When surveyed, seven out of 10 boards of directors say they intend to accelerate their digital initiatives, but in what areas should organizations accelerate?
Gartner Distinguished VP Analyst and Chief of Research Chris Howard sits down with Kristin Moyer, Gartner Distinguished VP Analyst, for an in-depth conversation on digital acceleration — what it means to organizations, how executives can speed up the pace of digital and why success requires a clear sense of direction.
For the full conversation, watch the video below or read the transcript that follows, which has been edited for clarity and length.
Digital business is not technology
Before we dig in, it would be useful for us to talk about what digital business is. It’s certainly a term that we’ve been using here at Gartner for some time. How do you think about digital business, Kristen?
It’s not technology. Digital business is about using technology to create new products, to create new business models, new operating models. And we distinguish between optimization and transformation. Optimization is where you’re using technology to improve customer engagement or sell more of your existing product. It’s about doing old things in new ways.
Transformation is different. It’s about doing new things in new ways. It’s about using digital to change the game in your industry and create new digital products and new business models. And I find that with just about every client that I work with, it’s a good thing to level-set on what it is, because just when you think everybody’s on the same page, you find out that they’re not.
Instead of a cost, digital is considered a tool to move forward
It is. And speaking of being thrust onto the same page, it’s very much the dynamic of the crisis that we’ve been through and why this topic has sort of come to the foreground of that. I like to say that the future has been brought forward and many of the things that we were working on before all of a sudden started to move faster.
It’s different from a typical recession. It’s different in lots of different ways. First of all, it’s a legislated recession, so that dynamic is completely different. It’s not like the financial system fell apart, but it did make us have to scramble to figure out how to keep the business going in some cases and respond to the situation that was surrounding us.
In a typical recession, executives are very much focused on cost-cutting, for example. And there’s been some of that, certainly cost avoidance in order to trim those things that we could, but we’ve seen in the data a shift actually away from that recently toward more aggressive types of actions.
69% of board directors are now saying that they want digital
What we’re seeing is that 69% of board directors are now saying that they want digital business. Instead of a typical cost-cutting-type reaction, the reaction this time is different. In some ways it’s our first digital recession, where digital is a tool that can help us move forward. And so it’s really out with the old and in with the new.
Some of the IT spend data that we’re seeing is also showing that this recession is very different. In most recessions, what you see as you see a dip in IT spending, then followed by an increase in IT spending. And right now there’s a divergence, where you see spending for things like RPA up by 13% and infrastructure as a service up 14%, but then things like inkjet printers are down 24% and on-premises communications down 27%.
One of the other pieces of data from that board of directors survey talks about their intention to invest more generally in information and technology. And the way that I read that data is not just for central IT, but across wherever IT solutions are developed within the organization, what I call the IT diaspora, in that you have a lot of very skilled technical people delivering solutions that sit in line of business or closer to the customer and so on. And the intention is to fund that.
Now it’s a shift of funding, so some parts of the organization, like marketing, are experiencing a decrease in funding for maybe obvious reasons, but it’s a signal that at the top level, at the corporate director level, the belief is that investment in technology is actually a way to scale out of this situation that we’re in.
What I find interesting about the situation is that the corporate directors that we’re surveying and talking to are reporting the status of what’s actually happening. And 70% are telling us that things are moving faster, so that’s really optimistic and it’s a vote of confidence for those who have been working really hard to deliver solutions to keep the business running over the last seven months. So it’s an interesting time, a positive time. And I don’t want to miss the fact that it’s fairly optimistic.
The thing is that now the board of directors is ready to go, but that doesn’t just magically mean that all of a sudden, “Oh, great, we’ll just accelerate. Sure, we haven’t been trying to do that for the last five years at all.“ I think it’s really a time where leadership matters more than ever. And there are things that IT leaders, CIOs and executive leaders can be doing right now to make most of the situation. Get rid of things that are in the way that slow things down.
We’ve seen a lot of process automation. Automation in manufacturing settings has reduced the need to have 10 people in a tight, small area to one. Decisions are a big part of what slowed us down pre-COVID. And I recommend always trying to reduce the scope of decisions. Sometimes what you’re trying to make a decision on is just too big and it could be broken down into smaller pieces.
A need for digital business speed
We had to get rid of a lot of the ritual in our decision making and remove bureaucratic gates and stop points. Actually, people had to work together really quickly and ended up breaking things that needed to be broken perhaps before, so that you could move more quickly. So if it’s a physical environment we’re talking about, real physics, you would reduce drag and friction and inertia, at least the inertia that keeps you still in order to move more quickly. What are some other things that organizations can do to increase their acceleration even more?
So there’s drags and then the opposite of that is force multipliers, like doing things purposefully. If you’re a B2B company, put a prominent “here’s how to buy from us” on your website. And go as close as possible to one-click purchasing. Another tactic is about redirecting resources and that can be financial, it can be people. You could shift the travel and expense money that isn’t being spent now into the cloud. We’re seeing a big shift in spending, a big acceleration toward the cloud.
Sometimes going slow helps you actually go faster
If you have complex sourcing arrangements, can you move some of that to gig workers? And then most importantly of all, it’s a time to pause and rethink how you’re winning in the marketplace. There’s new demand. There’s all kinds of new opportunities that are emerging in this different kind of world that we’re living in. And sometimes going slow helps you actually go faster. So one way to do that would be creative video about what’s happening digitally in your industry on a worldwide basis.
Talent and cultures role in digital business acceleration
The other thing in the conversations that I’m having with executives and really over the last six months, the conversation often starts as a human conversation. This is a first, a human catastrophe that we’re in the middle of, and that causes a psychological ripple effect through everything that we do. And even though we’re talking about digital business acceleration, what this really is, it’s a story of human resilience.
So it is people in their determination to survive. And that actually gets transposed into business context, into government context and so on. And it takes me back to my undergrad psychology days. We go through time with a set of heuristics that works for processing the world that we experience. And that’s fine until the context is completely broken, which of course is what we’ve experienced.
Now is a time to hack for emotions, culture hacks for pride, for belonging, for agency
And at that time, what the brain does is it searches for new patterns. It searches for the things that are going to work next. It’s a very experimental, very innovative time and so on. And we do that as a species to survive. But it’s fascinating that businesses do this, too. And so all the things you’ve talked through in terms of reducing drag and reallocating resources, adding accelerants and fuel into this seizing value, all of these things are true survival mechanisms. And the thing that of course makes this easier now is the state of technology.
So even though digital business isn’t really about technology at its essence, it couldn’t exist without it. So the things that we’ve been able to do, for example, to get people working remotely really effectively — think if this had happened 20 years ago, we wouldn’t be able to have these kinds of conversations. There wasn’t enough bandwidth, we didn’t have the right kind of dial-up for all of this. And so there’s this shift that I’m sensing, which is human to enterprise to society actually.
Yeah. I think when we think about acceleration, a couple of the bigger barriers that CIOs have been dealing with over the last bunch of years are talent and culture. And because of all the things you just mentioned, we’re in a different situation with those two areas. They’re still very important things to pay attention to, but from a culture standpoint, people’s lives have been turned upside down in so many different ways. And we’ve all had to make big changes in our personal lives. We’re primed for change. And we want our companies to succeed and thrive and do well.
We’ve done some new research around culture hacking where now is a time to hack for emotions, culture hacks for pride, for belonging, for agency. We’re ready for change. We’re having to change all the time right now. Then from a talent perspective, it’s a great time to take talent in your organization that maybe isn’t as busy as they usually are and retrain them to areas that have been in high demand, like data science.
Determine where digital business initiatives fit within business goals
Ultimately this results in more work to be done and the need for some kind of prioritization for initiatives that are going to move at different speeds. How do we think about that in terms of staying in your lane?
You don’t want to stay in your lane, and very few are still in the exact same lane that they were in, six months ago. There’s a fast lane and this includes projects that you had to do really quickly, such as work from home during lockdown. And now is a good time to go back and make that more robust. Another example is digital commerce that companies got up really quickly, which may not have delivered the best customer experience, so go back and improve.
There’s a growth lane and that’s new opportunities that have been uncovered because of COVID-19. So for example, AI for customer segmentation or machine learning for product optimization.
Customer retention is such an important metric right now because that’s the foundation for future growth, as is finding new customer segments
There’s a fix-it lane for initiatives that are not working very well. I just saw that a lot of the small and midsize banks in the U.S. that were planning core banking system replacements, they’re continuing forward with because even as digital as that industry has been, there’s a lot more transactions that are being done through a mobile and contact list and so forth. And they want to make sure that their systems are robust enough to handle that.
And there’s slow lane things that because of COVID-19, maybe you deemphasize. So in some industries, if you were doing a lot of work around blockchain experimentation, it’s not that you stop that, but digital commerce might be a more important priority right now.
Then there’s the exit lane, things that you were doing before that just don’t make sense now. For example, we see dramatically declining spend on on-premises communications because people aren’t in the office right now.
Prioritize digital investments to demonstrate success
You’ve given us the five lanes, but how do you decide which digital initiatives to prioritize?
I think it’s really two things. It’s about what matters to customers and what matters to you as an enterprise. And so I would evaluate both of those things on a scale of one to five. It’s about revenue for you as an enterprise, it’s about net profits, but then for customers, it’s about what can you do? That’s really going to provide more value to customers. Customer retention is such an important metric right now because that’s the foundation for future growth, as is finding new customer segments.
You talked about skills a little bit. Some of the things that I’m seeing is the move toward cloud for one and automation is another. And the skills that are associated with that are really important. For example, teaching people to really understand container architectures and how to use those for cloud. Because that’s a resilience characteristic, and it’s a pattern that’s easy to break, which ends up in bad things.
In the automation space, there are a lot of underlying process improvements that have to happen. It’s not enough just to automate processes that already exist, but to really rethink those. So there’s a process analysis element to that. And then of course, everything having to do with data and information, information governance. Those are always perennially important topics, but even more so now if we’re trying to make decisions more quickly and understand the environment. Those are some of the ones that I see.
I would add to that design thinking because we’ve made this rapid transition to digital customer interactions. And then, we’ve seen such a high demand for AI cybersecurity as well.
COVID-19 and its effect on digital business
How might COVID-19 slow us down when it comes to accelerating digital businesses? Is COVID-19 itself a drag on an acceleration?
It’s kind of like as people, our biggest strengths are usually our biggest weaknesses, but I think some of the slowdown is good in terms of pausing and rethinking. What state of disruption is your industry in, even aside from COVID-19. Because we will come out of COVID-19, and many of the forces that we’re acting on in various industries will be there as strong as ever.
When it comes to COVID-19, where I see it creating drag, is it creates a hesitancy because we don’t know how the virus is going to act. So if you think about it, human catastrophe, many businesses were impacted really negatively. Not all, it’s not sort of universally bad.
There were some where demand actually increased, but it changed the whole nature of what we do. And it changes so frequently — every week seems a different priority. Combine that with the downstream instabilities that the virus caused. So whether that be social instability, economic, instability, geopolitical, instability, it makes it really hard to plan.
So when I’m looking at scenario exercises, now they’re not three years out, they’re three quarters out at the longest. The drag that comes from COVID-19 is to not plan or think toward the future.
A really significant psychological dynamic happened when Q2 ended. And we’re seeing in the economics data in many parts of the world where March, April and May was the very nature of the very bottom of this thing. And starting to come back up again, economically and so on. So there’s a sense that there’s some forward movement there. COVID-19, because of the uncertainties of the epidemiological models themselves makes it hard to plan, but that doesn’t mean you shouldn’t plan. That’s how I think about it.