Digital: opportunity or threat?

man writing opportunity and threatThe answer is both according to the recently published results of PwC’s Annual Global CEO Survey. The survey, which covered 1,322 CEOs from 77 countries, reveals the challenges and dilemmas facing CEOs as they try to lead their organisations through the digital revolution. It also gives some insights into what CEOs are doing to ensure their businesses can rise to the challenges of digital and the benefits they are realising from becoming a digital business.

The survey asked CEOs whether they believe there are more opportunities or threats for their organisation compared to three years ago. An impressive 61% of respondents said they see more opportunities for their company although 59% also said that there are more threats than there had been in the past. That one finding captures perfectly the inherent conundrum of digital; it is a significant opportunity for organisations that can transform their business model, culture, products and services to meet the needs of customers. But for those companies that do not change or that cannot change quickly enough there are indeed some significant threats.

CEOs clearly see opportunity in using mobile technology to engage customers with 81% of them saying this area was strategically important to their business. And the benefits of using data to generate insights was recognised by 80% of respondents. The study also asked CEOs about the extent to which digital technologies had created value for their organisations in areas such as customer experience and innovation. 72% of CEOs said their organisation had used digital to create value by improving the customer experience while 71% had seen their innovation capacity improved through digital. And, perhaps not surprisingly given how many CEOs see the strategic importance of data, 84% of respondents said that data and data analytics had created value for their organisation.

Perhaps more interestingly, however, is that 88% of CEOs said their company had realised benefits in operational efficiency as a result of investing in digital. This is a clear demonstration that there is a lot more to digital than the customer facing elements of a business (see There’s more to digital than marketing). Digital does not stop at functional boundaries; it flows through the organisation to create integrated offerings and a seamless customer experience. Becoming a truly digital business therefore requires change in how internal functions work, the skills they require and the way in which they interact with other functions.

In terms of threats, CEOs cited over-regulation (78%), availability of key skills (73%) and government response to fiscal problems (72%) as being the top three issues facing their businesses. It is interesting to see regulation identified as the top threat, as companies such as Uber and AirBnb have in some respects bypassed existing regulations to create new business models that are disrupting entire sectors. So, perhaps instead of worrying about regulation, CEOs should be thinking about alternative models that negate its impact. Similarly, it is unlikely that these disruptors view a particular government’s response to economic pressures as something they need to worry about or as something that can threaten their business models. Digital markets and digital business do not respect geographic boundaries and digital business may actually view government action as an opportunity to enter a new market or geography.

The survey also asked CEOs to identify the top industry disruptors. Regulation, and specifically changes in regulation, also topped this list with 66% followed by an increase in the number of significant direct and indirect competitors (61%), changes in customer behaviour (61%) and changes in distribution channels (50%). The increase in direct and indirect competitors is a feature of digital markets; technology enables customer needs to be met in different ways by existing players and by new market entrants. No wonder then that when asked which industry other than their own was likely to produce a significant competitor to their business, 32% of CEOs selected the technology industry. And to compound their concerns about the threat from technology companies, CEOs are also worried about their own technology capability. An increasing number of CEOs see the speed of technology change as being a key threat (58% compared to 47% in 2014).

The encouraging news from the survey is that CEOs appear to know what they need to do to counter these threats. In the article Vision and leadership key to digital success I discussed the importance of a clear vision and strong leadership to a successful digital transformation. And it seems that most CEOs also appreciate the importance of these factors as 86% said they should champion the use of digital technologies in their organisation and the same proportion also said there needs to be a clear vision of how digital can help achieve competitive advantage. The important point here though is that this needs to be vision of the entire business as opposed to a separate digital vision. Digital is not an add-on to the business; it encompasses the whole organisation and beyond. The vision for digital transformation is, therefore, the vision for the organisation, it defines the type of business it needs to become to thrive in the digital age.

CEOs also appreciate the importance of partnering and collaborating with other companies with many already involved in join ventures, strategic alliances or informal collaborations with a diverse range of partners including suppliers (69%), customers (66%), academia (52%), companies in other industries (52%), competitors (50%) and start-ups (44%). And this is set to continue with 51% of CEOs saying that they expect to enter into new alliances in the next 12 months.

Digital businesses do not exist in isolation; they are part of an ecosystem of related and interconnected organisations that each provide components which, when combined, can create a new offering. Successful digital players are often those organisations that can build and manage a digital ecosystem of partners to meet customer needs. Such businesses recognise that they do not have to have all the relevant capabilities in-house to create digital product and services.

Digital is both an opportunity and a threat to traditional businesses. Organisations that have a CEO that gets digital and that provides the necessary leadership and vision necessary to reinvent the company stand a much better chance of capitalising on the opportunity and realising the benefits of becoming a digital business.

If your organisation wants to develop a vision and strategy for its digital transformation, or if it wants to reinvent its business model for digital then please contact me or visit my website, axin.co.uk.

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  1. […] the threats and opportunities of digital are well known. And we know that digital is inevitable: regardless of where you are in […]

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