HOW TO WIN AT DIGITAL

TRANSFORMATION
INSIGHTS FROM A GLOBAL SURVEY OF TOP EXECUTIVES

IN ASSOCIATION WITH:
TABLE OF
CONTENTS
Executive Summary
Page 2

Methodology
Page 3

State of Play
Page 4

STEP 1: The Right Strategic

and Investment Focus
Page 6

STEP 2: Business- and

Innovation-Driven
Page 9

STEP 3: The Potential of Data

and Analytics
Page 13

STEP 4: Adopt an Enterprise-Wide

Approach
Page 16

STEP 5: Balance People and

Technology
Page 19

Econometric Research
Page 22

Conclusion
Page 24

Acknowledgments
Page 24
EXECUTIVE SUMMARY Make transformation a top strategic priority. Digi-
tal transformation is the top strategic priority (50%),
confirms the Forbes Insights and Hitachi survey.
The strategic emphasis on digital transformation is
Digital transformation sits atop the strategic reinforced by executives’ focus on investment.
Investing in new technologies to enable digitization
agenda for enterprises, according to a Forbes
is the top investment priority over the next two
Insights and Hitachi survey of 573 top years (51%), along with increasing data and analyt-
executives worldwide. The next two years are ics capabilities (51%).
critical in this regard, as half of them believe that
their organizations will be vastly digitally Business outcomes need to drive digital transfor-
mation. New business models are the top driver of
transformed in that time.
DX (41%), followed by new technologies (40%). It is
a sign of maturity that the ability to innovate is the
top measure by which the success of DX is mea-
It won’t be an easy undertaking. Technology is at the sured (46%), along with revenue growth (46%),
core of every digital transformation, with the digital followed by cost reduction (43%).
transformation imperative ushering in an era of
unprecedented change. However, digital transforma-
tion is not about technology. Rather, it uses technolo-
gy as a means to an end and goes beyond business.
Digital transformation (DX) is as much about the
transformation of how individuals work and the
cultures of organizations as it is about technology. Its
most difficult task is to change the way we think.

Digital transformation concerns every business, not

just the likes of Uber or Airbnb. Large, long-time
industry leaders also need to be innovative if they
don’t want to be replaced by the next hot startup.

How ready are companies for this complex and

difficult undertaking? Survey results and one-on-one
conversations with top executives reveal that a
transition toward digital maturity involves five
major steps, some of which will be easier to take
than others.

There are some areas where a majority of companies

seem to be on the right track:

2 | HOW TO WIN AT DIGITAL TRANSFORMATION

At the same time, there are also issues companies
still grapple with and need to resolve:
METHODOLOGY
The potential of data and analytics is not fully
This report’s findings are based on responses
utilized yet. While less than half of companies
(44%) see themselves as advanced or leaders in of 573 C-level executives from North America,
data and analytics, a vast majority (91%) have Latin America, Europe and Asia-Pacific. The
already seen revenue increases due to the use of majority of respondents were chief executive
data and analytics. Only a third of companies
officers (23%), chief technology officers (20%),
consider themselves leaders in customer experi-
ence based on their digital transformation, which chief information officers (15%), and chief
points to underutilized potential. financial officers (7%), and all were involved in
the planning or implementing of digital
An enterprise-wide approach to DX needs to be transformation in their organizations.
adopted. Currently, cross-functional teams are
Respondents represented a wide range of
not involved enough in developing (40%) or imple-
menting (35%) strategy, with the bulk of this work industries, including technology and services
done by IT (50% and 54% respectively). IT is the (20%), telecommunications (10%), financial
function considered the most prepared for digital services (14%), and healthcare (10%).
transformation (53%), while other functions lag,
with just over a third of survey respondents deem-
ing them ready.
10% Geography
Asia-Pacific
Companies need to learn how best to marry 34%
28% North America
technology with human resources. Technology
Europe
cuts both ways. It is seen as the biggest challenge 29%
Latin America
(29%) and the top contributor to a successful
digital transformation (56%). People (defined as Note: Does not add to 100% due to rounding.
talent and capabilities), on the other hand, are not
seen as equally significant contributors to the Revenues
19% 19%
success of DX. $10 billion or more
$5 billion - $9.9 billion
35% 27%
$1 billion - $4.9 billion
$500 million - $999 million
Note: All monetary figures in this white paper are
listed in US dollars unless otherwise specified.

\ COPYRIGHT © 2016 FORBES INSIGHTS | 3

2|
 French telecommunications company Orange is
STATE OF PLAY among the leaders in digital transformation. Digitiza-
tion is embedded in the company’s DNA, according
to Pascal Viginier, the company’s CIO. Its 2020 strat-
egy calls for digital interactions with all customers,
What is digital transformation? The definition both business-to-business (B2B) as well as more than
varies depending on the company, its leaders, 250 million individual customers. The company’s
objective is for over half of customer interactions
and industry. However, there are areas where
across Europe to be through digital channels by
executives agree. Digital transformation uses 2018. Internally, the company is involving all employ-
technology as a means, not an end. “We don't ees in digitization. It monitors internal adoption rates
think of it as just a digital transformation. We're by conducting and publishing surveys of employee
driving an end-to-end business transformation,” usage.
says Simeon Preston, chief operations officer of
Orange has also announced that it will increase reve-
AIA, a leading life and health insurer in Asia. nues in the new digital verticals, such as banking and
Internet of Things (IoT), by more than US$1 billion by
2018. Internally, the company involves all employees
It also goes beyond business itself. Digital transfor- in digitization. It monitors internal adoption rates by
mation is as much about the transformation of individ- conducting and publishing surveys of employee
ual human beings and cultures of organizations, as it usage.
is about technology. “The biggest part of our digital
transformation is changing the way we think,”
says Monique Shivanandan, group chief information
officer of Aviva, a British multinational insurance
company.

Digital transformation concerns every business, not

just the likes of Uber or Airbnb. Large, long-time
industry leaders need to be innovative as well. “They
have no choice. Either they move forward full throttle
with digital transformation, or there's a risk that the
next hot startup would displace them, no matter what
industry they are in," says Peter Russo, vice president
of product marketing at SAP.

In terms of understanding and implementing all

aspects of digital transformation, we are past the
early stages. Forty-five percent of companies believe
they have moved beyond the intermediate level in
terms of their digital transformation and consider
themselves either advanced or leaders. The 55% that
remain are either just beginning their digital transfor-
mations or have some technologies in place, but not
on an enterprise-wide level.

4 | HOW TO WIN AT DIGITAL TRANSFORMATION

 TOWARD MATURITY: ON THE RIGHT TRACK
Which of the Following Best Describes Your Company’s Digital Transformation Progress in Terms
of Improvements to Efficiency, Customer Experiences, and Business Models?

Ad hoc: Inadequate technologies and

limited use of digital.
10%

Beginning: Started to implement

technologies (for example, cloud and
mobile) and strategize about the role of
14%
digital transformation for our business.

Intermediate: Created an adequate

technology infrastructure and basic
strategy for digital transformation and
31%
some digital solutions.

Advanced: Created technology

infrastructure and enterprise-wide
strategy for digital transformation and
32%
digital technologies.

Leaders: Enterprise-wide integration of

digital technologies and digital
technologies that lead to substantial
13%
improvements.

The next two years will bring significant change, as Future trend: What happens over the next two years
almost half of companies (49%) believe that they will may reinforce the current division between compa-
be vastly digitally transformed over the next two nies in terms of DX maturity rather than bringing
years. In terms of timing, the biggest group (32%) those lagging behind up to speed. More leaders
expect transformation to take one to two years. plan to continue the transformation, with 61% who
Forty-two percent think it will take less than one year, believe they will be significantly transformed over
and 27% more than two years. the next two years. Only 47% of non-leaders think so.

COPYRIGHT © 2016 FORBES INSIGHTS | 5

STEP 1
The Right
Strategic and
Investment
Focus

6 | HOW TO WIN AT DIGITAL TRANSFORMATION

 A top-down approach is most effective when corpo-
“IT has grown from a function that was largely rate executives create a fund and run it like venture
capital would, Frank adds, and accept that two out of
about back-room process improvement to
ten ideas will work and kill those that don’t. British
becoming a boardroom topic, spanning issues insurer Aviva has created such a fund, which invests
ranging from risk management to corporate in local and global digital startups, either to infuse
strategy,” says Kim Stevenson, chief operating their knowledge into the company or to leverage
officer for the Client and Internet of Things breakthrough products within its environment.
Businesses and Systems Architecture (CISA)
In contrast, AIA performs many pilots and proto-
Group at Intel. Survey results confirm her types, and starts typically with one business line or
statement with the finding that digital function before it goes full scale. For example, it first
transformation is the top strategic priority (50%). launched iPoS, an interactive point of sale platform
that allows agents to engage with customers elec-
tronically, in Taiwan in 2011. After a successful pilot
program, it was scaled quickly across the organiza-
How do companies execute their digital strategies?
tion and today more than half of the new premiums
Executives interviewed by Forbes Insights agree that
come through the iPoS platform.
the best strategy is not to "boil the ocean.” People
who start too big and are overly ambitious tend to fail.
The strategic focus on digital transformation is
It is simply too hard to transform the organizational
reinforced by executives’ focus on investment in this
culture and people’s conceptions of the business all
area. Investing in new technologies to enable digiti-
at once, according to Malcolm Frank, chief strategy
zation is the top investment priority over the next two
officer at Cognizant.
years (51%), along with increasing data and analytics
capabilities (51%).

Top 5 Strategic Priorities Over the Next Two Years

Digital transformation 50%

Expansion (for example, mergers &

acquisitions, joint ventures)
38%

New products and services 35%

Diversification into a new business area 24%

Geographic diversity 22%

COPYRIGHT © 2016 FORBES INSIGHTS | 7

 Top 5 Investment Priorities Over the Next Two Years

New technologies to enable digitization 51%

Increasing data and analytics capabilities 51%

Development of new products and services 45%

Expansion into new geographic markets 40%

Internet of Things, machine-to-machine technologies 38%

Budgets have been on the rise and the next two Econometric study shows that higher technology
years should bring even more significant investment investments lead to higher revenue growth rates.
increases in digital transformation. While 22% of Independent econometric research conducted by
budgets increased by more than 10% over the last the Department of Business Technology at the
two years, 41% will see an increase on that level over University of Miami School of Business in association
the next two years. The same is true for the share of with Forbes Insights confirms that investment in tech-
revenues devoted to DX. Over the last two years, nology results in higher revenue growth rates. The
20% of companies dedicated more than 10% of their study of the world’s largest companies shows that
revenues to DX, while 40% plan to do so over the companies that invested in technology from 2007 to
next two years. Over the next two years, almost a 2009 had a revenue growth rate from 2010 to 2015
quarter of companies (23%) will devote 25% or more that was double the growth rate of companies that
of operating expenditure to digital transformation, did not keep up with investment in technology. (See
and the same ratio holds true for capital expenditure. page 22.)

8 | HOW TO WIN AT DIGITAL TRANSFORMATION

STEP 2
Business- and
Innovation-Driven

COPYRIGHT © 2016 FORBES INSIGHTS | 9

The ultimate reason for digital transformation (DX) is What is crucial is to observe valid business
to achieve business outcomes, so it is a positive sign models and new competitors emerging from
that new business models are the top driver of DX, across all industries. As an example, Frank cites
followed by new technologies. Especially encourag- Under Armour, a sports apparel maker that now
ing is the finding that more IT executives, who live uses technology-based activity and diet-tracking
and breathe technology, are driven by new business mobile and wearable applications. This means
models (46%) than by new technologies (43%). that the company is no longer a competitor for
Nike and Adidas, but also competes with compa-
“This isn't about technology for technology's sake,” nies like Apple. With CEO Kevin Plank’s statement
says Renee McKaskle, chief information officer at that Under Armour will "fundamentally affect
Hitachi Data Systems. “CIOs have a responsibility to global health," the company also becomes a com-
recognize that the lines between IT and business are petitor for health insurers who also offer wellness
blurring.” programs.

For the existing business, digital transformation Another example: AIA is creating online experi-
offers gains in efficiencies and cost reductions. But ences and communities for its clients. It has
technology executives interviewed by Forbes launched AIA Vitality, a science-backed wellness
Insights consider cost-savings a given. “Increasing program, across six markets. People can follow
efficiency is a low-hanging fruit,” says Frank. “As a their health improvement progress online via
CIO, it would put me back ten years if I was talking mobile devices. The online experiences are
about just cost savings,” agrees McKaskle. paired with real-world incentives. AIA Vitality
users who take action to get healthier—say, by
The pro-growth outcomes result from the introduc- exercising more, eating better or stopping smok-
tion of new business models. They are often based ing—can receive significant discounts on their
on a wealth of data that companies have gathered premiums over time, in addition to near-term
over the years, and are only now putting to work, rewards such as coffee vouchers and cinema
says SAP’s Russo. He points to Sabre, originally part tickets.
of American Airlines, as a company that has posi-
tioned itself as a technology leader. It has become a With such industry-blurring changes in business
leading technology company for the travel industry. models, it is somewhat troubling that a majority
Most of the time when we book an airline ticket, or (57%) of transformations are driven from the
make a hotel reservation, it is done on Sabre inside out, which may result in missed trends and
systems. Sabre now looks at the data to help its technologies in the market. This is especially true
customers in the travel or hospitality industries to in the era of open innovation, when different
optimize their pricing, marketing, and capacity. entities, including competitors, startups or
trade associations, form ecosystems to better
“Digital transformation does not work when it's tech- navigate the technologically complex business
nology-led, when companies try to blindly emulate environment.
what they see out there among the FANG gang
(Facebook, Amazon, Netflix, Google), saying ‘let's be
the Amazon of our space, let's be the Uber of our
space,’ while not knowing how it’s applicable to their
business,” says Cognizant’s Frank.

10 | HOW TO WIN AT DIGITAL TRANSFORMATION

 Top External Drivers of Digital Transformation

New business models 41%

New technologies 40%

Competitors from 36%

our industry

Customer 35%
expectations

Disruptive
competitors from 23%
other industries

Partners, vendors
and third parties
16%

Bright spot: Innovation emerges as the top mea-

sure of DX success. Ability to innovate, along with
revenue growth, is a top measure of the success of
digital transformation initiatives (46%), followed by
cost reduction (43%). The biggest groups of compa-
nies also report tangible results for the ability to inno-
vate (40%) and cost reductions due to DX (41%). To
view DX through the lens of innovation attests to the
maturity of companies, who no longer see straight
cost reductions as the sole purpose of digital trans-
formation.

Products and services is where most of the innova-

tion will happen over the next two years (55%),
followed by new business models (46%) and internal
processes (46%). Innovation is the top area where
DX is predicted to happen across all regions, while
there are some differences across industries.

COPYRIGHT © 2016 FORBES INSIGHTS | 11

 Over the Next Two Years, Most DX Will Happen in These Areas

Innovation in products and services 55%

New business models and revenue streams 46%

Internal processes and organization 46%

In our relationships with customers

42%
(for example, engagement)

New distribution channels 37%

Collaboration within the enterprise 34%

Collaboration with third parties 23%

(partners or vendors)

Talent management and human resources 16%

12 | HOW TO WIN AT DIGITAL TRANSFORMATION

STEP 3
The Potential
of Data and
Analytics

COPYRIGHT © 2016 FORBES INSIGHTS | 13

TOWARD MATURITY:
But they are not equally strong in customer analytics.
“We need deep customer insights to be the Google of

ISSUES TO FIGURE OUT

insurers,” says Shivanandan.

Use data and analytics to bolster customer experi-

ence. Only a third of companies consider themselves
leaders in customer experience based on their digital
“Winners and losers in the transformation. This is somewhat surprising consider-
ing that digitization and data have created possibilities
digital world get separated at for new customer segmentation, omni-channel
the data level.” engagement and personalized messaging.
— Malcolm Frank, Chief Strategy Officer, Cognizant
These results are significantly lower than for the matu-
rity of digitization overall. Why? In short, because
customer experience is a transparent area, where
While less than half of companies (44%) see them- companies compare themselves to the likes of
selves as advanced or leaders in data and analytics, a Amazon when it comes to website navigation, product
vast majority (91%) have already seen revenue increas- offering, or return policies.
es due to the use of data and analytics. Of that
number, almost a third (31%) experienced increases in There is also more urgency to improve customer
revenues of 5% or more. experience. The customer is instantly dissatisfied
when something goes wrong and companies often
Intel has achieved over a billion dollars in incremental learn about it in real time by tracking online usage.
revenue and productivity gains in the last two years Speed matters as customers quickly find another
thanks to its investments in the company’s data layer. provider online. To prevent this, Aviva introduced
Data and analytics allowed the company to see trans- agile processes to respond to customers who may
actions from the customer all the way back to product drop online activities or complain to a customer
engineering, which helped forecast the right product service agent.
mix and demand. Intel also created a predictive model
that fundamentally transformed how it engages in its
reseller channel, which also generated a couple of
hundred million dollars in revenue.

And this is just the opening phase of realizing the

potential of data. “If this was a movie about data, we
would be still at the opening credits,” says Intel’s
Stevenson.

There are interesting differences by industry in this

area. Aviva’s Shivanandan points to a data-related
paradox in the insurance industry. While on one hand,
insurers have always been immersed in actuarial
science, they typically looked at data from a product
perspective.

14 | HOW TO WIN AT DIGITAL TRANSFORMATION

 What Best Describes Your Company’s Progress With Digital
Transformation in Terms of Customer Experience?

Our business struggles to provide high-quality customer

experiences and uses digital technologies primarily to 21%
counter threats.

Our digitally enabled customer experiences and

products are generally inconsistent and not well 19%
integrated.

Our business uses digital to provide consistent

experiences and services. We are not yet truly 26%
innovative.

Our business is a leader in its markets and provides

world-class digital products, services, and 23%
experiences.

Our business remakes existing markets and creates

new ones to its own advantage thanks to digital. We 10%
are a fast-moving target for competitors.

Synchronize data and analytics capabilities with needs. The IT function has the highest data and analytics
capability (55%), but just 23% see IT’s need for data and analytics as the highest. Marketing has the biggest
negative correlation between capability and need, with capability at 8% and need at 18%. The very low level of
capability among marketers is especially troubling, since a chief marketing officer is seen as a function that will
undergo significant change over the next two years. The significant discrepancy between IT and everyone holds
true across regions, industries, and functions. The only difference is the degree of this gap.

Overall, the trend is that many more IT executives believe they have the highest capabilities (63%), while only
46% of line-of-business executives see this dominance of IT (46%). At the same time, fewer line-of-business
(LOB) executives (18%) than IT executives (27%) believe that IT has a high need for data and analytics capabilities.

Functions With the Most Data Highest Business Need for

and Analytics Capability Data and Analytics

IT 55% IT 23%

Finance 13% Sales and marketing 18%

Operations 8% Finance 16%

Sales and marketing 8% Operations 16%

Human resources 7% General management 10%

COPYRIGHT © 2016 FORBES INSIGHTS | 15

STEP 4
Adopt an
Enterprise-Wide
Approach

16 | HOW TO WIN AT DIGITAL TRANSFORMATION

It is often said that these days every company is, in Everybody needs to get involved with strategy
effect, a technology company. As an extension, every design and implementation of digital transforma-
executive becomes a technology executive. With the tion. Currently, cross-functional teams are not
lines between business and technology blurring, so involved enough in the development or implementa-
are the lines between executives’ responsibilities. tion strategy (40% and 35%, respectively), with the
For starters, this means closer collaboration between bulk of this work done by IT (50% and 54%, respec-
IT and line-of-business executives. “Marrying IT with tively). Dedicated teams are active at the develop-
business functions is where the power comes in,” ment stage (51%), but unfortunately fall off at the
says Stevenson. She is the embodiment of the shift- implementation stage (29%). This is not a good sign,
ing executive responsibilities, with a recent promo- since implementation often calls for business and
tion from chief information officer to chief operations technology adjustments, some of which may be
officer. beyond the scope of IT.

Collaboration should mark the top of the list of things Initially, both sides need to have a better sense of
to do, but currently only about a third of executives how technology helps them achieve business goals.
plan to focus on it over the next two years. An enter- Stevenson recalls a conversation she had with a busi-
prise-wide approach to DX, to ensure it does not live ness leader after becoming Intel’s chief information
in silos, is key to success. In this area, companies still officer. When asked about the IT department,
grapple with several issues. line-of-business executives responded that the
department was great because their PCs worked
Where are the champions? There are plenty of deci- well and the automated phone systems functioned
sion makers, but not enough champions. Digital flawlessly.
transformation needs more champions. The biggest
decision makers when it comes to investing in digital That was Stevenson’s “aha moment,” when she
transformation initiatives are the CEO (62%), chief realized that business was missing IT’s potential. She
technology officer (43%), and chief information officer told the executive: "Look, your expectations are too
(40%). However, the levels at which executives cham- low. If you have higher expectations of us, then we'll
pion DX are much lower, with chief technology rise to the occasion and we'll help you define and
officers as the biggest champions (29%). This view is execute your strategy.”
shared across functions, including chief technology
officers. To involve multiple functions in digital transformation,
AstraZeneca follows a process called Flight Deck,
Readiness for transformation across all functions. which grew out of the commercial part of the busi-
Currently, IT is the function considered the most ness, says David Smoley, AstraZeneca’s chief infor-
prepared for digital transformation (53%), while other mation officer. Flight Deck is essentially a demand
functions lag with just over a third of survey respon- management and prioritization process. It's
dents judging them ready for DX. Not surprisingly, cross-functional and connects people so they share
LOB executives believe that non-IT functions are best practices, and green-light the best ideas. It also
better prepared to take on digital transformation than helps leverage common methodologies. Over the
do IT executives. last year, Flight Deck considered 219 initiatives and
green-lighted 129. Forty-nine of these initiatives have
been implemented.

COPYRIGHT © 2016 FORBES INSIGHTS | 17

IT and LOB executives do not see eye to eye on who designs and implements DX. IT executives think they
do more than others, but LOB executives do not share their view. Who is right?

IT executives think: LOB executives think:

IT 54% A dedicated team 56%

Who is most involved in the A dedicated team 47% IT 46%

development of DX strategy?
A cross-functional 41% A cross-functional 38%
committee committee

IT 61% IT 45%

Each function A cross-functional

Who is most involved in 36% 39%
independently committee
the implementation of
DX strategy? Consultants and 32% Each function 36%
system integrators independently

18 | HOW TO WIN AT DIGITAL TRANSFORMATION

STEP 5
Balance People
and Technology

COPYRIGHT © 2016 FORBES INSIGHTS | 19

Technology: A double-edged sword. Technology
cuts both ways. It is seen as the biggest challenge Top Contributors to a Successful Digital
(29%) and also the top contributor to a successful Transformation
digital transformation (56%).
Technology 56%

Top-level executives 29%

Top Challenges to Achieve Data-Driven
Vision and strategy 29%
Digital Transformation
Business leaders 24%

Legacy technologies 29% Talent and capabilities 20%

Lack of talent throughout 23% Budgets 14%

the enterprise
Employees 10%
Lack of collaboration on 23%
data and analytics (for Collaboration 9%
example, data sharing)

Lack of vision and strategy 21%

Technologies That Are the Top Focal Points

IT department readiness to 21%
adopt and support digital for Digital Transformation
transformation
Cloud 64%
Inability to clearly 18%
demonstrate ROI Mobile 44%

Budgetary issues 15% Analytics 42%

Internet of Things 31%

No consensus about the
course of action 13%
(investment, strategy) Social media 30%

Lack of sponsorship at the 13%

top levels of the company Cloud leads the list of top DX technologies, followed
by mobile. Forbes Insights spoke with executives
Difficulty implementing about what’s next in technology. Hitachi’s McKaskle
12%
enterprise-wide with foresees a world where data becomes agnostic from
functional silos its containers, with a layer on top that allows for
predictive analytics, insights, and competitive
advantage.

20 | HOW TO WIN AT DIGITAL TRANSFORMATION

AIA sees artificial intelligence, blockchain, and digital Changing executive roles: Digital transformation will
health as the three pillars that have enormous poten- soon start affecting non-IT roles more than IT roles.
tial to transform the health insurance industry. To stay Technology executives have so far undergone the
on the cutting edge, AIA partners with external biggest change due to DX. Over the last two years,
parties, including Nanyang Technological University the role and responsibilities of the chief technology
in Singapore, and is currently testing various artificial officer have changed the most by a large margin
intelligence technologies. AIA has also joined the R3 (55% for chief technology officer and 34% for COO).
blockchain consortium, along with many of the However, the next two years should see COO jobs
world’s biggest financial institutions. changing more than chief technology officer roles
(37% versus 31%).
Bring People With You
Hitachi understands how disruptive and uncomfort-
“Digital transformation is an organizational and able the new digital reality may feel for employees. IT
human capital commitment. It's not a technology employees who used to rack and stack servers and
commitment. The change management is the most crimp cables may have to become system integra-
important investment you can ever make,” says tors. Others may be asked to help create scripts so
McKaskle. that robots will do some of their work. “That can be a
very scary proposition unless you bring people along
To follow her lead, companies must change their up the knowledge worker chain with you,” says
approach in the following areas: McKaskle.

Talent as a contributor: People, defined as talent and One way to change the culture is to create an innova-
capabilities, are seen as the second biggest chal- tion lab to develop new technologies and introduce
lenge (23%) to successful digital transformation, but agile processes. Aviva has several such labs, which
are not considered a highly significant contributor to the company calls garages. They are set up different-
success. Talent and capabilities as well as employees ly than typical day-to-day office environments.
scored relatively low in the ranking of the top contrib- Employees who work in such garages catch the bug
utors to success, at 20% and 10% respectively, with of agile processes and digitally transformative tech-
more of the credit attributed to the top executive nologies, and begin to change the culture of the
ranks. This view is shared across functions and company when they go back to their regular jobs.
regions. The company also injects the digital vibe by hiring
digital thinkers from other industries, including online
Dealing with challenges: It is people that are on top gaming.
of the list when it comes to dealing with challenges of
DX. New hires come first (57%), followed by internal
training (54%). In this area, investing in technologies is
ranked lowest (24%), which indicates that companies
understand that, while they have the technologies to
gather data, they may not have the skills yet to use it
effectively. While overall hiring is most often on top of
the list, there are some geographical differences. The
financial industry stands out with its eagerness to hire
new talent before resorting to other solutions.

COPYRIGHT © 2016 FORBES INSIGHTS | 21

 Companies that spent more on technology
ECONOMETRIC during the recession (57 companies)

RESEARCH Above-average
Conducted by the Department of Business Technolo- post-recession 6.23%
gy, University of Miami School of Business, in associa- revenue CAGR
tion with Forbes Insights.

This study examined the relationship between

increasing technology expenditures during the last Companies that reduced technology expenditures
recession (2007 through 2009) and an increased during the recession (42 companies)
compound annual growth rate (CAGR) during
economic recovery (2010 through 2015). It is based
on the analysis of 99 of the world’s biggest compa- Below-average,
nies. (See Methodology). post-recession 3.88%
revenue CAGR

KEY FINDINGS
Companies that prioritized technology expendi- INDUSTRY ANALYSIS
tures during the recession experienced above-aver-
age performance afterward. Their revenue growth Industries with increased technology expenditures
rate was almost double that of companies that did during the recession and above-industry-average
not keep up with technology investments. post-recession revenue CAGR included communica-
tions, conglomerates, consumer products, energy,
Average technology CAGR: The average technology financials, and technology.
CAGR in the 99-company universe was 14.09%. This
means that, on average, companies increased tech- Industries that experienced an average decline in
nology-related investments by 14.09% each year from revenue (negative CAGR), despite increased
2007 through 2009. Of these 99 companies, 57 expenditure, included materials and printing and
increased technology expenditure during the reces- publishing.
sion, while 42 showed a trend of reduction.
The industry with the highest average technolo-
Average revenue CAGR: The average post-reces- gy-expenditure growth rate was healthcare. It was
sion revenue CAGR was 5.23%. This means that on also the industry with the highest average post-re-
average, companies experienced a 5.23% increase in cession revenue CAGR. The industry with the lowest
sales each year from 2010 through 2015. Total reve- average expenditure CAGR was industrials, and its
nue for these 99 companies ranged from $1.45 billion post-recession performance was below the universe
to $283.61 billion. average.

22 | HOW TO WIN AT DIGITAL TRANSFORMATION

ANALYSIS BY REGION METHODOLOGY
Asia Pacific (APAC) had the highest overall average Consideration for inclusion in the study required
technology expenditure increase and enjoyed the companies to be publicly traded from 2007 through
highest average revenue growth rate. Europe, the 2015. Their official reports needed to mention
Middle East, and Africa (EMEA) experienced a lower investing activities related to technology (such as
growth rate than the overall average of the software) from at least 2007 through 2009, and
99-company universe, regardless of expenditures. these expenditures needed to be capitalized. The
Companies in APAC and North America (NA) that final 100 companies were determined by examining
increased technology expenditures experienced 1,068 companies from the Forbes 2000, a list of the
above regional-average and company universe world’s biggest public companies. After adjusting
average growth rates. Companies in EMEA and NA for outliers, we were left with a 99-company
that decreased technology expenditures during the universe. The 2016 list features public companies
recession had below-average revenue growth rates. from 63 countries that together account for $35
trillion in revenue, $2.4 trillion in profit, $162 trillion
of assets, and have a combined market value of $44
Avg CAGR trillion. The companies represented the following
Overall Region Avg CAGR Increased Tech Capex Decreased Tech Capex industries: healthcare, financial services, technolo-
Capex Revenue Capex Revenue Capex Revenue gy, communications, printing and publishing,
APAC 16.08% 8.63% 39.99% 10.64% -18.46% 5.72% conglomerates, consumer products, energy and
EMEA 14.89% 2.42% 35.95% 1.52% -19.05% 3.88% industrials.
NA 9.62% 7.19% 43.27% 11.91% -21.78% 2.78%

CONCLUSION
Overall, companies that increased technology-related
capital expenditures during the recession were more
likely to experience an above-average post-recession
growth rate. Companies that reduced technology-
related capital expenditures during the recession
were more likely to experience a below-average
post-recession growth rate.

COPYRIGHT © 2016 FORBES INSIGHTS | 23

CONCLUSION

To continue to move forward toward maturity in digital transformation, companies need to maintain focus on
DX as a strategic and investment priority, as well as evaluate the success of DX business and innovation-relat-
ed measures. They also need to become more data-driven, ensure that DX is enterprise-wide, and make
certain employees are not left behind.

ACKNOWLEDGMENTS

Forbes Insights and Hitachi Data Systems would like to thank the following individuals for their time and
expertise:

Malcolm Frank, Chief Strategy Officer, Cognizant

Renee McKaskle, Chief Information Officer, Hitachi Data Systems

Dr. Robert Plant and Benina Lopez, Department of Business Technology, University of Miami School
of Business

Simeon Preston, Chief Operations Officer, AIA

Peter Russo, Vice President of Product Marketing, SAP

Monique Shivanandan, Chief Information Officer, Aviva

David Smoley, Chief Information Officer, AstraZeneca

Kim Stevenson, Chief Operating Officer, the Client and Internet of Things Businesses and Systems
Architecture (CISA) Group, Intel

Pascal Viginier, Chief Information Officer, Orange

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