IT-related product improvements and technology are the biggest-rising priorities for CEOs in 2017, with the majority (65 percent) saying they plan to increase IT spending this year, according to a Gartner survey of 388 CEOs.
Gartner calls this focus on IT-related priorities a “digital business strategy,” and says CEOs’ understanding of the benefits of a digital business strategy is improving. “Although a significant number of CEOs still mention e-commerce or digital marketing, more of them align it to advanced business ideas, such as digital product and service innovation, the Internet of Things, or digital platforms and ecosystems,” said Mark Raskino, vice president and Gartner Fellow, in a statement.
While IT-related changes are the no. 2 business priority for CEOs, growth ranks at the top of the list for 58 percent of CEOs.
“IT-related priorities, cited by 31 percent of CEOs, have never been this high in the history of the CEO survey,” Raskino, said, adding that almost twice as many CEOs (57 percent) are focused on building up in-house technology and digital capabilities as those that plan on outsourcing it (29 percent).
“We refer to this trend as the reinternalization of IT — bringing information technology capability back toward the core of the enterprise because of its renewed importance to competitive advantage,” Raskino said.“This is the building up of new-era technology skills and capabilities.”
Although more CEOs have digital ambitions, nearly half have no digital transformation success metric. Of the CEOs that do quantify progress, revenue is a top metric with 33 percent of CEOs defining and measuring their digital revenue.
This is where CIOs can help drive digital business success, Raskino said. CIOs should help CEOs by defining these business goals so they can be quantified and scaled up. “You should also ask yourself: What is ‘digital’ for us? What kind of growth do we seek? What’s the No. 1 metric and which KPIs must change?”
In an email exchange, Raskino said the survey suggests the relationship between CEOs and CIOs is healthy.
“Sixty-five percent of CEOs told us they intended to increase IT investment in 2017, while only 4 percent said they would cut it,” he wrote.“The real challenge for CEOs is organizing business leaders and managers to apply technology more aggressively and creatively for growth. That’s probably why a third of respondents told us they also have a digital officer. We think those CDOs are employed to help create the needed business strategy, purpose, and change management. For example half of CEOs could not give us a success metric for digital transformation and 38 percent have done only minor revision or no revision to management KPIs.”
Digital Business Transformation
The survey found 47 percent of CEOs are being challenged by the board of directors to make progress in digital business, and 56 percent said that their digital improvements have already increased profits.
CEOs have also progressed in their digital business endeavors with 20 percent now taking a “digital-first” approach to business change. Examples of this include creating the first version of a new business process or a mobile app.
Additionally, 22 percent are “taking digital to the core of their enterprise models” with digital capabilities supporting their product, service and business models.
The Gartner survey echoes an Enterprise Strategy Group study published earlier this month that found the vast majority — 95 percent of the 1,000 surveyed — of large companies aren’t fully embracing next-generation data center technologies that enable digital business.
Seventy-one percent, however, agreed that digital transformation is essential to ongoing business competitiveness.
So what’s the CIO’s biggest challenge in transforming the organization to a digital business? It’s three-part, according to a Gartner blog: culture, people, and technical debt.
“To get the money you need for tomorrow you have to make changes in how IT operates today,” said Gartner research VP Donna Fitzgerald. “The digital transition for IT requires giving up a service mentality and instead adopting an investment mindset. Supporting the legacy systems of the past can’t be allowed to consume all of the money necessary to thrive in the future.”