Are business leaders asleep at the wheel when it comes to right-sizing their business to compete in the 21st century?
‘Sur’, I know nothing about computers’, appears to be a common refrain among the leadership class that is supposed to be guiding Irish businesses out of the recession. A new PwC study has revealed that Irish CEOs are behind their international peers when it comes to digital transformation.
Early forerunners of the digital transformation of Irish businesses could be seen in Michael O’Leary’s transformation of Ryanair 16 years ago from a sleepy regional airline into Europe’s biggest airline thanks to an adroit appreciation of the internet and e-commerce early on.
‘If you try to run digital initiatives separate to your core business then you are missing the point. You will miss the boat’
– DAVID MCGEE, PWC
A more recent example could be Nightline Couriers’ creation of Parcel Motel to enable consumers all over Ireland to have e-commerce purchases delivered to petrol station forecourts of their choosing all across Ireland.
However, recent figures from the IEDR have revealed that 91pc of SME businesses have websites that can’t handle e-commerce transactions, despite Irish consumers spending approximately €4.5bn online in 2014. Christmas 2015 will undoubtedly only see that figure increase, with most of that spend going overseas.
Digital confusion in higher echelons of Irish business world
The latest Digital IQ survey from PricewaterhouseCooopers (PwC) found that Irish firms are not embracing digital technologies to disrupt their organisations and Irish business leaders are more cautious about investing in digital technologies.
When it comes to who is responsible for digital transformation, there is confusion in organisations as to who is responsible and investment in skills like data analytics is lacking.
Based on interviews with 2,000 executives in 51 countries, the Digital IQ study included Ireland for the first time and found that the country’s overall Digital IQ was 75.8, behind the global average of 77.2.
Irish business leaders do not view digital as a way to drive disruption either in their own or other organisations. Rather, they expect digital to yield immediate returns such as revenue and profit growth. Only 5pc expect product innovation and only 5pc brand enhancement.
Irish companies are more cautious than global companies when it comes to investing in digital. For example, just one in 10 is spending more than 15pc of revenues on digital, compared to nearly one-third (31pc) globally. Three-quarters (68pc) of this spend is in non-IT areas, such as marketing, sales, customer service and operations, and is similar globally.
At the same time, executives are seeking more strategic value from digital investments. In Ireland, creating better customer experiences is the No 1 priority for digital investments (Ireland: 44pc; globally: 25pc). Globally, the No 1 priority for digital investments is growing revenue (Ireland 35pc; globally 45pc)
The survey revealed that less than half (42pc) of Irish companies have a dedicated team for digital innovation compared to 65pc globally.
‘If you are an existing business your job is to either completely re-engineer your business to compete in this world or accept you are managing a decline’
– DAVID MCGEE
Ireland scores well for CEOs championing digital (Ireland 74pc; globally: 73pc). However, the CIO’s role continues to change. For example, in three years’ time, 42pc of Irish business leaders expect CIOs to lead all digital efforts, compared to 33pc today.
According to the survey, just over half (56pc) of Irish respondents said that their organisation’s culture embraces the speed of rapid change and disruption compared to over two-thirds (68pc) globally.
More Irish companies see the lack of alignment and clarity of roles and responsibilities relating to digital ownership as a barrier to progress when compared to global counterparts (Ireland:67pc; globally: 59pc).
While Irish business leaders understand the value of digital, there is some catching up to do, admitted PwC partner David McGee.
“The global evidence of digital transformation being urgent isn’t rubbing off in Ireland.
“Irish CEOs and CFOs need to realise that digital is their business, if you try to run digital initiatives separate to your core business then you are missing the point. You will miss the boat.
“They need to realise that digital is not only about increasing revenues from new channels like e-commerce or social media, it is about employing digital to reduce costs and make customers happier.”
Data-driven decision making
As an example, McGee said that the cost of data sensors is falling, enabling drinks firms in Asia, for example, to place sensors on fridge doors to measure the sale of soft drinks.
“The cost of gathering that data for 5,000 retail outlets 10 years ago versus today is just a fraction. Data can be used to make much better decisions and drive decision making, you shouldn’t be separating digital as something separate from your core business.”
McGee cited Ryanair and Parcel Motel as firms that realised early on the cost benefits of selling through new channels.
“If you are an existing business your job is to either completely re-engineer your business to compete in this world or accept you are managing a decline. Digital is going to have an impact on every organisation.”
McGee said that from the research of leaders worldwide, 74pc agree that the CEO should be a champion for change.
“The attitude of ‘sur’ I know nothing about computers’ needs to be replaced by a mindset that is predicated on adding value for customers.
“Nearly three-quarters of CEOs agree that the CEO should be the champion for digital strategies – a digital strategy should be set as a high-level strategy in the organisation.”
Digital superheroes image via Shutterstock
