Digital transformation and the C-suite

September 2017  |  COVER STORY  |  BOARDROOM INTELLIGENCE

Financier Worldwide Magazine

September 2017 Issue

Digital transformation has taken off over the last few years, with companies awakening to the myriad opportunities it can offer.

Digital transformation involves the realignment of existing technology, or investment in new technology, business models and processes, to drive value for customers and employees. It allows companies to react to, and compete in, an ever-changing and increasingly cut-throat digital economy. Furthermore, companies can use it to target new growth markets, achieve new standards in regulatory compliance and meet the evolving needs and behaviours of their customer base.

Digital transformation can play a key role in an organisation’s development. According to a survey from Progress Software, 96 percent of companies see digital transformation as important or critical to the development of their business. Furthermore, 86 percent say they have two years to embark on the journey to digital transformation before suffering financial or competitive consequences. Given the threat of losses or an emerging corporate disadvantage, many organisations are beginning to develop transformation plans.

But merely paying lip service to digital transformation is not the answer. According to Avado, companies, and the C-suite in particular, often hold back on buying in to the process and fully embracing digital transformation. For example, educational tools, such as digital training, may only be delivered to a small percentage of the workforce, typically the sales and marketing departments. In this digital age, under-investment is not sustainable; digital transformation must be rolled out company wide.

Transformation ownership

Companies undergoing digital transformation need to map out the path. Responsibility for driving digital transformation across the enterprise lies with the C-suite. The chief information officer (CIO), chief marketing officer (CMO), chief human resources officer (CHRO) and chief operations officer (COO), among others, must work together to make the transformation happen. However, this can be difficult to achieve. Certain members of the C-suite may not buy in to digital transformation if they are not proficient with technology, for example. “Research tells us that there is a major disconnect, largely a language disconnect, between IT decision makers and the people that work in digital security, and the C-suite,” says Mike Gillespie, managing director of Advent IM. “The idea of submitting cyber security reports to the boardroom is to reduce risk. If risk is not reduced then it is an exercise in futility and the purpose of the exercise has been to produce a report rather than actionable insight that boardroom strategists will definitely go ahead and act upon. Plenty of information is sent to the C-suite but the C-suite does not see it as actionable and so they ask, ‘Why are you even bothering with this if you are not asking for a decision?’ Meanwhile, because of a lack of decision, the IT decisionmakers are frustrated because they feel like the C-suite is not interested or engaged. So there is a major disconnect because the people that are involved in digital transformation are not speaking business language and quite often they are not able to articulate, in true business language, the benefits of digital transformation. They are not starting with business objectives, they are not starting with corporate objectives, mission statements, core values or the headline targets of the organisation. Instead, they are starting with ‘visual transformation is a great idea’ – and are then expecting business to change to adopt digital transformation. So, as a business leader, why would you immediately embrace that?”

Overcoming this disconnect can be a difficult process. It requires different departments within an organisation to get on the same page. Furthermore, it requires companies considering digital transformation as an issue for the entire company, rather than just for IT. To undergo a truly successful transformation, companies must be able to remove the internal silos which hinder cooperation.

The C-suite must also ensure that the right people are tasked with implementing digital transformation. Employees from across their organisation should be engaged. However, a common mistake is to rely too heavily on the IT department. According to a 2016 Quickbase survey, central or corporate IT is responsible for providing 47 percent of the key decision makers for digital transformation. Thirty percent come from central or corporate operations and 21 percent from business unit IT.

 “This is a challenge we have had for 20 years,” says Mr Gillespie. “Over the years cyber or IT security has gone through multiple names: information security, IT security, cyber security, digital security. The problem is, in every case, the focus has been on ‘How can the IT guys make this better?’ But actually, much of the way we manage our information assets is through our people, not through our IT. This is the same with digital transformation; digital transformation is only a success if the technology is adopted, used and exploited as effectively and efficiently as possible.”

Impact of technology

While digital transformation must be directed and driven by people and strategies, the technology itself does have a key role to play. Technological innovations such as mobile communications, social media, cloud computing, Big Data and unified communications have emerged as key tools for digital transformation. The continued evolution of technology solutions, and their disruptive capabilities, will exert considerable influence over the style and speed of digital transformation, going forward. “Technology change and the resulting pace of digital disruption will only increase over the coming years and decades,” suggests Greg Verdino, a digital marketing and digital transformation keynote speaker. “In short, we are just getting started, and most enterprises are merely at step one of their own digital journey. As exponential technologies like artificial intelligence, machine learning, workforce automation, augmented reality, and so on go mainstream, companies will be forced to reimagine and reinvent themselves faster than ever before or risk extinction.”

It is the role of the C-suite to manage this process if organisations are to truly benefit from digital transformation. The wider process allows companies to increase revenue, reduce costs, improve customer satisfaction and enhance differentiation in an increasingly crowded and competitive marketplace. As a result, companies are investing heavily in new technologies. However, reimagining an organisation cannot be completed without a clear digital strategy.

Top-down approach

For digital transformation to be effective, companies must undergo organisational change, and this process must be led from the top. They will need to develop new skills, as well as undergo a substantial cultural shift to adapt to a digital mindset, while preserving whatever made them successful in the first place. This cultural shift must be overseen by the C-suite, argues Michael Bruemmer, vice president of Experian Data Breach Resolution. “The C-suite is critical to the success of a company’s digital transformation. As the leaders of their organisations, they are uniquely positioned to set forth the strategic vision for embracing new technologies, streamlining operations, improving customer experiences, implementing organisational changes and developing new internal skill sets,” he says.

One particular area of focus for the C-suite among digital transformation should be cyber security. “As companies move toward interconnected technologies and embrace this new era of automation, we may see a coinciding era of increasingly sophisticated social engineering attacks. It is vital that companies have strong security programmes in place, including up-to-date data breach response plans and extensive data protection and privacy training (DPPT) programmes for employees. A culture of cyber security must span top to bottom, with C-suite members leading the charge,” adds Mr Bruemmer.

Although a figurehead may take ultimate ownership of the digital transformation process, the whole board needs to be actively invested – and well informed. “These are board level, executive people who need to be able to understand what it is they are being asked to do,” says Mr Gillespie. “Most importantly though, they also need to have total clarity of the risks and benefits of doing this transformation. To do that, companies have got to align the transformation they are trying to go through with their corporate objectives. Ultimately, you would expect the CEO as the ‘grand fromage’ to be totally supportive, and spearheading all corporate initiatives.”

For Mr Bruemmer, responsibility for spearheading digital transformation is more nuanced than pointing to a single executive, like the CEO, to drive the entire operation. “Ultimately, digital transformation will be most successful if driven by a collaborative effort among C-suite executives, including, but not limited to, the CEO and leaders in critical security and technology roles like the CIO, CDO, CTO, CSO and CISO. For instance, a CEO must be on board with a company’s overall vision and effort to embrace industry shifts such as digital transformation, while the technology executives can ensure systems are secure, that unique and sensitive company data is accounted for, and that new policies and practices are being communicated to internal IT teams. Each executive has a unique perspective and speciality, so should play a hand in major company transformations to ensure integration and overall success.”

The experience and knowledge carried by individual members of the C-suite will make them integral to the project. The role of the CDO, for example, will be pivotal in helping to determine exactly how new technologies are deployed and the speed at which they are rolled out. Furthermore, given the increasing sophistication and tenacity of cyber criminals, the input of different C-suite executives will be crucial for helping companies to align their cyber security provisions with their wider digital strategy. “From a cyber security perspective, the CDO will need to closely partner with the CSO to ensure all systems are properly protected against cyber threats and that sensitive company data is accounted for,” explains Mr Bruemmer. “Along with the growing number of interconnected technologies, we have seen a growing number of security risks that many companies have failed to address. Ransomware – which less than half of companies are taking steps to prepare for – is just one example of how increased dependence on digital networks and platforms is opening new doors and opportunities for cyber criminals.”

According to PwC, the importance of the CDO will continue to grow. Its data suggests that European companies are considerably more likely to have CDO positions than other regions. This imbalance may be the result of different cultures towards digital transformation, as many American companies may feel that they already have this in hand, with experienced executives that lead technological change. But for some companies, the role of the CDO may be transitional. “CDOs, in my view, are a temporary solution to a permanent reality,” says Mr Verdino. “While a strong CDO can serve as a catalyst for digital transformation, and play an important role in increasing an organisation’s digital DNA, over the long term, ownership and accountability for digital must top the CEO’s personal agenda and digital must be part of everyone’s job rather than one person’s job. Digital is not a department, like marketing or finance or operations or manufacturing. Digital is the business and digital thinking must be infused into every area of the business.”

Marketing and digital transformation

With digital permeating all areas of business, departments and executives that might not normally be associated with digital transformation are becoming increasingly important to the process. According to a survey by Altimer Group, many companies believe that the CMO should largely guide companies through digital transformation, as they are the executives responsible for owning the customer experience, and thus becoming fully accountable for revenue growth.

Equally, the relationship between the CMO and the CIO is crucial, as these two positions are inching inexorably closer. Digital activities such as product experience, customer journey analysis and analytics fall somewhere in between the remits of the CMO and the CIO and, as such, collaboration between these two executives must drive digital.

To facilitate this transformation, CMOs must develop a better understanding of social and digital technology to keep pace with their customers and ecosystems. They must also foster strong partnerships with innovative and service-oriented CIOs to achieve a people-oriented digital transformation with clear goals and the involvement of all stakeholders. “The CMO has the opportunity to be a key driver of digital transformation on two fronts,” Mr Verdino explains. “Firstly, as a champion for customer experience. Many organisations consider customer experience to be a key focus for digital transformation, as even traditional companies aim to deliver a digital experience that is every bit as good as the best experience their customers have with digital native startups like Uber, AirBnB, Spotify or Amazon. Second, according to Gartner research, in 2017 CMOs are spending more on technology than their CIO peers. While technology itself should never be the main driver of a transformation – technology is just the toolkit for executing against a strategic transformation agenda – you cannot discount the fact that marketers are now technology-enabled, data-driven change agents in many organisations.”

CMOs, much like the rest of the C-suite, must ensure that digital transformation is not siloed. Progressive business leaders need to look beyond the usual suspects and tap talent outside the IT department. Transparency in all departments will be crucial as digital transformation becomes more prominent. Collaboration and cooperation fosters a greater understanding of business goals and helps to navigate headwinds. Digital transformation requires internal alignment and adequate communication, and the entire C-suite must be heading in the same direction.

© Financier Worldwide

BY

Richard Summerfield