Digital Leadership for Business Transformation
The TCS 2020 Chief Information Officer (CIO) Study seeks answers to central questions facing information and technology executives across industries in North America and Europe: How are they helping their enterprises navigate a complex and fast-evolving digital landscape? Where are they focusing their digital initiatives? What traction have they gained this decade from those efforts?
This report focuses on how chief information officers and other senior leaders in their companies think about data as a strategic asset in their digital transformations, and how they could gain competitive advantages from it.
Other reports in this series examine these and other issues across and within industries:
■ Key Findings: How CIOs Are Helping Their Companies Navigate the Digital Ecosystem
■ Roles & Responsibilities in Digital Business
■ Threats & Opportunities: Industry vs. Ecosystem
■ Master Report: Study Results, Trends & Best Practices
Additional reports look specifically at the following industries: consumer packaged goods; banking, financial services, and insurance; retail; and media, entertainment and information services, as well as the viewpoints of CIOs at North American and European firms.
All reports currently available from the TCS 2020 CIO Study can be found at: on.tcs.com/ciostudy
Data Priorities & Practices
■ 37% of CIOs still oversee data and analytics despite a trend to move oversight to chief data officers or other parts of companies.
■ When CIOs oversee data and analytics, their companies are more likely to have had greater success in digital transformation this decade (firms we call “Digital Leaders”). In companies with less digital success, fewer CIOs are responsible for data and analytics.
■ In rating which type of currently available data is most important for their companies’ future growth, CIOs put online reputation data at the top of the list. Digital Leader companies rate that as most important and also highly value customer purchase data, marketing and sales channel data, and distribution data.
■ Digital Leader companies are at least 1.5 times ahead of all other surveyed companies in analyzing and leveraging customer data.
■ To highly digitize key business processes, companies must collect, process and leverage big volumes of data. However, the companies we surveyed say certain business processes—particularly production and manufacturing, logistics and supply-chain management—are far less digitized than others. Support functions like human resources and legal are likely to have the greatest degree of digital transformation over the next decade.
■ Nearly all surveyed companies (98%) buy or obtain customer data from third parties for marketing, sales and support purposes, while 92% sell or share their customer data to external partners. But how companies use customer data varies widely.
How Digital Leaders Are Different: Context in the CIO Study
Across 11 industries in Europe and North America, we analyzed the survey answers of 1,010 CIOs and other IT executives to understand the differences between firms that are leading and trailing in the digital transformation of their businesses.
We categorized the Digital Leaders as those that have the most progress in digital transformation this decade, and the Digital Followers as those that made the least progress.
Oversight for Data
For decades, starting when large companies put CIOs in charge of IT operations, these “information officers” have been responsible for managing their organizations’ digital data. However, in the early 2000s, companies began creating the position of chief data officer (CDO), a role responsible for data governance, analytics and related activities.
Today, TCS sees fewer CIOs in charge of corporate data than in the past, an observation supported by our study: a minority of CIOs (37%), or people reporting to them, are in charge of data and analytics. In all 11 industries that we studied, in less than half of the companies were CIOs overseeing data and analytics. The percentages ranged from 45% at the high end (telecommunications) to 27% at the low end (insurance).
CIOs Who Oversee Data, Analytics & Data Security
The CIO Study shows a much different picture, however, in the Digital Leader companies. More than half (56%) of their CIOs oversee data and analytics, compared to less than a third (32%) of CIOs at all other companies. CIOs at Digital Leader firms were also more than twice as likely to be responsible for data security than were other CIOs.
The bigger the company, revenue-wise, the more likely its CIO oversees data and analytics. In companies with revenue of between $500 million and $1 billion, only a third of CIOs are responsible for data and analytics. However, in companies with $20 billion or more in sales, 47% of CIOs oversee this activity.
Data Priorities Today for Tomorrow
We asked CIOs to rate eight types of data already largely in use in terms of their importance for their companies’ revenue growth over the next decade. Across all companies, monitoring customer comments and feedback in online channels (such as social media sites and product review sites) is rated as most important. We believe that’s the case because customer input can be highly revealing about whether customers will remain loyal—and because those public comments can greatly influence whether other customers do business with a company.
The Digital Leaders’ CIOs also rated such data as most important to future growth. They place high value on three additional types of enterprise data:
■ What products and services customers buy from them or show interest in buying
■ Marketing and sales channel data that shows how customers find out about the company and its products and services
■ Distribution data
Most of these categories deemed important to future growth are examples of enterprise data that companies generally already possess or can produce. Based on their client work, TCS practice leaders believe other kinds of data—newly available or even not yet available—are just as likely to drive future growth. They include:
■ Ecosystem data resulting from value chain partnerships, new platforms and new, data-enabled markets
■ New applications of universal data available to whoever can analyze it best, whether it comes from public or nongovernmental entities such as the U.S. National Weather Service or the international Organisation for Economic Co-operation and Development (OECD), or is aggregated from other publicly available sources, as in sentiment analysis of social media activity
Such data will give companies whole new opportunities to identify nascent customer needs and other signals of growth opportunities.
Just How Digital Are Companies’ Business Processes Today?
About half (51%) of CIOs say their job includes overseeing development of new information systems to support their company’s existing business processes. They also indicated they see a lot of headroom over the next decade for their firms to increasingly digitize those processes and the functions they support.
We asked CIOs to estimate the degree to which their companies’ key business functions and business processes were digital today, from not at all digitized to fully digitized. Across all surveys, the activities farthest along the digitization path were marketing and sales processes (with a 50% degree of digitization to date, on average). Other activities with similar degrees of digitization were finance and accounting, new product/service development, and technology/process development.
Digital Leaders are more advanced in their digitization efforts, Digital Followers generally less so. The leaders estimated their finance and accounting activities were the most digitized, followed by technology and process development, and customer support and product or service development. The greatest gap between the Digital Leaders’ progress to date and the Digital Followers’ (and, indeed, all other companies’ progress) is in customer support and after-sales service. It is among the most digitized activities for Digital Leader companies yet is considered the least digitized today by other firms’ CIOs.
While the aggregate of all 1,010 CIOs naturally resulted in describing nearly uniform levels of digitization currently across all processes—from 44% to 50%—individual responses varied greatly across and within industries. For example, in the telecommunications industry, logistics and distribution operations appear to be only 26% digitized today, whereas for consumer packaged goods (CPG) companies, those processes are already digitized about 57%. Yet even within these two industries, estimates from individual CIOs ranged from zero to 100% among CPG companies and from zero to 90% for telecom companies.
How Much More Digital Will Business Get?
To look ahead, we asked CIOs to estimate how digital these processes could become at their company over the next decade. Estimates were from 67% to 77% depending on the activity in question—although, again, within and across industries average predictions ranged more widely, from an average of 52% possible digitization for production and manufacturing processes in telecommunications, to 84% potential digitization for information security and IT service management at banking and financial services firms—and 40% of bank CIOs say this aspect of their company will be 100% digitized by 2030.
In TCS’ digital transformation work for large organizations, practitioners have found that cross-company and support functions, often represented by the C-suite, have either been or are expected to be easier for companies to digitize. The business processes many companies believe are more critical to competitive advantage (such as production and manufacturing processes, after-sales service, and distribution) appear much more difficult to fully digitize.
What’s more, although a number of companies have shown how many products can be fully digitized (think consumer banking services and commercial insurance), most of the companies we surveyed expect their products and services to require at least some kind of physical format or environment, at least in part. On average, CIOs predict that by 2030 their products and services could be 67% digital.
In fact, only about one in five (22%) CIOs believe their products and services would be in 100% digital form by the end of the next decade. In addition, despite the rise of chatbots and other customer service automation, only 14% of CIOs thought customer support and after-sales service could be fully digital processes by 2030. It very well may be true—or it may signal a lack of imagination on the part of many CIOs and their company’s leadership.
Gaining Competitive Advantages Through Customer Data
If data is the new oil of a digital ecosystem economy, customer data is premium grade crude. The CIOs in our study indicated this to be the case. Most say their companies are either ahead of, or on par with, competitors in analyzing and benefiting from customer data.
But Digital Leaders are in a stronger position. Nearly two-thirds of them consider themselves ahead of the competition in analyzing and using customer data. Compared to the survey’s Digital Follower companies, Digital Leaders are at least 1.5 times more likely to see their customer data analytics capabilities as a competitive advantage. And this difference may be understating the case. Based on the experience of TCS practitioners working with large enterprises, this “analytics gap” may even be much wider, with some companies placing data about customers at the center of their business model (think ridesharing services) while others are still primarily focused on their product or service (think taxi companies).
Customer Data in the Digital Ecosystem
The clear majority of companies that we surveyed (98%) acquire customer data from external parties. And most (92%) provide their own customer data to external parties.
Yet exactly how customer data is monetized varies from company to company, though it’s clear that many firms share data with business partners to identify prospective customers. For example, slightly more than half (54%) of companies use other firms’ customer data to identify prospects and try to convert them into customers. Only 40%, however, use other firms’ customer data to pitch products and services to current customers.
How We Conducted This Study
For the TCS Business 4.0 Institute’s 2020 CIO Study, we surveyed more than 1,010 CIOs. We are also conducting interviews with several to explore their digital initiatives more deeply. Our focus is in three key areas:
■ The role and responsibilities of CIOs on digital transformation matters, now and in the years ahead;
■ How they view opportunities and competitive threats in the context of their emerging digital ecosystem; and
■ How their companies use data strategically.
The survey respondents work in 11 industries with headquarters in the United States, Canada, the United Kingdom, Germany and The Netherlands. About three quarters of the respondents work in enterprises with revenue that tops $1 billion. Some 72% have annual IT budgets of at least $50 million, and 45% have IT budgets of more than $100 million.