© PAC 2014

Executive Summary

Digital Transformation in Germany Changing marketing and IT strategies

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Sponsors

2014 Digital Transformation in Germany 2

The production and distribution of this study was supported by: Adobe Systems GmbH, Avanade Deutschland GmbH, Capgemini Deutschland GmbH, Damovo Deutschland GmbH & Co. KG, Salesforce.com Germany GmbH und Unify GmbH & Co. KG

Premium sponsor: Gold sponsor:

Silver sponsors:

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Background

The way enterprises interact with their customers is currently undergoing a massive change: Digital technologies, such as social media, mobile apps, big data or cloud computing, are revolutionizing marketing and IT strategies.

Digitization is having its greatest impact on customer relationships. However, the digital transformation of enterprises needs to go beyond individual marketing or customer service projects. The business strategies and operative processes of all corporate areas must be put to the test and made ‘digitally sustainable’.

Digital technologies are moving to the center of corporate strategy, and IT is gaining a completely new role. The CIO must work closely together with corporate management and all other lines of business, especially with marketing, in order to develop and implement a company-wide digital strategy.

The report “Digital Transformation in Germany” analyzes at which stage German enterprises and public authorities currently are in terms of the digital transformation of their marketing and IT strategies and how they address inherent challenges.

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For the study PAC interviewed decision-makers from IT and marketing in enterprises with at least 500 employees, focusing on the following questions:

●  To what extent are German enterprises and public authorities already pursuing a company-wide strategy in order to meet the new challenges of the digital age?

●  Who takes part in the definition and implementation of a digital strategy? Who takes the investment decisions?

●  Which need for action do executives in charge identify, and where are the focuses of investment?

●  Which role do external services providers, such as IT services providers, systems integrators, strategy consultants or media agencies, play in the implementation? Which are the most important requirements?

•  50% IT managers •  50% marketing

managers

•  1/3 Manufacturing •  1/3 Public sector •  1/3 Services, retail &

wholesale, transport

•  Approx. 40% upper medium-sized enterprises

•  Approx. 60% large enterprises and organizations

More than 150 interviewees

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Executive summary I

Two thirds of all German enterprises and public authorities feel the implications of digitization very clearly, one in every five respondents even describing the implications as ‘disruptive’ to their industries. All respondents (100%) are discussing the digital transformation topic from a strategic perspective.

Nevertheless, the majority of Germany enterprises have hardly addressed digitization with comprehensive strategies so far: 58% execute individual digital projects in selected business areas, however they do not pursue a company-wide strategy. 14% report that they are still at the beginning of their way to digitization. At least 28% have already formulated a digitization strategy for the entire enterprise.

Within enterprises, however, there are very different opinions on who should be in charge of the digital strategy. 91% of IT managers see themselves in a prominent position and want to take charge of the digital strategy. Only 20% of IT managers, however, want to involve other lines of business in defining the strategy.

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The implications of digitization have become distinctly noticeable!

A lot of IT staff also want to leave out their marketing colleagues: The majority (61%) of German IT managers do not believe that marketing should be involved in the definition and implementation of digital strategies! Marketing managers obviously see this differently: Around 90% of them of course want to participate in the setup of digital strategies for their enterprises.

German IT managers, however, would be well-advised if they saw digital transformation rather as team play. Because the challenges are manifold and affect further lines of business besides IT and marketing. Respondents particularly consider the growing diversity of digital interaction channels and a stronger customer focus as big challenges, but feel well equipped to meet those challenges.

However, every second enterprise thinks they need to become a lot more innovative to develop new digital services and business models. Just as many do not feel well prepared for the implementation of business strategies which are based on the extensive analysis of business and customer data.

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Shares (weighted) in percent of organizations questioned (n = 151)

We pursue a company-wide digital strategy for the entire enterprise.

28% We execute

individual digital projects in selected business areas, but

we don’t have a company-wide

strategy.

58%

We’re still at the beginning, at the planning stage.

We haven’t discussed this topic yet.

14%

0%

“Which statement best describes your company’s approach towards the digitization topic?”

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Executive summary II

In every second organization (55%) IT has budgetary sovereignty. IT managers therefore carry essential responsibility for the successful digitization in enterprises and should be very familiar with the requirements of the lines of business with respect to digital transformation.

However, this does not always seem to be the case: For instance, almost 80% of all marketing managers want to strongly invest in IT solutions for the support of online marketing, which only applies to 40% of all IT managers.

This pattern also shows in other areas: In fact every second company wants to invest in CRM solutions. However, it is particularly the marketing managers who aim at investments (67%), and not so much the IT managers (41%).

20-30% of enterprises are planning to invest in digital commerce solutions in the next 1-2 years. In the area of customer experience and service, particularly investments in multi-channel service centers are planned (36%).

Around 30% of enterprises are having solutions for customer experience management and analytics on their investment agenda. Again, the need for investment is considered essentially higher here from the marketing perspective than from the IT perspective.

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Marketing managers identify larger need for investment and action than IT managers

12%

10%

10%

10%

19%

20%

28%

36%

39%

43%

12%

9%

12%

12%

12%

0% 20% 40% 60% 80%

Personalized marketing

Mobile marketing

Marketing analytics

Social media marketing

Online marketing

Digital marketing: In which areas is your company planning to

invest in the next 1-2 years? Larger IT investments Smaller IT investments No investment, but need for action

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201

4

Shares (weighted) in percent of organizations, n = 151 ("Neither investment nor need for action" and "Not relevant" not displayed)

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Executive summary III

73% of both IT and marketing managers questioned believe that the IT will have to play a considerably stronger role in the digitization of business processes. The CIO must become ‘Chief Process Officer’.

62% consider the CIO as future ‘Chief Orchestrator’, i.e. as coordinator of different digital initiatives in the lines of business.

54% request the IT to play a significantly stronger role as innovation driver, e.g. in the implementation of innovative business models, as well as the CIO to become ‘Chief Innovation Officer’.

In addition, 53% of respondents expect stronger commitment of IT managers as ‘Chief Analytics Officers’ to support the processing and analysis of data from all enterprise areas.

From the perspective of 44% of the respondents, the CIO should assume the role of ‘Chief Digital Officer’ and take considerably more responsibility for the digital vision and business strategy of the company.

However at this stage, by far not all IT departments are well prepared for the requirements arising from digitization.

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The new requirements for digitization are also significantly changing the tasks and role of IT

It is particularly the marketing managers who rather skeptically assess their IT colleagues’ capabilities to push corporate digitization. Almost 70% of them do not consider the IT department as being capable of developing and implementing a company-wide digital business strategy.

(graphics excerpt)

27%

44%

33%

4%

3%

19%

...develop and implement a digital business strategy for the enterprise

...coordinate and orchestrate the digital initiatives of the different lines of business

...process data from all enterprise divisions and analyze their implications on the

business

How do you assess your IT department with respect to the following capabilities?

Very good Good Not very good Not good at all

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37% 11%

38% 16%

47% 22%

Shares (weighted) in percent of the marketing managers questioned, n = 80

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Executive summary IV

For 80% of both IT and marketing decision-makers, IT providers and software vendors play an important or even very important role in supporting them in their digital transformation.

Digital agencies are primarily considered as important transformation partners by marketing managers: Traditionally, a lot of marketing managers cooperate with agencies. As a result, 55% of marketing managers, but only 22% of IT managers, rely on agencies to support them in their digital transformation.

An overwhelming majority of German companies (81%) prefer the cooperation with few strategic software vendors – presumably the big vendors that can cover a wide spectrum of applications for digital transformation with their portfolios.

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In the implementation of digital strategies the classic IT providers are the most important partners

39%

55%

34%

85%

80%

25%

22%

55%

64%

81%

0% 20% 40% 60% 80% 100%

Cloud providers

Digital marketing agencies/ media agencies

Strategy consultants/ management consultants

Software vendors

IT service providers/ systems integrators

Very and relatively important provider groups in supporting the implementation of a digital

strategy

IT Marketing

Shares (weighted) in percent of organizations, n = 151

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4

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Analyst conclusion

2014 Digital Transformation in Germany 9

German corporate executives are well aware of the need to put their business strategies to the test for their digital transformation. However, challenges are primarily identified in customer-oriented areas. Executives still often underestimate the fact that digitization is shaking up the value chain models and ecosystems of entire industries and therefore requires an extensive transformation of business models, processes and structures. A successful digital transformation requires changes in all enterprise areas, not only in marketing and IT. Consequently, all lines of business need to be involved in the implementation of a digital strategy – from product development over supply chain & logistics up to human resources. Silo mentality and ‘departmental thinking’ should be things of the past! The study results especially show a major gap between IT and marketing managers. This is alarming as both groups are the designated forerunners of digitization. Along with corporate management they should jointly coordinate the digitization efforts of the different lines of business and integrate them within a company-wide strategy. In many companies digital transformation means a patchwork of ambitious, albeit hardly coordinated initiatives. IT providers can be pleased with the study results: For both IT and marketing managers, IT providers are the preferred partners in the implementation of digital strategies. IT services providers and software vendors should organize their services portfolios accordingly, for in the digital transformation area they can expect a continuously increasing demand for consulting and technology solutions.

Nicole Dufft Independent Vice President –

Digital Enterprise

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Disclaimer, usage rights, independence and data protection

Disclaimer The contents of this study were compiled with the greatest possible care. However, no liability for their accuracy can be assumed. Analyses and evaluations reflect the state of our knowledge in September 2014 and may change at any time. This applies in particular, but not exclusively, to statements made about the future. Names and designations that appear in this study may be registered trademarks.

Usage rights This study is protected by copyright. Any reproduction or dissemination to third parties, including in part, requires the prior explicit authorization of the sponsors. The publication or dissemination of tables, graphics etc. in other publications also requires prior authorization.

Independence and data protection This study was produced solely by Pierre Audoin Consultants (PAC). The sponsors had no influence over the analysis of the data and the production of the study.

The participants in the study were assured that the information they provided would be treated confidentially. No statement enables conclusions to be drawn about individual companies, and no individual survey data was passed to the sponsors or other third parties. All participants in the study were selected at random. There is no connection between the production of the study and any commercial relationship between the respondents and the sponsors of this study.

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About us!

2014

Nicole Dufft Independent Vice President – Digital Enterprise n.dufft@pac-online.com

Melanie Flug

Analyst & Researcher +49 (0)30 28 52 96 24 m.flug@pac-online.com