CEOs are optimistic about the sweeping changes that digital brings. The vast majority — 95 percent — see technological disruption as more of an opportunity than a threat. Many are determined to seize the competitive edge it offers and get on the front foot. Over half of CEOs (54 percent) are actively disrupting the sector in which they operate, rather than waiting to be disrupted by competitors.
To win the digital race, CEOs are taking close personal ownership of driving digital transformation. They recognize the power of data to personalize the customer experience, though only 23 percent claim to be exceeding customer expectations today. They are embracing the likes of AI and the Internet of Things to reshape their businesses. They are taking on — as a personal responsibility — the obligation to protect data and earn the public’s trust. And, as automation and AI reconfigure the workforce, CEOs are planning how to prepare their people for the age of the smart machine.
KPMG’s Goodburn welcomes these developments: “more and more of the CEOs I speak with are telling me, ‘I am personally leading our digital charge’. That says to me, ‘I’m creative, adaptive and agile, and prepared to transform my business to be successful in a digital world’.”
Samuel Tsien, Group CEO of Singapore-headquartered OCBC Bank, has a similar view of how CEOs should approach transformation. “The word ‘disruption’, often used in association with digital technologies, has an antagonistic feel that I’ve never liked,” he says. “Instead, we need to look at it as a transformation that is brought about by the change in our market environment.”
In the digital age, CEOs are prepared to lead their organization through a radical transformation of its operating model. In fact, 71 percent of CEOs say this. American CEOs are most prepared to drive this transformative change, with 91 percent saying that they are prepared to step up to the plate. They are keen to be first-movers, too: 86 percent of CEOs in the US feel their organization is actively disrupting the sector in which they operate. For Susan Story, President and CEO at American Water, the largest publicly traded water and wastewater utility company based in the US, CEOs’ focus on transformation reflects the fact that business and technology are now intertwined. “In the old days, you had business and then you laid technology on top of it,” she explains. “Today, business is technology and everything we do has technology threaded through it. How you most effectively and efficiently do that is what distinguishes companies that are digitally transformed from those companies that aren’t.
Keep up with expectations
As well as acting as champions of change, CEOs are under the spotlight in terms of delivering results on technology investments — and expectations can be challenging. Over half of CEOs (51 percent) say that their board of directors has an unreasonable expectation of returns on digital transformation investments.
Vinod Kumar, Managing Director and Group CEO of Tata Communications, believes that “the largest challenge with getting a return on technology investment is the adoption of it.” He explains, “once you have the technology, your people and processes have to evolve to leverage it. There’s usually a lag effect, so adoption tends to be slower than planned.”
Setting clear expectations will be critical, as CEOs recognize that a degree of patience is required. We found that 65 percent of CEOs say that the lead times to achieve significant progress on transformation can seem overwhelming.
Steven Hill, KPMG’s Global Head of Innovation, believes that leaders need to challenge ROI conventions by fundamentally rethinking how they view digital investments and how returns are measured. “Business leaders need to rethink their innovation equation,” he says. “You can’t look at investments and returns in the way you did in the past. First, you will only get marginal benefits if you just digitize an existing process — leading organizations rethink analogue system workflow at a minimum and the entire business model in many cases.”
Jim Kavanaugh, CEO of World Wide Technology, advises taking a long- term view on technology investing. “You can no longer evaluate technology investments through only a traditional lens. When the goal is market disruption or to create a new business model or level of engagement, understand that the return is more complex and may materialize over time.”
Paul Massara, CEO of UK-based Electron, a company that provides blockchain solutions to the energy sector, agrees that digital innovation is top of mind for today’s business leaders. “Nearly every industry is being disrupted by technology of some sort and the energy industry is no exception — battery storage, AI, electric vehicles and blockchain are just some,” he says. “The challenge for both incumbents and new entrants is how you transition to new models in a highly regulated and political environment. My money would still be on the new entrants but any new models need to be grounded in the reality of the market rules.”
Traci Gusher of KPMG’s Data & Analytics Center of Excellence says a combination of quantitative and qualitative measures are needed to measure the benefits of AI. “It’s a bit short-sighted to focus solely on quantitative metrics. Some of the qualitative measures we’ve looked at are things like general competitive advantage. So, while you may not see a direct benefit of putting investment dollars into AI for your supply chain, you’re going to lose competitive advantage over time if you’re not using it,” she explains.
“Another measure is around attracting high-performing talent. The most attractive talent wants to be part of an innovative culture where cutting-edge approaches and technologies are being implemented.”
The article “Digital gets personal” was taken from the publication entitled Growing Pains: 2018 Global CEO Outlook.
© 2020 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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