What are the forces that will shape organisations over the next three to five years? IBM’s global C-suite study has the answers.
Over the last 10 years, IBM has undertaken an extraordinary research exercise to get inside the minds of the C-suite, conducting 23,000 face-to-face interviews with executives.
Most recently the insights of 4183 CxOs – including CEOs, CFOs, CMOs, CIOs and other assorted ‘chiefs’ – from more than 20 industries in more than 70 countries have been brought together in the IBM global C-suite study, produced by the IBM Institute for Business Value.
Together they give an insight into the landscape which will shape strategic thinking for the next three to five years.
Change at the pace of revolution
Outlining the findings of the study at the 2014 SAP Australian User Group Summit, Todd Kirtley, general manager, global alliances, IBM, says not only is the current pace of change unpredecented, the jobs of business and IT professionals are more demanding than ever.
There are three key reasons for this acceleration:
- An emerging middle class of over five billion people, with money to spend. It’s a two-edged sword – governments and institutions now need to provide services across five billion more demanding users, requiring business models and IT systems that can accommodate that. “But more importantly, in growth markets, you have opportunities from new customers. Is your company really doing the right job of stepping out and putting together new products and services to address this tremendous market potential?,” Kirtley says.
- Data is doubling every 18 months. With 15 billion mobile enabled devices and over one billion users in social networks, there is a huge amount of information being generated. “You are thinking, are we really aligning our businesses to address the new emerging big data trends that are in the industry? Are we really positioned for this transformation around big data in the digital age?” Kirtley says.
- There has been a fundamental transformation in end user devices. This is changing the relationship between business and personal use, and making users much more demanding of their devices and systems.
Overall, the question senior executives must answer is, are they making the transitions in their business that are necessary to compete going forward?
Technology paramount to transformation
When it comes to the single most important external force shaping the future of their enterprises, CEOs overwhelming named technology. Other CxOs also saw it as one of the top three factors affecting their business, and this is up from the sixth most important external force in 2004.
“71 per cent of CEOs listed that as the number one focus that had their attention. I would have never thought that the CEO could actually talk about transformation of IT and digital. Increasingly we are seeing convergence between the point of view of line of business executives, IT executives and now CEOs,” Kirtley says.
While the line of business executives – those in finance, marketing, HR and supply chain – understand that they need more information on their customers, their products and services, and changing demographics, at the moment they are drowning in data.
“They are having a hard time going from data to information to insight to the predictive world they need to serve in a marketplace, change their business models, and come up with new products and services,” Kirtley says.
And who are they asking for help? The CIO. But the challenge for CIOs is that they are now trying to fulfil three key roles in most organisations.
- Day-to-day operation of IT. With 80 per cent of most IT budgets spent on legacy systems and maintenance, there’s rarely enough money to be spent on new project development.
- Partnering with line of business executives to transform the enterprise. “They start looking at data analytics, social systems and the next generation of systems that are going to come for the base of legacy projects that they have today. That transformation requires lot of trade-offs between expense and capital and projects and people and activities,” Kirtley says.
- Looking into the future at how IT can pioneer change. In this role, they are looking at what might be next in order to adjust the business models to offer next-level products and services. “So the CIOs are basically, in a word, stretched. They have more on their plate than they could get done.”
Engaging in a more open ecosystem
A key issue the research canvasses is how organisations will be engaging with their customers over the next three to five years. Only 20 per cent thought that traditional face-to-face interaction would be the way forward, while 68 per cent now believe extensive use of social and digital interaction will be a defining factor in customer relationships over this period.
“They are focusing much more on microsegmentation, and they are looking at customers as individuals. In order to make this happen, you have got to be much more open with your employees, your supply chain of ecosystem partners, and your customer,” Kirtley says.
This openness also extends how innovation will be introduced and driven in the organisation. Seventy-three per cent of CxOs stated they would be looking for partners external from the organisation to drive new product and service capabilities, and 61 per cent expect to see more partnering to increase value.
“[Most CxOs] envisage that organisational boundaries will become far more porous, enabling greater collaboration with employees and partners to accelerate innovation. They also anticipate sourcing more of that innovation from outside. Where once an enterprise could go it alone, and be successful doing so, it must now collaborate,” the report says.
In fact, 90 per cent of CxOs plan to collaborate much more extensively with their customers within three to five years.
The digital frontier
The report says the emergence of social, mobile and digital networks has played a big part in democratising the relationships between organisations and customers. With this backdrop, CMOs consider it critical to have a strong digital strategy in place and want to overhaul every aspect of the customer interface.
Fortunately, they seem to be on the same page as the CIOs on this front – four-fifths of CIOs surveyed say they aim to digitise their front offices within the next few years to sync with customers more effectively, and 84 per cent of CIOs include new, mobile means of interacting with customers in their top five priorities for enhancing their organisation’s competitiveness in the next few years.
Repositioning IT
According to the report, as CIOs reposition the IT function from service provider to critical strategic enabler, they anticipate spending much more time on activities that have traditionally fallen within the CMO’s sphere, such as customer experience management and new business development.
Eighty-four per cent of CIOs expect to invest more in mobility solutions and business analytics, and again here CIOs are in sync with their CMO colleagues – 94 per cent of whom believe analytics and mobile will play an important role in helping them realise their goals.
Cloud, internal collaboration/social networking and business process management were also cited as investment priorities by 64 per cent of CIOs, with 87 per cent of CMOs saying collaboration tools will be critical to achieve their objectives.
“It is an everyone to everyone economy. We are now looking at not just individuals being the centre of the economy, but the world of social,” Kirtley says. “People trust their networks and the people they are connected to more than they trust individual corporates in many cases.”
And while generating deep insights using analytics is a key priority for CIOs, they realise they need a scalable and extensible information foundation with which to manage big data – and 55 per cent say this is lacking in their organisation.
Achieving more together
With the study also comparing the views held by those in outperforming or underperforming organisations, it is clear to be successful in this dynamic environment, the members of the C-suite must pull together, the report says.
“A full 92 per cent of CEOs heading outperforming enterprises think they and their fellow CxOs work effectively together in a collegial manner. Only 72 per cent of those heading underperforming enterprises can make the same claim – hard proof of the dividends a united boardroom can bring.”
To read more of the insights from the study, visit www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/. This article was first published in the Inside SAP Yearbook 2015 (published November 2014).
