Once digital revenue for a sector hits 20 percent of total revenue, digital transformation can't be stopped, Gartner says. Digital disruption has been seen in industries such as in books, clothing, and it’s beginning in other industries such as traditional grocery markets.
Digital disruptors are doing two things: finding new opportunities, and attacking the weakness of incumbents, says Peter Sondergaard, executive vice president and global head of research.
"Digital disruptors serve unmet customer demand. They find ways to use excess capacity in the supply chain, exploit new platforms for awareness and marketing, and they also capitalize on new distribution channels," Sondergaard said. "Digital also exposes the weaknesses of incumbents."
Measure Success With Digital KPIs
However, Sondergaard said the incumbents are not sitting still. Many large, established companies are trying to rise above the competition. To better understand best in class practices, it’s important to develop enterprise-wide digital key performance indicators (KPIs).
"Digital KPIs will become your enterprise compass, built into the performance objectives of every leader in the organization. These digital KPIs must measure leading, not lagging, indicators," Sondergaard said. "The large ecosystem players measure themselves by the number of registered partners in their ecosystem. You might measure how many ecosystems you participate in, and the conversion rates in each. Digital allows for deeper, outcome-driven measures, and they apply to all industries."
Get Digital to Stay Competitive
Gartner data shows that two-thirds of all business leaders believe that their companies must pick up the pace of digitalization to remain competitive. The new breed of CEO believes their companies must use technology to gain a competitive advantage.
"That puts CIOs in the spotlight. You play a part in the digital transformation," Sondergaard said. "But it does not mean the exact same thing to every CIO. To meet the digital challenge, you must understand both what will be expected of you, and what you truly aspire to be."
Three Situational Roles for the CIO
Within the enterprise, on any given day, and with any given partner, the leadership the CIO provides may vary. There are three situational roles for the CIO that include: a partner CIO; a builder CIO; or a pioneer CIO.
-The IT Partner CIO is expected to operate in a more transactional way, with a focus on managing services, core IT, value for money, while also preparing for digital.
-The Digital Builder CIO is designing and enabling new products and services, and working with others across the enterprise.
-The Digital Pioneer CIO is acting an entrepreneur, leveraging technologies to build new capabilities, new business models, and new revenue streams to achieve digital value and scale.
"The digital value may be either optimization — just efficiency — or full transformation in the form of growth. It is best used to invent something entirely new," Sondergaard said. "This is critical because if your organization is not creating new digital business models, or new ways to engage constituents or customers, you are falling behind."
Sondergaard pointed out that scale does not merely mean getting bigger. The largest organizations are not the only ones that will win. In the emerging world of interconnected platforms and ecosystems, smaller organizations can very rapidly compete with the largest.
Having the Talent to Succeed
Looking ahead to 2018 and beyond, Gartner anticipates three high demand skills:
-Artificial Intelligence (AI)
-Internet of Things (IoT)
"We believe that AI will be critical to solving both digital security and IoT challenges," Sondergaard said. "It will be an essential defense, creating a continuously adaptive risk and trust response. So, prioritize your investment in AI, beginning at the top with AI capable leaders."
Many enterprises will not be able to hire the people necessary in AI and security to drive digital transformation. There is a shortage of qualified candidates in these fields. CIOs will need to partner with their human resources organization to find a solution, and that will include leveraging AI.
"CEOs who are making a priority of digital are challenging their Chief Human Resources Officers with creating an appealing digital workplace environment that will attract and retain the best people," Sondergaard said. "The solution for CIOs and their HR partners is AI. About 10 percent of CIOs are now using AI in the recruitment and talent management process. It will help you find people, and it will help you develop your people. It allows you to combine the best capabilities of humans with the best capabilities of machine learning systems."
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