“In the most basic sense, people have been the missing variable in the digital transformation equation.”
Companies that don’t consider the human element could be damaging their own digital IQ.
A recent survey of 2,216 executives by global professional services provider PricewaterhouseCoopers said that just over 50% of company decision makers rate their commitment to digital transformation as strong. According to PwC’s 2017 Digital IQ report [PDF], confidence in digital abilities has dropped in the last two years, irrespective of the amount of company investment in innovative tech.
Over the last 10 years, digital IQ—defined by PwC as “the measurement of an organization’s abilities to harness and profit from technology”—has become an indicator of success. Companies have needed to reassess how they interact with customers by providing digital initiatives that deliver value and delight. The problem, the report said, is that companies have not taken the human experience into account.
In PwC’s 2015 survey, 67% of people said that their company’s digital IQ was strong. A year earlier, that figure was 66%. Simple logic would suggest that this figure would grow as digital investments increase but PwC said that the confidence rate among executives was at 52% in 2016.
One reason for this could be that companies are putting revenue growth above customer experiences, the report said. Around 57% of people said that revenue was the prime reason for investment in digital technology, a year-on-year increase of 12%. Only 10% of executives said that digital investment was intended to create better customer experiences—a drop of 15% from the previous year.
“In the most basic sense, people have been the missing variable in the digital transformation equation,” the report said. “Instead of the prior decade’s obsession with business-IT alignment, enterprises must now pursue a more balanced approach to digital transformation that’s equal parts business, experience, and technology.”
Digital Transformation Is Not Easily Defined
A major roadblock for decision makers is the fact that the definition of digital varies from company to company.
A full 32% of people said that digital related to “all technology innovation-related activities,” with 29% responding that digital was synonymous with IT. Digital is a customer-facing technology activity according to 14% of people. A similar number said “digital refers to all the investments we are making to integrate technology into all parts of our business.” A mere 5% of executives said that digital referred to data and analytics activities.
Digital IQ cannot be measured on a static scale but should be tracked against organizational preparedness, PwC said. A recent report by IDC said that digital transformation was a strategic business imperative, with worldwide investment in digital experience initiatives predicted to hit $2.2 trillion in 2019.
That level of investment puts added pressure on companies that are still struggling to come to terms with all of the digital tools available. The Internet of Things, artificial intelligence and even virtual or augmented reality are already supplementing foundational technology such as cloud, mobile and big data. Despite the availability of these digital tools, investment remains low—in 2017, the average investment in emerging tech was expected to be 18% of tech budgets, PwC said.
Increased awareness has not been mirrored by wholescale adoption.
Around 43% of people said that their company had a dedicated team for digital innovation, with the job of digital leadership falling to the CIO—43% of people said that they expected the CIO to be responsible for digital innovation. Commenting on the findings of the report PwC said:
A decade of digital IQ has seen increased awareness of the business value of new technology adoption, but companies have not adapted quickly enough to stay ahead of constant change. In some ways, they have regressed, as many organizations still take a passive approach to seeking out innovation: in 2007, they most often turned to technology vendors and consulting firms to explore how to apply emerging technology to their business. Today, despite a profusion of resources (for example, incubators/startups, crowdsourcing, makers, open source, university labs), most still rely on old-school voices like industry analysts, competitive intelligence, and vendors.
Despite an apparent regression over the last decade, the report said that companies were confident in their current level of digital investment.
Two-thirds of decision makers said that they were following a multiyear roadmap that covered business and IT processes. Almost the same number said they measure outcomes from innovation efforts. A full 80% said identifying opportunities to “digitize our enterprise” was critical to the future success of the company.
Around 70% of people said that their company focused on the way that new technology affected human experiences—both customers and employees—although PwC noted that this was more related to false confidence as opposed to actual digital transformation.
Human Element Drives Digital Success
Digital transformation was ultimately hampered by a number of familiar issues. Decision makers cited a lack of skilled teams, integration with existing tech or data, inflexible or slow processes and outdated technologies as reasons why their organizations were not getting the expected results from digital initiatives. In addition, so-called “disruptive” technology such as the Internet of Things, AI and robotics were all expected to have a potentially negative effect on business practices within the next five years, the report said.
So what is the answer to the digital transformation problems that companies seem to face?
According to PwC, the human element is the way forward. Companies have to invest in not only creating better human experiences but also make sure that every level of the organization knows what the digital roadmap is. Decision makers need to ensure that existing and emerging technology is leveraged in such a way that the digital transformation is seamless and scalable. At the same time, companies that pay attention to people will reap the benefits in both the short and long term.
“How, then, can company leaders be expected to consistently unlock value from digital investments in a rapidly advancing world? The answer is at once simple and infinitely complex: Focus on the human experience,” the report said. “That entails rethinking how you define and deliver digital initiatives, considering employee and customer interactions at every step of the way, investing in creating a culture of technology innovation and adoption, and much more.”