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How are disruptive digital technologies impacting companies? What role should CIOs play in responding to these issues and opportunities?
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Digital disruption–
dive in to thrive
Highlights of H1 2014 CIO Center of
Excellence Survey
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 2
Summary – Key findings
Majority of companies are concerned about digital disruption (i.e., competitive threats from
digitization) but few are prepared to address it
Just 36 percent of clients profiled have a digital business strategy
■ only eight percent have one that is enterprise-wide
For companies that have a digital business strategy, the CEO and CIO are typically involved, but
neither usually leads the effort
Challenges in responding to digital disruption include:
■ lack of vision
■ limitations of IT systems
■ lack of critical skills
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 3
The Research
Global, 21%
North America, 37%
South America, 5%
Europe, 40%
Middle East, Africa, 2%
Asia Pac, 13%
KPMG is pleased to release the findings from its KPMG 2H14
CIO Advisory Global Centre of Excellence Pulse survey. The
Pulse surveys provide insights into trends and projections in
end-user organizations’ use and management of information
technology. The learnings are gleaned globally from KPMG
International (KPMGI) member firms’ (KPMG firms’) advisors,
who work closely with end-user organizations that are actively
employing IT to impact business outcomes.
In October 2014 we surveyed KPMG IT Management
Consultants with regards to the impact that Digital
Disruption was having on their clients.
■ We collected responses from 118 consultants from
30 different countries.
■ 85 percent of respondents were Partner/Director
level.
Source: KPMG Global CIO Advisory Pulse Survey 2014
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 4
Section 1:
CIO Trends
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 5
Digital disruption – a cause for concern for most organizations
44
16
10
9
7
7
Improve operational efficiency and reducecosts
Develop flexible but resilient IT architecture
Leverage cloud technology
Simplify IT
Re-engineer the sourcing strategy
Invest in and improve cybersecurity
What are the top CIO information technology priorities for 2014?
28
22
16
13
11
11
Reduce business operating costs
Automate core business processes
Increase enterprise growth
Attract and retain new customers
Leverage Big Data and analytics
Create new products and services(innovation)
What are the top CIO business priorities for 2014?
■ Improving operational efficiency and reduce costs remains CIOs top technology priority.
– Other priorities will contribute to lower costs, for example, cloud technology can reduce overall infrastructure costs and
simplify IT to reduce operational costs.
■ The number two priority focusing on resilience and flexibility reflects the growing demand for “always on” systems as an
increasing number of business transactions and customer engagement moves to an online venue.
■ Clearly, CIOs have cost on their minds as their top business priority is also cost focused as they work to leverage
technology investments to reduce business operating costs.
Bottom Line:
We expect that for most organizations cost cutting will reach a point of diminishing returns. Increasingly the business
requires IT to support growth which may actually require spending more on IT and not less.
Source: KPMG Global CIO Advisory Pulse Survey 2014
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 6
Section 2:
Awareness and
Readiness
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 7
Digital disruption – a cause for concern for most organizations
The majority, 58 percent, of respondents are concerned or very concerned about digital
disruption.
6% 25% 33% 24% 13%Digital disruption concern
How concerned is your client about digital disruption?
Extremely concerned Very concerned Concerned Somewhat concerned Not concerned
Digital disruption may
threaten current
businesses – but it also
creates opportunities
and must be addressed
with some action:
■ Understanding the impact that digital disruption will have on an
organization’s products, services, and business model is the first step.
■ Developing a digital business strategy, acquiring the necessary digital
skills, and getting the organization to buy into the required changes
represent the next steps.
Source: KPMG Global CIO Advisory Pulse Survey 2014
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 8
Most companies do not have a digital business strategy
Yes, enterprise-wide, 8%
Yes, in one or more business units, 28%
No, but currently working on one, 26%
No, but thinking about one, 29%
No, and no plans at this time for one, 8%
36 percent of companies have a digital business
strategy for one or more business units
Designing the strategy involves:
Result is enterprise-wide digital technology
roadmap with sub-strategies for different needs of:
■ only 8 percent have one that is enterprise-wide
1. defining what digital disruption means to the
organization at all levels
2. enumerating its threats and opportunities
3. identifying ways to meet implementation
challenges and requirements
■ business units, geographies and functions
■ different classes of employees, customers and
business partners
Source: KPMG Global CIO Advisory Pulse Survey 2014
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 9
CEOs and CIOs involved but not leading the effort
For companies that have a digital business strategy, most CIOs (58 percent) and almost half of the CEOs (43
percent) are involved or very involved
Given the huge impact of digital disruption and the organizational change required for transformation, strong
executive leadership is critical for success.
Bottom Line:
Merely supporting the effort is not enough … involvement is paramount to success
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 10
Skills and technologies top the list of challenges
Bottom Line:
CIOs need a clear view of what digital disruption is, when it will impact their business, and how to leverage disruptive technologies
■ Responding to digital disruption
involves mastering and implementing
new technologies that require new
skills
– 65 percent of respondents cited a
lack of critical skills as the
number one challenge
■ Limitations of existing IT systems
(cited by 64 percent) impede the
ability to quickly develop and
implement IT solutions and integrate
them with existing systems
■ Cultural resistance (56 percent)
needs to be overcome for
businesses to learn new behaviors
and master new technologies
■ No easy or quick solutions – but
without a clear vision (55 percent),
tackling the other challenges is
impossible
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 11
Cloud, social media, mobile apps and big data lead in
deployment
0%
1%
5%
6%
9%
18%
23%
13%
33%
40%
36%
33%
9%
4%
20%
25%
14%
16%
35%
30%
36%
13%
26%
21%
32%
42%
6%
15%
32%
21%
Enterprise app stores
Internet of Things (IoT)
Big data/analytics
Mobile apps
Social media
Cloud based services
To what degree is your client deploying the following digital technologies to transform the business?
Using broadly Using some Piloting Exploring Not using
Bottom Line:
As mobile technologies proliferate, enterprise app stores will probably grow more popular
■ Cloud based services are the clear leader at 51 percent, followed by mobile apps (46 percent), social media (45
percent), and big data/analytics (38 percent)
■ Surprisingly, 32 percent are not using social media
■ More deployment is expected as digital technologies mature, especially social media and big data
Source: KPMG Global CIO Advisory Pulse Survey 2014
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 12
Agile development processes are now widely used
3%
16%
28%
23%
15%16%
On all projects On more than 50%of all projects
On at least 25% ofprojects
On a few projects Don't use agile Don't know
To what degree is your client organization using agile development processes?
Bottom Line:
With increasing pressures on IT to deliver faster, cheaper, better, usage of agile processes will continue to grow rapidly
■ Today’s digital world requires
agility – the ability to adapt
and respond quickly to
internal and external events
■ Traditional plan, build, run IT
operating model is too slow,
costs too much and often
misfires
■ Agile methodologies are
gaining traction – adopting
them can go a long way in
reducing development cycles
– Almost 70 percent of
respondents now use agile
development processes
– 16 percent use them on
over half of their projects
and 3 percent on all projects
Source: KPMG Global CIO Advisory Pulse Survey 2014
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 13
Section 3:
Organization and
Impact
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 14
IT organizations need to upgrade their capabilities
Bottom Line:
With fierce competition in the labor market, organizations need to be smart about how they internally develop and externally
acquire the skills they need
■ Responding to digital
disruption requires new skills
and capabilities
■ IT organizations with strong
capabilities in the 8 areas
above are more likely to
execute their digital strategies
successfully
■ Organizations have room to
improve their capabilities
across the board
– IT governance (23 percent)
and sourcing and vendor
management (20 percent)
are the two highest rated
capabilities, but there still
remains great opportunity to
improve.
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 15
CIO/CMO relationship is key to digital success
Non-existant Weak Average Good Great N/A/Don't know
How would you characterize the CIO/CMO (or most senior marketing executive) relationship in your client
organizations?
5% 19%29% 24%6%15%
56% 19% 7% 4% 13%
Do you believe that the quality of the CIO/CMO relationship is important to the success of digital transformation?
NoYes, direct Yes
moderate
Yes
minor
Don’t
know
Bottom Line:
As digital initiatives are increasingly driven by marketing functions, collaboration between the CIO and CMO takes on increasing
importance to ensure IT investments align with overall enterprise goals and objectives.
■ A good relationship between
the CIO and CMO is important
to successful digital
transformations
– Over half (55 percent)
agreed that the quality of
the CIO/CMO relationship
had a direct impact
■ Few organizations believe that
there is a high quality
relationship between their CIO
and CMO
– 21 percent said that the
relationship was good or
great
– 34 percent said that it was
weak or non-existent
Source: KPMG Global CIO Advisory Pulse Survey 2014
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 16
Section 4:
Recommendations
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 17
Dealing with digital disruption – Recommendations for CIOs
The strategy should be enterprise-wide, with sub-strategies that account for varying
needs across business units, geographies, functional areas and for different classes
of employees, customers and business partners
Educate other C level executives and the board about digital disruption, current and
emerging disruptive technologies, and the opportunities available
Articulate what digital disruption means to the organization at all levels and detail its
threats, opportunities, challenges and requirements
Put a C level executive – such as a chief digital officer (CDO) or someone functioning in that
role – in charge of defining and executing this strategy
Create a digital
business strategy
01
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 18
Dealing with digital disruption – Recommendations for CIOs
Foster strong relations with the CMO and chief digital officer (if the role exists)
Identify specific areas for improvement in the IT function— such as IT systems
limitations and skills gaps — and define programs to remediate and address
Prioritize the most important IT digital initiative capabilities to improve —such as IT
governance — and define programs to remediate and address
Take an active
role in defining
and driving the
implementation of
this digital
business strategy
02
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. 19
Dealing with digital disruption – Recommendations for CIOs
Develop a
mechanism to
incent collaboration
between IT and the
business for
developing digital
initiatives
03 Create a dedicated incubator or lab type environment where new technologies and
ideas can be quickly developed tested
Maintain a separate R&D budget to support innovating digital initiatives
Ensure you have a process in place to share digital best practices across the organization
© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms
of the KPMG network of independent firms are affiliated with KPMG International. KPMG
International provides no client services.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of
KPMG International.
The information contained herein is of a general nature and is not intended to address the
circumstances of any particular individual or entity. Although we endeavour to provide accurate and
timely information, there can be no guarantee that such information is accurate as of the date it is
received or that it will continue to be accurate in the future. No one should act on such information
without appropriate professional advice after a thorough examination of the particular situation.
kpmg.com/socialmedia kpmg.com/app
Matt BishopPrincipal, KPMG LLP
Global CIO Advisory Leader
T: 1-214-840-2749
E: mbishop@kpmg.com
Marc Snyder
Advisory Managing Director
CIO Advisory, KPMG LLP
T: 1-978-807-0522
E: msnyder@kpmg.com
Visit kpmg.com/thrivingamiddisruption to learn
more about how CIOs need to respond to
disruption.
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