Digital transformation is becoming the lifeline of companies like Walgreens Boots Alliance and PricewaterhouseCoopers, signaling to investors, employees and the public that modernization is a top priority.
It also signals a company's capacity to innovate.
But IT organizations provide more to companies than a checklist of completed projects. And it's not enough for employees to use digital solutions, digitally fluent IT units help companies avoid becoming obsolete. Companies most likely to achieve digital savviness embrace four key actions, outlined by MIT Center for Information Systems Research (CISR) research:
CIO works closely with other executives to establish a digitally-motivated modus operandi;
Support in "building a digital discipline across the enterprise";
Reinforcement of digital initiatives taken by improving customer engagement;
The ability to "relentlessly" deliver operational efficiency.
IT units that exemplify and excel at these target actions are digitally nimble and outperform competitors, according to MIT CISR. A company's digital savviness is determined by the "average score" derived from the completion of the four actions.
Companies with net margins in the top quartile of MIT CISR's research possessed IT teams that were "significantly more digitally savvy" than their competitors, according to a co-produced Harvey Nash survey of more than 4,200 companies.
The top quartile is more likely to skew to focusing on digital disciplines than project completion, have more focus on operational efficiency and customer engagement, and are more likely to have a strategic CIO.
Is the back office digitally savvy?
The companies with digitally savvy IT units embodied the four criteria and resulted in a company profitability 24% higher than competitors, according to the report.
But empowering CIOs to serve as a strategic force and digital enabler is still an issue, especially when about $2.6 trillion of global tech purchases in 2019 will go to the back office for support systems, according to Forrester.
The rest of the spend — the remaining quarter, equivalent to $963 billion — is earmarked for business technology spend like customer analytics, CRM or product lifecycle management.
IT organizations can often feel the burden of a back office that demands as much attention, if not more, than modernization. It can become an endless cycle of employees trying to self-remediate technology woes, adding to unaccounted for security and scalability risks.
"CIOs are going to have to worry about the back office," said Stephanie Woerner, research scientist at the MIT Sloan School of Management, CISR, in an interview with CIO Dive. But what separates back office CIOs from their more affluent counterparts is their ability to delegate and mentor those around them.
If CIOs are able to hand over the reins of back office functionalities, it frees their ability to pursue more digital opportunities.
"If you're going to just look at the back office," said Woerner, "that's not where you get the most value from your CIO."
How to prepare for digital disruption
Cementing a seat at the table is becoming easier for companies that value the innovation technology affords. CIOs are cropping up across industries, graduating former VPs or GMs of technology to a coveted C-suite position.
When asked how CIOs fit into their company's leadership, 48% said their responsibility is predominantly leading digital initiatives, according to a 2016 MIT CISR survey. The other 52% of CIOs said digital issues are business issues and "it should be driven by the leaders of the business units."
The trickle down effect of digital change from nontechnical leadership is one most companies would like. It secures an embedded sense of innovation prevalent across business lines that breaks down silos.
It also helps CIOs advocate for and justify budgets to fellow executives. It's easier for boards to support technology when CIOs speak in terms of what technology can do to make more money. However, Woerner warns, "what you don't want to do is become maniacal on cost and only cost."
Boards that are more inclined to become digitally savvy look to their CIO to become "a great ally," said Woerner. Firms highlighted by MIT CISR's research, like DBS Bank, are motivated by a unifying digital vision.
"All firms want to make sure they're digitally transformed so they're not going to be disrupted," said Woerner. But this is a proactive reaction to modernization and one not wholly recognized by weaker performing companies.
Nearly half of CIOs in top performing companies recognize that digital disruption will threaten their companies' revenue, according to the survey. The concerns of these top-performing CIOs proves that knowingly leaning into disruption is the best case for their company's survival.
CIOs and companies that are slightly behind competitors in terms of digital savviness need to start working on their platforms, according to Woerner.
"It's hard to have a digital discipline if you're not able to automate what needs to be automated," said Woerner. CIOs should "really think about creating modules and components that can be reused."