Digital strategy key to business growth

At long last, technology leaders are getting what they have wished for: direct, unfettered access to the highest levels of business and with it, the opportunity to influence their company’s strategy. Just over one in three chief information officers now reports directly to the chief executive, according to this year’s Harvey Nash/KPMG CIO Survey. At 34 per cent, that is a higher rate than at any time in the past decade and a 10 per cent increase on 2015.

The survey results signpost a significant change from the days when the technology was relegated to the status of utility, whose remit was to deliver IT services to the business at the lowest possible cost, with little input into major business decisions.

“Data and digital strategies are now very important for every company delivering a service or product,” says Jim Friars, chief executive of the Irish Computer Society. “The entire customer experience is being managed through the IT implementation and architecture that an organisation chooses to pursue. Technology has gone from being utilitarian to a commodity to a strategic asset that, if used correctly, can give significant competitive advantage.”

Two of the biggest agenda items for businesses today are digital strategies that allow them to serve customers more efficiently, and the Internet of Things, which can reveal data-driven insights about customers and their buying patterns.

“These are business critical challenges deserving of the CEO’s focus and prioritisation,” says Paul Toner, partner and head of consulting at KPMG Ireland.

“IT functions need to support the business in leveraging these enabling technologies to drive superior, differentiated customer experience and to further reduce ‘costs to serve’. To give you a sense of relevance and focus, digital strategy is a standard agenda item on all investor roadshows today,” he adds.

As all things digital increase in importance for many businesses, IT budgets are rising to match. Grenke Leasing’s contracts book is growing at 20 per cent a year to an expected €40 million this year, driven by Irish organisations upgrading their systems and embarking on technology projects.

The company has seen increased uptake in its master lease offer which provides a sum which businesses can draw down over the course of a year to invest in projects as needs arise. “Everyone is looking to streamline their own internal processes and procedures to make them more efficient,” says Justin Twiddy, managing director of Grenke Leasing.

The Harvey Nash survey findings also reflect a change in chief information officer priorities, with 63 per cent of respondents saying they focus on IT projects that make money, rather than saving it. Some of the traditional CIO priorities, such as increasing operational efficiencies and delivering stable IT performance, have fallen in importance over the last four years.

“There is no doubt the key driver is making money but critically and in almost every situation, success will be also be measured by cost and efficiency criteria,” Toner says. “By improving the means and options for customers to engage, driving a superior customer experience, you reduce the need for traditional channels and human intervention, resulting in increased efficiency and cost savings.

“Similarly, you have the opportunity to improve automation in back-office operations, further reducing the need for human intervention and resulting in greater savings.”

In the financial services sector, the trends identified in the CIO survey are having even more profound impacts, says David Dalton, a partner at Deloitte’s strategy and operations consulting practice. “I think it’s going to be much more like a technology-enabled utility than the service-provider model that they have today,” he says.

New nimble players in the fintech space are emerging to challenge traditional financial services firms, so the providers are having to adapt by scaling up their investment in technology. “The importance of technology being at the heart of their strategy and the way their business is run becomes much more critical,” Dalton says.

In the newer type of company, the traditional ratio of technology to business staff is being flipped on its head. Dalton gives the example of the online financial adviser Wealthfront which began with three highly experienced investment executives and 10 technical staff.

“When you get that balance, the business knowledge becomes subject matter expertise to be drawn upon to build the technology solution. That’s a big shift for these big organisations like custodians today.”

He gives the example of the asset-servicing industry which is facing potentially significant change from technologies like robotic process automation and blockchain. The regulatory environment has shaped this sector in the past but Dalton says technology needs to become at least as important a focus in the years ahead.

“Achieving that mindset requires changing the profile of your senior management team to include more technology-aware, technology-focused senior executives. That’s the fundamental kind of change you need to make.”

If these trends continue, next year’s CIO survey should make for interesting reading.