at companies such as General Electric (GE) in the U.S. and other larger overseas businesses that see digital as fundamentally transformational,” Rowsell-Jones adds.
"They’ve shifted their business models from focusing on selling product towards becoming information analytics businesses, where cloud-based analytics and productivity enhancing capabilities are creating non-price competition,” he says.
“As a supplier, it’s about seeking non-price competition and differentiating your product and the ecosystems around it. I don’t see a lot of that happening in Australia.
“Looking at the Australian retail sector, for example, businesses are experimenting with new digital business models, but they aren’t able to compete with the likes of Amazon and Walmart, which own the majority of the U.S. retail market. Amazon has released innovative tools such as a Wi-Fi connected device (Amazon Dash Button) that reorders your favourite product, as well as a hands-free speaker you control with your voice (Amazon Echo), to give consumers the next level shopping experience,” Rowsell-Jones says.
“The fact that no one is experimenting like this in Australia will mean that when Amazon finally decides to do it here, it’s going to be a problem.”
Rowsell-Jones says growth and digitalisation are the main business priorities for Australian CIOs, with business intelligence and analytics the main technology priority.
“In a more digitalised organisation, CIOs are struggling between two competing pressures: to provide stable, secure, high-performance services and to deliver agile, innovative, technology-intensive services quickly,” he explains.
“Bimodal IT provides a way to address both. It involves operating two separate, coherent modes of IT delivery – one focused on stability and the other on agility,” says Rowsell-Jones.
“High performing organisations go bimodal because it drives innovation, whereas the lower performing ones say it helps relationships with their business units. The high performers indicate that the only real cost is additional people and there’s a bit of friction within the IT organisation, whereas lower performers are worried more about the technical aspects,” he says.
“In contrast to businesses that do it properly, the reliability of those that don’t will go down and costs will go up in the long-term.
“To compete in this digital world, it’s better to be first than better, which means you have to be able to do things quickly,” says Rowsell-Jones. “The people that aren’t doing this well don’t understand the next stage.”
Rowsell-Jones says there are important new skills that CIOs will need to deliver the greatest value to digitally transformed enterprises.
“As the IT environment evolves from an IT-centric, industrialised model to a more business-centric, digitalised one, the idea of the CIO being a technical person, or a person with a generic set of skills, is a thing of the past,” he explains.
“The old notion that a business strategy drives an IT strategy and the IT strategy enables the business strategy is a virtuous cycle. If you were entirely dependent on the CMO to drive the digital strategy then that is only half the cycle.
“To complete the circle, the IT organisation (especially the CIO) must understand a lot more about the market and the customer experience than they’ve ever done before,” Rowsell-Jones says.
Rowsell-Jones says the challenge for CIOs is knowing how to help their people understand the role of IT in the company and build business acumen.
“This will enable them to combine their technology know-how with a broad understanding of market, industry and customer needs and wants,” he says.
“Then they can apply them in the discovery, design and implementation of digital solutions that create new business value and growth.”
Rowsell-Jones says there are also some very simple marketing maxims that CIOs can learn from and apply.
"It’s better to be first that it is to be better - if you’re trying to establish a market position or a standard, you have to get to the market first,” he says.
"If you can’t be the first in a category then set up a new category you can be - subdivide the market,” Rowsell-Jones suggests.