Digital disruption - Dive in to thrive

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

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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



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



Section 1:

CIO Trends



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.




Section 2:

Awareness and

Readiness



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.




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




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



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



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




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




Section 3:

Organization and

Impact



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.



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




Section 4:

Recommendations



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




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




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: [email protected]

Marc Snyder

Advisory Managing Director

CIO Advisory, KPMG LLP

T: 1-978-807-0522

E: [email protected]

Visit kpmg.com/thrivingamiddisruption to learn

more about how CIOs need to respond to

disruption.

http://kpmg.com/socialmedia

http://kpmg.com/socialmedia

http://www.kpmg.com/thrivingamiddisruption

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Digital disruption - Dive in to thrive