Australian organizations are experiencing digital fatigue

Via Gartner Newsroom

Sep 13, 2016


STAMFORD, Conn., September 12, 2016

Ahead of Gartner Symposium/ITXpo 2016 on the Gold Coast next month, we asked conference chair and research vice president Andy Rowsell-Jones how Australian CIOs are adapting to digital transformation and the new skills required to deliver the greatest value to their enterprises.

Andy Rowsell-Jones, Research VP

1. How are organizations in Australia progressing along the digital business path?

We are now knee-deep in the digital business era, with many enterprises reimagining their business and operating models based on digital capabilities. If you ask CIOs what percentage of their budget they spend on digital, they will universally say it is going to go up.

There was an initial flurry of interest around digital in Australia, however, boards of directors appear to now be distracted by other business priorities. It seems that interest in digital transformation is abating, and if anything, we’re seeing digital fatigue.

Like many industry disruptions, the pundits overestimate the impact in the short-term and underestimate the impact in the long-term. Digital transformation is following that pattern. This is the most dangerous time as there’s temptation for organizations to just ignore it and go back to what they were doing before. The effects of digital are now just beginning to be felt, so they have to stick with it – it’s a multi-year journey.

2. Are Australian organizations innovating in this digital journey?

Most Australian businesses are still in the early experimental phase. The larger businesses in Australia are not necessarily behind, but it’s hard to find those that are leading the pack and doing something completely revolutionary with digital. Australia is very innovative where it has scale in sectors such as health, mining and agriculture, yet in other sectors the markets are small, which makes innovation difficult.

Australia and its economy are big enough that you can work alongside your competitors and still make a living. In that environment, it’s always more rational to improve the service you have than to be disruptive. What digitalization looked like it was going to do was to disrupt that, but now boards are figuring out that it isn’t and that they can control competition here in Australia. If you can do that, then you will innovate in a much slower way, which is fine until someone comes along and steals your market.

3. How is this different from other parts of the world?

All you have to do is look at companies like General Electric (GE) in the US and other larger overseas businesses that see digital as fundamentally transformational. They’ve shifted their business models from focusing on selling product towards becoming information analytics businesses, where cloud-based analytics and productivity enhancing capabilities are creating non-price competition. As a supplier, it’s about seeking non-price competition and differentiating your product and the ecosystems around it. I don’t see a lot of that happening in Australia.

Looking at the Australian retail sector, for example, businesses are experimenting with new digital business models, but they aren’t able to compete with the likes of Amazon and Walmart, which own the majority of the US retail market. Amazon has released innovative tools such as a Wi-Fi connected device (Amazon Dash Button) that reorders your favorite product, as well as a hands-free speaker you control with your voice (Amazon Echo), to give consumers the next level shopping experience. The fact that no one is experimenting like this in Australia will mean that when Amazon finally decides to do it here, it’s going to be a problem.

4. What are CIOs in Australia and New Zealand most concerned about?

Growth and digitalization are the main business priorities for Australian CIOs, with business intelligence and analytics the main technology priority. In a more digitalized organization, CIOs are struggling between two competing pressures: to provide stable, secure, high-performance services and to deliver agile, innovative, technology-intensive services quickly. Bimodal IT provides a way to address both. It involves operating two separate, coherent modes of IT delivery – one focused on stability and the other on agility.

High performing organizations go bimodal because it drives innovation, whereas the lower performing ones say it helps relationships with their business units. The high performers indicate that the only real cost is additional people and there’s a bit of friction within the IT organization, whereas lower performers are worried more about the technical aspects.

In contrast to businesses that do it properly, the reliability of those that don’t will go down and costs will go up in the long-term. To compete in this digital world, it’s better to be first than better, which means you have to be able to do things quickly. The people that aren’t doing this well don’t understand the next stage.

5. What are the most important new skills that CIOs will need to deliver the greatest value to digitally transformed enterprises?

As the IT environment evolves from an IT-centric, industrialized model to a more business-centric, digitalized one, the idea of the CIO being a technical person, or a person with a generic set of skills, is a thing of the past. The old notion that a business strategy drives an IT strategy and the IT strategy enables the business strategy is a virtuous cycle. If you were entirely dependent on the CMO to drive the digital strategy then that is only half the cycle. To complete the circle, the IT organization (especially the CIO) must understand a lot more about the market and the customer experience than they’ve ever done before.

The challenge for CIOs is knowing how to help their people understand the role of IT in the company and build business acumen. This will enable them to combine their technology know-how with a broad understanding of market, industry and customer needs and wants. Then they can apply them in the discovery, design and implementation of digital solutions that create new business value and growth.

There are also some very simple marketing maxims that CIOs can learn from and apply.

*It’s better to be first that it is to be better - if you’re trying to establish a market position or a standard, you have to get to the market first.

*If you can’t be the first in a category then set up a new category you can be - subdivide the market.

*It’s better to be first in mind than first in market. If you look at Dominoes, which sells pizzas, people have the idea that it’s a really high-tech business with its pizza delivery robot and drones, so are more inclined to use their app to order pizza.

Mr. Rowsell-Jones and other Gartner analysts will be examining the latest business and technology trends that will help CIOs and senior IT leaders drive digital to the core of their products, processes and talent in more detail at the upcoming Gartner Symposium/ITXpo 2016 on the Gold Coast, 24-27 October.

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