CIOs need to understand three CEO concerns — reglobalization, economic slowdown and digital dithering — and address them in their strategic planning over the next 12-18 months, according to Gartner.
Many boards are asking CEOs to get more returns from digital to counterbalance other difficult business issues. CEOs think it’s time for digital initiatives to show value. They have been investing in digital for many years, and now expect it to ‘grow up’ and start delivering at scale.
“If CIOs understand what their CEO needs to achieve, they can shift their agenda to support them,” Kristian Steenstrup, distinguished analyst and Gartner Fellow, said.
Deeper changes to business models, rules of competition, products and services are coming. “Organizations must avoid falling into short term dependency on tactical digital results at the expense of longer-term structural changes, such as mergers and acquisitions and company reorganizations,” Kristian Steenstrup said.
Globalization is under pressure, facing major shifts and challenges as governments around the world reassess trade relationships and the rules of trade. Reglobalization is a new topology of globalisation, with societies rethinking relationships and boundaries.
The Gartner 2019 CEO Survey indicated 23 percent of CEOs said new international trade tariffs, quotas and other controls would have a significant impact on their business in the next three years.
CIOs should focus on guiding their organizations using geo-flexibility by applying data science to stay ahead of competitors by identifying the best geographic business locations and flows; deploying cloud-based capabilities to be geographically agile in their operations; and exploiting geographic moves as opportunities to accelerate digital business transformation.
Economic indicators have been causing increasing concern for CEOs throughout 2019, particularly inverted yield curves, reduced earnings growth, lower trade volumes and reduced confidence indexes.
CIOs can help CEOs by challenging tired/traditional measures of productivity that are delivering diminishing returns; identifying new keys to productivity to drive the organization’s digitally shifting business model; and applying digital and IT innovation to create productivity breakthroughs.
Many CEOs have not committed as deeply as they should to digitalization, despite its ability to deliver on their growth priority. Many are uncomfortable in digital area because digital is not their area of specialty. Others hesitate due to the cost and the deep changes required in the execution of digital journey.
“We are seeing softening perspectives on digital amongst CEOs. They shouldn’t give up on digital transformation through this trough of disillusionment, as they will regret it in three-to-five years. Some companies may not survive; while others will fall behind and find it very hard to catch up,” Kristian Steenstrup said.
CIOs can help their CEOs secure their organization’s long-term digital vision by crafting a three-horizon digital strategy, which addresses what digital will look like next year, in five years and in 10 years. The strategy must overtly show how today’s progress secures future options, and focus on differentiating, enduring capabilities and long-range measures.
The march to digitalization is so commonplace today that 40 percent of global CIOs have reached scale for their digital endeavors, more than doubling the proportion of enterprises from 2018, according to Gartner’s survey of CIOs.
The next challenge CIOs face in the coming two to three years is looming disruptions, such as an economic recession or data breach, which will force them to take action if they wish to emerge stronger on the other side of a “turn.”
In the past four years, 90 percent of enterprises have experienced a turn that upset normal operations, such as severe operating cost pressures, political upheavals, leadership turnover, adverse regulatory interventions and so on. Only a quarter of enterprises are fit enough to come out ahead of the turn, according to Gartner.
“You can’t read much about business today without coming across the word ‘disruption,’ especially market, economic, trade and political,” said Andy Rowsell-Jones, vice president and distinguished analyst at Gartner.
Most enterprises optimize existing business models for today’s environment, rather than thinking about preparing for the next turn, leaving them exposed when the next crisis hits. CIOs need to take specific actions to increase their organization’s fitness now if they want to grow stronger and more competitive after the coming turn.”
Analytics, application modernization and various forms of cloud computing are among the areas where most CIOs are increasing their investments in 2020, according to Gartner.
“CIOs must make a material difference to the enterprise’s financial performance. Last year, I said that CIOs need to elevate their digital business to a stable and secure state. For the most part, they are well on the way to achieving that,” said Rowsell-Jones.
The CIO is the culture change leader and the chief HR officer (CHRO) is a key partner to the CIO in shifting the mindset of their own IT team member, said Gartner.