BENCHMARKING COMPETENCIES FOR DIGITAL PERFORMANCE:

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1 BENCHMARKING COMPETENCIES FOR DIGITAL PERFORMANCE: Commissioned by:

2 Executive summary Digital transformation has gone from novelty to norm, becoming the single biggest business shift since the Industrial Revolution, according to IDC researcher Shawn Fitzgerald. As Microsoft s CEO recently observed, every organisation in every industry is becoming a digital organisation. Now what sets one organisation apart from another are digital competencies. To better understand how organisations are developing digital competencies and the relationship with performance, The Economist Intelligence Unit in January-February 019 surveyed 51 senior business and government leaders in North America, Europe, the Middle East and Africa and Asia Pacific. The survey, commissioned by Riverbed, aimed to assess the behaviours, skills and abilities that help organisations improve digital performance and, ultimately, achieve their objectives. Our study focused on nine competencies: analytics using customer and/or operational data from digital systems; ability to manage and measure the user and/ or employee digital experience; digital product and service innovation; digital talent recruitment, retention and management; IT infrastructure modernisation/ transformation; automation of business processes with digital technology; digital development techniques (e.g., Agile, design thinking); organisation-wide digital transformation strategy; and workplace transformation with digital technologies. A significant majority of organisations surveyed say digital competencies are strategically significant, especially for increasing revenue, gaining a competitive advantage and assuring service quality. However, many respondents remain dissatisfied with their digital-competency progress, and 57% of organisations say that s why they re struggling to achieve key performance goals. High-performing organisations, compared with others, continually improve their digital competencies and take unique approaches to developing them. High performers are defined as respondents who say: they ve received measurable benefits from digital strategies; they re confident of their ability to overcome digital competency challenges; and their organisations either grew 018 revenue by 6% or more (private sector) or over-delivered on performance targets (public sector). The Economist Intelligence Unit Limited 019

3 3 Key findings from the survey include: Digital competencies are important to achieving positive outcomes. Eight in ten respondents say their organisation s digital competencies are either very or extremely important to achieving revenue growth, service quality, mission delivery, profit growth/cost reduction and customer satisfaction. This is relatively consistent across segments, although more pronounced in the retail, media and technology industries, where a majority of respondents described digital competencies in the strongest way, as extremely important for growth. The competency most frequently cited for meeting organisational goals is data analytics. Among the top competencies are workplace transformation, product and service innovation, digital experience management, and IT infrastructure modernisation. Digital matters How important are digital competencies to achieving the following objectives % of respondents More important Somewhat important Less important Customer satisfaction 89 8 However, many organisations still have digital-competency gaps. More than half of respondents (54%) say they re unsatisfied with their organisations progress on developing digital competencies. In addition, 65% of respondents also say their digital-competency gaps have negatively affected user experience. When asked what s needed to improve digital competencies, IT respondents identified three priorities: improved data integration capabilities; IT team members with more digital technology experience; and upgraded IT infrastructure and business applications. The need to improve digital competencies is not a sign of being behind. On the contrary, it s the mark of a high-performing organisation. Eight in ten (81%) high performers say they re ahead of peers in all digital competencies, compared with fewer than two-thirds (63%) of others. High performers are also twice as likely to say they re significantly ahead on IT-infrastructure modernisation, business process automation, and digital techniques such as Agile development. More than half of respondents say they re unsatisfied with their organisations progress on developing digital competencies. Revenue growth 87 High product/service quality 86 Gaining competitive advantage 85 Profit growth/cost reduction 84 Source: The Economist Intelligence Unit However, high performers are not complacent. More than others, they understand that both digital transformation and improving digital competencies is an ongoing journey, not a destination. For this reason, 57% of high performers on average see a need to improve across all digital competencies, compared with 46% of others. Areas where, relative to other respondents, high performers say they especially need to continually improve include: product and service innovation, business process automation, workplace transformation, talent recruitment, and digital experience management. The Economist Intelligence Unit Limited 019

4 4 The IT department plays a leading role in developing digital competencies, but poor communication with the business persists. More than half (51%) of respondents say their IT departments have a leadership role in developing their organisation s digital competencies, twice as many as those who say line of business heads lead in this area. However, 63% of respondents say that poor communication between IT and other departments limits their organisations digital competencies. Complexity is the biggest roadblock to developing digital competencies. However, as organisations add experience, they also gain confidence. Developing digital competencies isn t easy. The most frequently cited challenge is the complexity of change, with twice as many citing it compared with a lack of leadership support. Other challenges include legal and security concerns (37%); rigid systems, networks and infrastructure (3%); lack of digital understanding, talent and skills (30%); and insufficient funding (9%). This gap in communication and knowledge sharing may explain why almost as many (61%) also say their non-it leaders do not understand the technical complexity of digital systems. Even more (68%) say their IT departments, instead of leading digital competency in other departments, limit themselves to technology implementation and management. 63% of respondents say that poor communication between IT and other departments limits their organisations digital competencies. Up against it Most significant challenges to developing digital competencies % of respondents Complexity of change Legal or security concerns Rigid systems, networks, infrastructure Lack of digital understanding, talent and skills 30 Insufficient funding Lack of organisational agility 7 Lack of data and insight to inform digital strategies 6 Inability to measure or monitor digital effectiveness 4 Lack of leadership and executive support Source: The Economist Intelligence Unit. Respondents were allowed to choose all that apply. The Economist Intelligence Unit Limited 019

5 5 How do you get better? Approaches used to develop digital compentencies % of respondents High performers Others Employee training in digital-related competencies Transforming our IT department Adoption of Agile development methods Establishing a digital department or competency centre 34 Appointing a chief digital officer New methods may be needed for developing digital competencies. High performers point the way forward. A majority of organisations have used two approaches to developing digital competencies: employee training and transforming IT departments. Both are important, although among high performers, IT transformation is the most frequently-cited digital competency for achieving goals. High performers are also more likely to have used several other approaches to developing their digital competencies: adopting Agile development techniques, appointing a chief digital officer, establishing a digital competency centre and hiring new executives. Others may want to consider these and other approaches, as well Executive and/or management training in digital-related competencies 43 New executive and/or management hires 37 Third-party consultancy services New non-management hires Acquiring another company or companies 7 41 Source: The Economist Intelligence Unit The Economist Intelligence Unit Limited 019

6 6 Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in the report. The Economist Intelligence Unit Limited 019

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