July 17 PwC Irish 17 Digital IQ Survey
PwC Irish 17 Digital IQ Survey Keeping pace with transformation PwC s tenth Global Digital IQ study highlights that while businesses around the world and in Ireland have spent a lot of time and money seeking to keep up with the scope and scale of digital-driven change, Digital IQ the measurement of an organisation s abilities to harness and profit from technology is on the decline based on senior executives self assessment of their own organisations. Businesses aren t so much falling behind as struggling to keep up with accelerating technology developments. And looking ahead, it is clear that most are not ready for what comes next. Technologies continue to combine and advance, and new ways of doing business go from inception to disruption seemingly overnight. With perspectives from 2,21 business and technology leaders in all key industry sectors around the world including 5 in Ireland, the study is a comprehensive overview of how companies are striving to deal with disruption by leveraging their digital capabilities. PwC s Digital IQ survey identifies trends in technology adoption, examines how organisations maximise returns on their digital investments and sets out considerations for organisations seeking to better harness the potential of digital for their businesses. 1 Digital IQ Survey 17
Digital IQ s link to financial performance Digital IQ is on the decline 52% of companies globally rate their digital IQ as strong. In our last survey in 15 it was 7% and before that %. And the trend is similar in Ireland where Irish companies are less likely than before to weave digital into the DNA of their organisations. Over the ten years since the first running of the this survey, companies have done a lot to prepare themselves to profit from digital. The CIO role has evolved and significant investments have been made in technology. So what accounts for the disparity between effort and outcomes? It starts with the fact that digital IQ is not measured against a static scale but instead tracks organisational readiness in a fast evolving environment. So, while companies are smarter about technology adoption than they were previously, the questions keep getting harder. Faced with a declining digital IQ how can business leaders be expected to consistently unlock value from digital investments in a rapidly advancing world? In search of answers, we analysed respondents data to see if there was any connection between those organisations that achieve stronger financial performance and how they have tackled the digital agenda. What we found was that top performing companies tend to have broader definitions of digital, encompassing customer-facing technology activities and going beyond technology and into an organisational mindset. These top performers also have a better understanding of the human experience that surrounds digital technology. They are more likely to resource digital projects with cross functional teams of business, technology and user experience specialists. More of them say that creating better customer experience is a top expectation from digital investments and they also prioritise innovation and emerging technology. The analysis, therefore, suggests that the human experience matters and that the focus is rewarded with stronger financial performance. It entails rethinking how you define and deliver digital initiatives, considering employee and customer interactions at every step of the way and investing in creating a culture of technology innovation and adoption. It will only become more critical as emerging technologies, like artificial intelligence and the internet of things, define the next decade of digital and fundamentally changes the way humans and machines work together. David Lee Technology Partner PwC Ireland 2 Digital IQ Survey 17
How do Irish businesses compare with their global peers? In addition to looking at the features and behaviours that differentiated the top performing companies, we also looked at how Irish respondents compared with their global peers and the analysis highlighted the ollo ing key fin ing 1. A ignificant ro ortion o igital initiati e are failing to deliver Similar to the global experience (45%) half of Irish executives (48%) reported that their strategic digital initiatives failed to deliver to their planned scope; 2. Revenue growth is the key driver for digital investments Consistent with the global findings, growing revenues is the primary driver for Irish businesses investing in digital; 3. Ireland is less likely to track outcomes from digital investments Ireland scores poorly (44%) compared to global peers (4%) in terms of consistently measuring outcomes from digital investments and this has deteriorated from % in 15; 4. Ireland is less ready to embrace change than global peers While the survey noted no difference between Irish businesses and their global peers in terms of the extent to which they consider the impact of new technologies on the human experience, the survey highlights that Irish companies lag their global counterparts on how their culture embraces rapid change and disruption. To get the full value from technology, organisations must create digital cultures that adapt to change, focus adequately on customer and employee experiences and develop the right mix of skills within their workforce. Over half (58%) of Irish respondents felt that their culture embraces rapid change and disruption compared to a global figure of 9%; 5. Ireland is more likely to involve customers when exploring emerging technologies Developing a high quality user experience for employees and customers is a critical component of maximising digital IQ. It is therefore encouraging to note that Irish companies are more than twice as likely (41%) as their global peers (19%) to involve customer advisory groups when gathering ideas to apply emerging technologies in new ways;. The lack of integration with legacy systems continues to be a barrier Consistent with global findings, six out of ten (%) Irish business and technology leaders are of the view that the lack of integration of new and existing technologies and data is a barrier to achieving expected results from digital technology initiatives (Global: 59%); 7. The lack of digital skills are holding back progress Similar to global peers (5%), only 4% of Irish survey respondents confirmed that they had the digital skills required for an evolving digital economy. Irish executives also rated their organisation s existing digital skills behind that of global peers for all key capabilities covering data analytics, architecture, digital strategy, technology evaluation, deployment of new technologies, creative design and user experience; 8. Ireland has under developed skills in key emerging technologies The next wave of emerging technologies is bringing dramatic advances in what computers can do. Executives expect the internet of things and artificial intelligence to bring about the biggest change. The survey further highlights that skills in key emerging technologies like robotics are less well developed in Ireland compared to global peers. This is noteworthy in light of the fact that these technologies are also identified to be some of the most disruptive to business models; Ireland places less focus than global peers on security and privacy In light of the recent 9. WannaCry ransomware incidents, it is noteworthy that Irish companies (%) are less likely than global peers () to proactively evaluate and plan for security and privacy risks in digital projects. The survey also reveals that 58% of respondents ranked their cybersecurity and privacy digital skills as strong or very strong compared to 4% globally. 3 Digital IQ Survey 17
Improving digital IQ - key considerations for Irish businesses o re ecting on the fin ing hat ractical te can Iri h ine e take to etter ena le the to realise a return on their digital investments? 1. ake tock o igital technology in e t ent With the bulk of technology spending occurring outside of IT, businesses need to understand what and where investments are being made and how each investment ties back to an overarching digital roadmap. Getting a handle on the full scope of investments again requires bringing together a diverse group of stakeholders. It is also critical that the benefits expected from digital investments are formally articulated and tracked. As noted in the findings above, this is an area where Ireland is significantly behind its global peers. 2. In e t in igital kill Now, more than ever, upskilling is needed. The findings of the survey highlight that Irish businesses are trailing its global peers in terms of the adequacy of their existing digital skill sets. This training includes teaching employees the skills to harness technology, whether that s a new customer platform or a new breed of collaborative robot. It also means cross-training workers to be comfortable and conversant in disciplines outside their own, as well as in skills that can support innovation and collaboration, such as agile approaches or design thinking. 3. Make emerging tech a priority: The survey supports the view that emerging technologies such as the internet of things, artificial intelligence and robotics are likely to significantly disrupt established business models over the coming years. Again the survey highlights that Ireland is trailing its global peers in the development of skills in these areas. It is critical, therefore, that leadership teams should view the exploration and adoption of emerging technology as a mainstream activity of the organisation. If emerging technology is considered as just a side project of IT, it is unlikely to have any lasting impact on the organisation as a whole. 4. oc on the h an e erience As businesses experiment with emerging technology, don t shortchange the customer or employee experience. A business can develop a digital/product service that leverages the technical capabilities of robotics, for example, but unless the innovation has sufficiently thought through issues like whether the digital product has created the necessary trust and transparency that customers and employees need, there is a risk that the product will not be adopted and the investment is wasted. 5. on t orget a o t ec rity an ri acy A business can do all the right things in terms of building its digital skills, putting the human experience at the centre of its digital design, investing in emerging technologies and setting up the right governance arrangement to track digital investments, but unless it gives adequate attention to security and privacy considerations it risks not just failing to capitalise on the potential of digital, but doing serious damage to its relationship with customers and employees and its overall brand. So, in conclusion, the survey highlights that Irish businesses are increasingly struggling to effectively harness and profit from technology. In our experience, people have been the missing link in the digital transformation. Businesses must pursue a more balanced approach to digital transformation that s equal parts business, experience and technology. Top performing companies tend to have broader definitions of digital, encompassing customer-facing technology activities and going beyond technology and into an organisational mindset. Just one in five of Ireland s respondents said that digital is synonomous with IT with a third (3%) confirming digital refers to all technology innovation-related activities. More top performers say that creating better customer experiences is a top expectation from digital investments. With Irish businesses less willing to embrace change and digital skills holding back progress the survey suggests that Ireland has some way to go to fully embed digital into the DNA of its organisations. 4 Digital IQ Survey 17
Further insights on the nine key findings in relation to Irish businesses he ollo ing ection ro i e ore in ight on the nine key fin ing in relation to Iri h ine e a e on the re on e to the r ey 1 A ignificant ercentage o igital initiati e are failing to deliver Similar to the global experience, almost half of Irish executives reported that their strategic digital initiatives are not delivering to the planned scope. Figure 1: On average, how often were strategic digital initiatives delivered within 1% of planned scope (% who said always and frequently ) 2 Revenue growth is the key driver for digital investments Consistent with the global findings, growing revenues is the primary driver for Irish businesses investing in digital. Irish respondents expect greater return on investment from digital initiatives in terms of revenues, profits Figure 2: Extent to which digital investments will enable revenue growth, profit growth, cost savings and better customer experiences and customer experience than global counterparts. However, global counterparts expect greater cost savings than Irish businesses. Given the findings of the study in relation to the importance of the human experience, it is encouraging to see that Irish businesses out-perform their global peers in relation to the focus on improving customer experience. Grow Revenues Increase rofit Achieve Cost Savings Better Customer Experience 52% 5% Ireland 88% 58% 28% 42% 71% 44% 4% 32% Western Europe 74% 47% % 32% Global 73% 47% % 34% 5% 55% 5 Digital IQ Survey 17
44% 44% 5% 5% 4% 4% 3 Ireland is less likely to track outcomes from digital investments Ireland scores poorly (44%) compared to global peers in terms of consistently measuring outcomes from digital investments and has deteriorated from % in 15. 44% 44% Figure 3: We consistently measure outcomes from our digital technology investments 4 Ireland is less ready to embrace change than global peers To get the full value from technology, organisations must create digital cultures that adapt to change, focus adequately on customer and employee experiences and develop the right mix of skills within their workforce. Irish companies, however, lag behind their global counterparts on how their culture embraces rapid change and disruption. Figure 4: Our culture embraces rapid change and disruption (% who agreed) 5 Ireland is more likely to involve customers when exploring emerging technologies 5% 5% 4% 4% Irish companies are more likely than global peers to involve customer advisory groups when gathering ideas to apply emerging technologies in new ways. 41% Figure 5: Likelihood of using customer advisory groups and surveys in the process of gathering innovative ideas from external sources (% who said yes ) 14% 19% 19% The lack of integration with legacy systems continues to be a barrier Six out of ten (%) Irish business and technology leaders are of the view that the lack of integration of new and existing technologies and data is a barrier to achieving expected results from digital technology initiatives and has improved slightly from 5% in 15. Figure : Is the lack of integration of new and existing technologies an obstacle when it comes to achieving expected results from digital technology initiatives? (% who said yes ranking it as a current and emerging barrier) 58% 78% 7% 9% Digital IQ Survey 17 % 5% 1% 59%
7 The lack of digital skills is holding back progress Similar to global peers, less than two-thirds of Irish survey respondents confirmed that they had the digital skills required for an evolving digital economy, but this is an improvement in Ireland from 53% in 15. The survey also suggests that Ireland has some work to do in terms of developing the digital skills required to achieve expected results from digital technology, albeit being ahead of global counterparts in this regard. Figure 7: Our employees have the skills required for the evolving digital economy (% who agreed ) Ireland 4% 2% Western Europe 1% Global 5% these skills competencies as strong or very strong. Just one in five (%) say that they have well-developed skills in the area of user experience and human-centred design compared to over a third (38%) globally. However, 1% of global respondents ranked this skill as important compared to just a third of respondents in Ireland. The survey further suggests that certain key skill capabilities have deteriorated in Ireland compared to 15. For example, data analytics ( 17: 54% Vs 15: %); evaluating emerging technology (17: 4% Vs 15: 5%), user experience (17: % Vs 15: 42%) and creative strategy and design (17: 2% Vs 15: %). Figure 9: A: How would you rate your organisation s digital skills in terms of its capabilities in the following areas: (% who said very strong and strong ) B: Importance of these skills to your business (% who said highly important and quite important ) Cybersecurity & privacy Capabilities (A) Importance (B) Ireland Global Ireland Global 58% 4% 78% 7% 83% 94% Data analytics 54% 59% 7% 84% 82% 9% Figure 8: The lack of properly skilled teams is a barrier when it comes to achieving expected results from digital technology initiatives (% who agreed ) Ireland 4% 5% Western Europe 4% Global 3% Irish executives rated their organisation s digital skills behind that of global peers for all key capabilities. While the most important skills to the business are evaluating emerging technologies, data analytics and digital planning, only around half of survey respondents rated Technology architecture & design Digital strategy & planning Evaluating emerging technology Business deployment of new technologies Creative strategy & design User experience and human-centred design 48% 58% 3% 78% 88% 48% 54% 82% 77% 89% 4% 55% 7% 92% 78% 89% 34% 48% 4% 8% 79% 87% 2% 4% 5% 2% % 73% % 38% 47% 34% 1% % 7 Digital IQ Survey 17
8 Ireland has under-developed skills in key emerging technologies The survey further highlights that skills in key emerging areas of technology, such as the internet of things, artificial intelligence and robotics are less well developed in Ireland compared to global peers. This is noteworthy in light of the fact that these technologies are also identified to be some of the most disruptive to business models. It is also interesting that while a step-up in investment in drones is on the cards in Ireland, these skills are currently non-existent in Ireland. 1 1 1 1 1 1 1 1 9 8 7 5 1 55 45 38 41 9 8 7 5 1 7 5 27 12 9 9 9 Figure 1: Skills are highly developed and quite developed in the following key areas (% who agreed ) 1 31 8 1 2 8 7 7 5 5 7 7 1 1 4 5 4 8 8 9 9 8 8 7 7 5 5 Ireland W. Europe 1 1 1 3 3 1 2 2 4 2 2 2 9 8 Global 7 All figures represented below in % 5 1 1 Internet of Things Artificial Intelligence Ro otic 3-D Printing Augmented Reality Drones irt al Reality Blockchain It is also worth noting that a greater step-up in investment in the internet of things and artificial intelligence is needed in Ireland over the next three years in order to keep pace with global levels. Investment in robotics over the next three years in Ireland is in line with global levels. Figure 11 (right): Technologies in which substantial investment is being made: Ireland Global Today Today Today Internet of Things 74% 58% 73% 3% 84% 5% Artificial Intelligence 3% 54% 54% 3% % 4% Robotics 14% 34% 15% 31% 18% 29% Augmented Reality 12% 24% 1% 24% 8% 24% 3-D printing 12% 12% 12% 17% 19% % Virtual Reality 4% 14% 7% 15% 7% 15% Blockchain 2% % 3% 11% 5% 9% Drones - % 5% 14% 5% 1% 8 Digital IQ Survey 17
9 Figure 12: Technologies which will be the most disruptive to your existing business model in the next five years 1 1 1 9 1 9 9 8 9 8 9 8 Ireland 8 7 8 1 9 9 8 8 7 7 5 5 5 5 5 5 5 5 38 42 1 35 12 1 1 All figures 7 represented below in % 18 8 18 4 13 1 1 1 1 9 9 9 7 Augmented Reality Internet of Things 8 Ireland Drones Global Blockchain 7 7 Artificial Robotics All figures represented below in % Intelligence 8 5 5 5 1 12 ial ence 9 8 4 1 Augmented Reality 1 1 8 22 23 1 3 3 1 1 3 3 Drones Digital IQ Survey 17 Blockchain 8 Ireland Global % % 75% 75% Figure 13: We proactively plan for security and privacy risks in digital projects (% who agreed ) 7 1 1 23 9 1 7 ial ence Global 1 8 7 5 23 According to the study, Irish companies are less likely than global peers to proactively evaluate and plan for security and privacy risks in digital projects. Having been exposed to the WannaCry ransomware and in a world where cyber-attacks are becoming the norm, posing huge reputational and financial risks to businesses, this is an area for greater attention. 1 1 9 Ireland places less focus than global peers on security and privacy 7 12 7 All figures represented below in % 8 4 1 1 1 3 3 % % Augmented Reality Drones 75% 75% Blockchain The survey reveals that just over half (58%) of Irish respondents ranked their cybersecurity & privacy digital skills capabilities as strong or very strong compared to 4% globally. Ireland also scored these skills as less important compared to global counterparts. A cyber crisis can be one of the most challenging and complicated that any organisation will face. They require strategies around investigation and communication, as well as significant forensic and analytical capabilities. In today s risk landscape, a company s degree of readiness to handle a cyber crisis can be a marker of competitive advantage and ultimately ensure its survival. We expect that there will be more attacks and all organisations should ensure they have protected themselves in the following key areas: robust digital hygiene; ability to detect intrusive behaviour; thoughtful design of IT infrastructure; advance planning and rehearsal including simulating a cyberattack and early adoption of cloud technology.
www.pwc.ie ey contact David Lee Technology Partner, PwC Ireland E: david.thomas.lee@ie.pwc.com Ronan Fitzpatrick Digital & Fintech Leader, PwC Ireland E: ronan.fitzpatrick@ie.pwc.com Alan Murphy Technology Senior Manager, PwC Ireland E: alan.d.murphy@ie.pwc.com This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. 17 PricewaterhouseCoopers. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. 8_1_417