By Lesley Stones
As companies continue to make technology a core component of their operations, it’s increasingly tough for CEOs to keep on top of all the changes.
But it’s incredible that only 4% of CEOs believe they fully understand their company’s digital business strategy. Even in IT companies, only 9% of CEOs say they are fully on top of all the developments.
The figures were unearthed by Forrester and shared by its vice-president Nigel Fenwick during the Huawei Connect conference held in Shanghai recently.
South Africa was one of the countries involved in the study that was commissioned by Huawei, a key player in cloud computing technologies.
The fact that only 4% of CEOs clearly understand their corporate digitisation strategy is “an astonishingly low number,” Fenwick said. Part of that is because technology is changing so quickly, but it’s also a mindset problem in how people see the role of technology, he said.
More than half the businesses that were polled expect cloud services to drive at least 40% of their revenue by 2020. But that may prove optimistic since they don’t know how to get there.
Only a quarter have a strategy that defines how they will transform into a digital business to create new sources of customer value. Another 48% are just enhancing the existing business model by bolting on digital elements like a website, an app or social media. Another quarter are still only planning that bolt-on approach, while 2% will ignore digital developments completely.
Forrester believes cloud-driven technologies and services are so radical that simply trying to adapt existing ways of working to the cloud is insufficient.
“That doesn’t change the way the company creates value,” said Fenwick. “To do that you need to change the company and think digital first.”
Forrester’s analysts expect the cloud to become as common as a light bulb – which has moved from a sensational novelty to something we flick on without a thought. But most companies still haven’t seen this technological tsunami bearing down on them.
The first digital transformation wave brought websites and e-commerce in the late 1990s. A second wave of cloud computing, social media and mobile apps started around 2005 and continues now. Yet the third wave promises to be “more holistic and comprehensive”, Fenwick said. Technology will no longer be a tool for improving efficiency, but the foundation of successful strategies and revenue growth.
“The revenue they generate will be driven by their ability to use technology to deliver value to their customers and drive sales,” Fenwick said. Examples are the use of artificial intelligence, machine learning and predictive analytics to let finance houses make more money for their client’s investments.
In manufacturing, robotics and sensors allow companies to tailor the output to individual customers instead of mass production. Media companies are moving to the cloud so content and entertainment can be delivered to the customer tailored for individual consumption.
“You have to design a digital experience and customer expectations are changing every day,” Fenwick said. “You have to rethink the architecture of your company and the cloud is becoming increasingly important. Almost every company could use the cloud to some extent, but the 25% that are changing their business model to be heavily dependent on the cloud understand its ability to change their business rapidly and it gives them a competitive advantage.”
IT must move from the back office to the front office as it is the driver of tomorrow’s revenue, Fenwick said. But business units see the IT department as a supplier, rather than a partner, and that attitude needs to change. They must work from the customer’s perspective and make the business more agile by designing digital experiences into every product and service.
Thankfully CIOs don’t need to build all the capabilities by themselves, as they can draw them from the cloud eco-system by selecting partners with the skills to build cloud-enabled systems, Fenwick said.
Ken Hu, one of Huawei’s three rotating CEOs, said the cloud is disrupting and restructuring everything. All enterprises will use cloud technologies by 2025, when 85% of the workload will be in the cloud, he predicted. “We are moving from an information revolution to the intelligence revolution. But cloudification is a huge step with a lot of transformation necessary,” he warned.
Business leaders must change their mindset from seeing IT as a support system to seeing it as mission critical, and be bold enough to use IT to drive innovation.
“Companies need to redesign traditional processes around new technologies, not passively adapt existing technologies to serve existing processes,” he said.