New Enabling Trust in a Digital Economy - ISACA Kenya Chapter der-Molen... · 2018. 5. 8. · In this key-note speech of KPMG, we will highlight: - What Digital means and what makes

Enabling Trust in a Digital EconomyPERSPECTIVES ON DIGITAL TRANSFORMATION and GOVERNING DIGITAL INNOVATION

2© 2018 KPMG Advisory Limited, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

In this key-note speech of KPMG, we will highlight:- What Digital means and what makes Digital Disruption different than traditional business

transformation- The key findings from our global research performed in 2017, namely the KPMG CEO

Outlook and the KPMG/ Harvey Nash CIO Survey. Both clearly indicate the need for andconcerns around Digital and Digital Transformation

- The key factors around Digital Transformation and how to deal with DigitalTransformation in the organization

- The key considerations with regards to Technology Risk management, and- A framework for emerging technology governance

A wide range of topics are being discussed in the following sections, out of which the mostrelevant themes can be selected and presented. We’d appreciate if we can have theopportunity to discuss what would fit best in the overall agenda, so that we can tailor thecontents to this.

Introduction


What does Digital Mean?Digital is not a thing, but is simply a word that describes our world today. Advancements in technologyhave blurred the lines between physical and virtual, creating an emergence of digital disruptors thatprovide new pathways for organizations to create value.

We believe digital is broad in its impact, but also industry-specific. It goes far beyond the front office tofacilitate true enterprise-wide business transformation so organizations can build sustainable competitiveadvantage. While we understand that embracing digital may present its own challenges, we viewdisruptors as enablers rather than inhibitors, allowing businesses the opportunity to innovate, transformand thrive.

Digital – what does this mean?

Digital BusinessStrategy

Enterprise Digital

Transformation

Omni-Business

Digital Customer

Engagement

Digital Marketing

Mobile

Digital Supply Chain

Disruptive Business Models

Activity was cantered on front office and customer

experience

Consulting firms created digital practices through

strategic acquisitions

Digital agencies entered the market and played a big

role

A digital focus on just the front office will not provide sustainable

competitive advantage

Organizations must focus on restructuring operations beyond

customer-facing functions to enable enterprise-wide digital

transformation

Organizations plan to spend more on digital in the middle and back

office than the front office

Digital Disruption has dramatically changed the Business Environment


New technologies are clearly at the heart of digitaldisruption. Social technologies like Facebook,Twitter, and LinkedIn enable businesses to engagewith customers and employees, share information,solve problems in real-time and build lastingrelationships. Smartphones and tablets are changingthe way people work and behave, making just aboutany location with internet access an office, retailoutlet or bank branch. The information generated byall mobile and social media interactions provides arich source of data that can be analysed and used tocreate custom marketing pitches and productsattuned to the individual’s unique requirements.

In addition, cloud technology has enabled a widearray of everything-as-a-service (XaaS) offerings thatsignificantly reduce the cost and time required toprovision everything from infrastructure to completeapplications solutions.

But disruption goes beyond technologies. In all of theprior technology shifts, such as mainframe tominicomputers to client/ server etc., an ITorganization with specialists was required to sitbetween technology and the business in order toprovision and support solutions. Today, people aremuch more tech-savvy. So called “millennials” (bornafter 1982) have grown up around computers and arecomfortable with them. This combination of tech-savvy users and XaaS offerings now allowsbusinesses to procure and provision technology-enabled solutions without the involvement of IT. Theyalso have higher expectations as a result of their ownexperiences with their use of personal technologies,such as the ability to download an app for free or fora few dollars from an app store, and begin realizingvalue immediately.

They are now looking for the same kind ofexperience at work.

At the same time, a firm’s external customers havesimilar expectations. They want to be able to conducttheir business (buy a book, download a movie,deposit a check) anytime of the day or night, sevendays a week using their smartphone, tablet or PC.They expect to be able to get immediate help byconducting a real-time chat with a customer-supportspecialist, and they share their experiences – bothgood and bad – widely on social media.

Therefore, we define the Digital Enterprise as theorganization that puts the Customer First anytime,anywhere, anyplace, based on NextGen customerexpectations;

Economics also play a role, as hardware has truly become commoditized and so inexpensive that compute cycles and storage can be rented for pennies an hour on demand. In fact, it has spawned a new “everything-as-a-service” business model where just about everything from raw compute cycles through enterprise applications can be rented. This has enabled the business to bypass the capital budgeting process and procure technology-enabled solutions directly with a corporate credit card. Often, the end result is a situation where the business gains new capability faster and more cheaply than it would have done if it had followed the traditional route of using its internal IT organization.

The combination of new technology, a tech-savvy population and economic factors is what makes this different from past technology shifts. It has led to the democratization of IT, where IT-enabled solutions are available to everyone.

WHAT MAKES DIGITAL DISRUPTION DIFFERENT?

KPMG Digital Framework


KPMG CEO Outlook 2017About the Survey• Conducted between February and April 2017.• Survey of 1,261 chief executive officers (CEOs)

from Australia, China, France, Germany, India,Italy, Japan, Spain, the UK and the US.

• Operate in 11 key industries: automotive, banking,infrastructure, insurance, investmentmanagement, life sciences, manufacturing,retail/consumer markets, technology,energy/utilities and telecom.

• 312 CEOs from companies with revenuesbetween US$500 million and US$999 million;

• 527 with revenues from US$1 billion to US$9.9billion;

• 422 from companies with revenues of US$10billion or more.

Key Findings of the KPMG CEO Outlook 2017

Today, more than ever before, leading a business isabout challenging convention and driving radicalchange. Three in four CEOs in the survey (74percent) say their company is striving to be thedisruptor in its sector. There are many reasons whyCEOs are embracing disruption. We have witnesseda shake-up of the geopolitical status quo by way ofthe elections in the US, the UK and other countries.Above all, technology-driven change is sweepingthrough industries and economies on a globalscale. 65% of the CEOs are seeing technologicaldisruptions as an opportunity than a threat.

.

The evolving risk landscape

As uncertainty increases, businesses have reviewedtheir register of key risks. Seven in 10 CEOs (69percent) report that they have increased investmentin governance and risk management in the past year,with 27 percent increasing it significantly. As they doso, operational risk has risen to become the highestconcern for CEOs overall.

Reputational risk One of the most striking changesin this year’s survey is the rise in the number ofCEOs who cite reputational and brand risk as atop concern. It is the third most important risk forCEOs (out of 16 in total), whereas last year it did noteven break into the top 10. CEOs also seereputation and brand risk as having the second-biggest impact on growth over the next 3 years;in 2016, it ranked seventh out of 10. CEOs areacutely aware that everything they do takes place ina more transparent environment than ever before.The impact of social and mainstream mediaspreading damaging news on a global scale, and at apace never seen before, is well understood by CEOs.Hackers can quickly distribute compromising emailsonline, while harmful videos of poor customer servicecan rapidly ‘go viral’. This issue may be amplified bycompositional changes to the labour force, where alarger proportion of employees are hired ‘on demand’and do not necessarily ‘live’ the brand’s values asconsistently as full-time employees.

The cyber connection Considering the high-profilenature of many recent cyber attacks, and thecatastrophic damage they can cause, it might seemsurprising that cyber appears at number five on therisk list — after ranking first last year. To an extent,this is explained by CEOs’ growing confidence intheir management of the risk. And it is worth notingthat there is a cyber dimension to all of the top risks;particularly operational, emerging technology andreputational risk, which confirms that CEOs’perception of the risk and its interconnectedness ismaturing.

KPMG Global Research – CEO SURVEY 2017

2017 2016

1 Operational 1 Cyber Security

2 Emerging Technology 2 Regulatory

3 Reputational / Brand 3 Emerging Technology

4 Strategic 4 Strategic

5 Cyber Security 5 Geopolitical

Source: 2017 CEO Outlook, KPMG International

The Risk Landscape, 2017 and 2016


PRIORITIES FOR TODAYS CEOS

If three in four CEOs are aiming to disrupt theirsector, what does this mean, in practical terms, fortheir business? And if 68 percent of CEOs areevolving their roles, how will they challenge thepeople and systems that make up theirorganizations? An even bigger question relates to thebalancing act that CEOs must play as they preparefor future uncertainty. Taking bold moves in themarket while ensuring resilience in a changing world,inevitably has implications for a company and how itoperates.

TECHNOLOGY: A PICTURE ON MATURITY

The ability to disrupt a market, or to innovate withinan organization’s established structures, is closelylinked to a business’s understanding of emergingtechnologies and their potential application.

CEOs in 2017 are notably more confident in theirunderstanding of new technologies than they were in2016. While half (47 percent) remain concernedabout whether their business is keeping up to speedwith new technologies, this figure was significantlyhigher — 77 percent — in 2016.

CEOs are working with different technologies on adaily basis and have more experience in seeing howthey are interlinked. After assessing the opportunitiesand limitations of one technology, it becomes mucheasier to adapt and apply that knowledge to newertechnologies.

Understanding technology does not mean, however,that CEOs consider technological innovation withintheir business to be a fait accompli. Four in 10 (38percent) express concern that they are not usingdigital as effectively as they could to connect withcustomers. And six in 10 (61 percent) tell us they areconcerned that their organization is not having asmuch success with new business models as itshould.

Despite the progress that businesses have madearound technology, deep-seated challenges remain.In particular, the principal issues that CEOs facerelate to talent shortages, and the complexity ofintegrating cognitive technologies.

Similarly, when asked about their biggest barriers to implementation, complexity of integration and internal skills shortages, come first and third, respectively.

The challenge of complexity is heightened, of course, when the business does not have an adequate number of suitably skilled people with an in-depth understanding of the technologies involved, especially when it comes to fast-evolving cognitive processes.

Half of CEOs (52 percent) say they are concerned about their business’ ability to integrate artificial intelligence (AI) into basic automated processes. Approximately one in three (31 percent) tells us that their organization is not ready to adopt advanced AI.

CYBER: AN EVER-EVOLVING THREAT

Cyber continues to be a major concern for CEOs, although it has dropped to rank as the fifth most significant risk from first place in last year’s survey. The 2017 survey shows that CEOs believe their business is making progress in their management of the threat, which may help explain why it is not the number-one risk overall this year.

Today, four in 10 (42 percent) feel adequately prepared for a cyber event — up from 25 percent in 2016.

While CEOs believe they are making progress, due to the controls and systems they have put in place, the need for vigilance remains high.

The demands of cyber security management are growing for CEOs. In the survey, 72 percent say they are comfortable with the extent to which mitigating cyber risk is part of their role. Last year, it was 83 percent.

Cyber innovation Reflecting sentiments in last year’s report, we find a significant proportion of CEOs (71 percent) who see their investment in cyber as an opportunity to find new revenue streams and innovate, rather than as an overhead cost. For example, some businesses have created value by investing in technology that sends an alert to the customer if there is an unusual login, such as in a different country. This means that the customer knows if someone is pretending to be them, which gives these businesses a good opportunity to delight their customers.



BEYOND THE SHORT TERM: BUILDING TRUSTINSIDE AND OUT

In recent years, and particularly since the globalfinancial crisis, public opinion has been highly criticalof big business. Many CEOs believe that there will belittle improvement in this sentiment in the near future.Just one in three respondents to the survey (35percent) expect public trust in business to get betterin the next 3 years.

Negative public opinion can have a direct impact onbusiness. Partly for this reason, and in recognition ofthe growing importance of brand and reputation tobusiness success, 61 percent of CEOs saybuilding greater trust among externalstakeholders and customers is a top threepriority for their organization today.

Trust and corporate culture

Building integrity and improving perceptions of anorganization is far from easy, and is unlikely to beachieved in the short term.

Indeed, organizations that seem overly keen todemonstrate their principles, through expensivemarketing campaigns, may find their efforts met withcynicism from critics who delight in accusing bigbusiness of ‘greenwashing’ and other tactics. Withthis in mind, we believe it is critical to have a long-term focus on building a respectful and transparentculture within the organization.

This view appears to be shared by CEOs in thesurvey, three in four of whom (74 percent) saythey are placing greater importance on trust,values and culture in order to sustain theirfuture.

Six in 10 (61 percent) believe that becoming moresocially responsible is incompatible with short-term performance objectives.

More than seven in 10 CEOs in this year’s survey(72 percent) correlate being a more empatheticorganization with higher earnings. Companiestoday are increasingly realizing that building trust isconsistent with their business objectives.

Reputation matters Reputation risk is one of thebiggest threats faced by organizations — primarilydue to the transparency created by the digital world.By building cultures based on respect and clearethical values and planning for a more sustainablefuture, organizations can demonstrate integrity andhelp ensure their business’ long-term success.

At a time of growing uncertainty, the role of the CEOwill not become any easier or any less complicated.Yet the survey shows that CEOs around the worldhave accepted the challenge and are leading theirbusinesses with determination, passion and aninspirational openness to new ideas.



About the Survey:

The 2017 Harvey Nash/KPMG CIO Survey is the largest IT leadership survey in the world in terms of number of respondents. The survey of 4,498 CIOs and technology leaders was conducted between 19 December 2016 and 3 April 2017, across 86 countries.

KEY FINDINGS FROM THE SURVEY

CIOs are used to change. The technology sector has been busily reinventing itself on a regular basis since the first commercial computers were launched in the 1950s, each time bringing a new opportunity or challenge. Often in equal measure.

But in this year's CIO Survey, technology leaders are telling us that change has reached unprecedented levels, and increasingly it is coming from unexpected corners. Few would have predicted the amount of energy to be spent discussing and evaluating the recent political change in many (Western) countries and how it is and potentially could impact business. Few would have predicted how competitors are now co-operating in ‘business ecosystems’ and the astonishing advances that have been made in data analytics, cloud, or – as this year’s survey reveals –automation.

While many things remain uncertain, what is certain is the steadfast focus by many technology executives on helping their organizations become more nimble and digital, to navigate through unpredictable change, and to thrive in an uncertain world. Whether that’s taking calculated bets on new innovation, or finding new skills or talent in unexpected places, this year’s survey shines a light on important changes being embraced today by CIOs.

Last year, stable IT performance had dropped down the rankings. Customer engagement seemed to be an increasing priority, suggesting that IT leaders had cracked the difficult task of managing a complex operational environment. But, this year, stable IT performance has rocketed back to the top of the list along with a similar increase for the need to develop innovative new products and services.

These priorities illustrate the difficult landscape in which IT leaders not only have to take risks in implementing business process change with unprecedented levels of technical innovation, but they also have to make sure that these new systems are rock-solid in terms of performance and reliability: a real headache.

KPMG Global Research – CIO SURVEY 2017

IT PRIORITIES FOR THE BOARD 2017 2016

Delivering consistent and stable IT performance 63 52

Increasing operational efficiencies 62 58

Improving business processes 59 57

Saving costs 54 50

Developing innovative new products and services 51 42

Delivering business change 46 46

Enabling business change 42 43

Driving revenue growth 40 40

Cyber security 40 41

Managing operational risk and compliance 34 36


DEALING WITH DIGITAL

Digital strategy: Many more organisations are addressing digital at a strategic level.

In the past 24 months, there has been a 52 per cent increase in the proportion of organisations with an enterprise-wide digital strategy in place. Four in ten respondents take a leading role in this activity and many present digital strategies to the main organisational board.

A further one in five respondents have digital plans for individual business units. IT leaders at smaller organisations are less likely to have implemented an enterprise-wide digital strategy – 39 per cent have done so – compared with peers at mid-sized (42 per cent) and large (53 per cent) organisations.

The proportion of respondents (18 per cent) who believe their organization is ‘very effective’ in using digital technologies to advance their business strategies is modest, both in absolute terms and compared with the other capabilities on which we measured digital effectiveness. This suggests that digital incorporation is relatively immature for most organisations, with lots of opportunity ahead to learn and improve.

The Chief Digital Officer

One in four respondents now report that their organisation has hired a Chief Digital Officer (CDO) or someone serving in that capacity. Given the extent of enterprise-wide digital planning, it is likely that, in addition to increased hiring of the CDO, a range of technology leaders may now also be responsible for digital. This also reflects the large proportion of the almost 70 per cent of organisations who report not yet having a CDO currently in lace, with no immediate plans to hire into the role.

The year 2017 has emerged as another ‘big-leap’ year for the Chief Digital Officer. The proportion of organisations with a CDO in place has more than tripled in three years, suggesting a positive correlation between CDOs, the adoption of enterprise-wide digital strategy, and very effective digital capabilities reported in 2017. After exploding onto the scene in 2014/15, the pace of CDO appointments levelled out somewhat in 2016, but the speed of CDO hiring has picked up again, with a 39 per cent growth compared with last year.

Fostering digital innovation

For more than half of our respondents, the top two most popular methods to help foster digital innovation are to dedicate more time for innovation (54 per cent) and to partner with innovative organisations such as academic institutions (52 per cent).

Ring-fencing innovation budgets is a distant third option used by three in ten (31 per cent), while hiring a Chief Innovation Officer is a strategy adopted by only one in ten organisations (12 per cent).

Larger organisations are increasingly using their networks and their relationships with academic partners to foster innovation; perhaps mindful of the notion that large is often considered cumbersome, they may feel they need to place their bets in a number of areas. The smaller organisations, on the other hand, rely heavily on making time for innovation. Their workforce are likely to feel much closer to their customers and their products or services, as they do not have to carry the large people-infrastructures of multinational corporations.

Digital innovation challenges

Cultural resistance to change has been a perennial problem for IT leaders. Unlike other enterprise-wide functions such as HR or Finance, IT affects the business in a unique way. New processes and computer systems can radically alter core business processes. Overcoming resistance to change (43 per cent) is almost twice as likely to prevent respondents achieving innovation success compared with securing financial resources (25 per cent). While there is a ‘burning platform’ of sorts where business leaders want to innovate quickly, workforces generally do not like change and certainly do not like it when it affects them adversely. Even if IT organisations can get past this hurdle, new technologies seem to be as difficult to implement as they always have been. It is difficult enough to innovate without having to surmount these very real obstacles.

KPMG Global Research – CIO SURVEY 2017


Digital disruption is changing the world inwhich we live and work. New technologieshave created new markets that, in turn, createnew customers and new competitors. Andthose customers and competitors are drivingnew expectations. The pace of change isunlikely to slow any time soon

To succeed in the digital world, businesses mustnot only provide superior experiences forconsumers, customers, employees and citizens,but deliver on their promises in a faster, morenimble way. The opportunities are immense, butonly for organizations that understand how far andfast they need to transform.

The KPMG CEO Outlook 2017 reveals that a keystrategic priority for CEOs is digitizing theirbusinesses, but that 57 percent are concernedthat their organizations do not have the sensorycapabilities and innovative processes to respondto rapid disruption.

There is a mismatch between aspirations to ‘godigital’ and capability to do it in a strategicallycoherent way.

Digital transformation is enabled by technology,but its success is about much more. It meanstaking on enterprise-wide change to evolve anorganization’s business and operating models, aswell as the way its people work – across the front,middle and back offices.

And it means integrating high volumes of data topredict, influence and respond to customerbehaviour. All with the objective of assuring clearbusiness outcomes.

Data and innovationThe common feature of many disruptivetechnologies – and industries – is big data.Abundant personal and professional data can beharvested from ‘always on’ mobile devices, andused to drive anything from real-time serviceadaptations to high-level decision-making andnew product design.

By 2019, 40 percent of information technologyprojects will create new digital services andrevenue streams that monetize data.

In the customer experience realm, transformativeprojects will include analytics-based customersegmentation, predictive marketing, personalizationand enhancement of touch-points to align withcustomer journeys. On the operational side, there willbe a greater focus on the workforce with data-drivendecision making and, ultimately, data-informedcognitive analytics.

Digital Transformation

Digital transformation is a natural progression fromtraditional business transformation, one more suitedto the modern world. The critical difference is theopportunities for innovation, scalability and agility thatare possible in any transformation process, now thatdigital is part of the mix. Rather than setting long-term goals and moving steadily towards them,sometimes over a number of years, digitaltransformation has the ability to deal with uncertaintyand respond quickly to change. What’s more, digitaltransformation is not a one-off program. Once it hasbegun, it opens up an organization to continuous andmuch more effective evolution.

The challenges ahead can seem overwhelming butnow that digital is part of the mix, the transformationprocess can be far more innovative, fast, scalableand agile. And we believe it should be approachedincrementally to ensure a continuous and effectiveevolution.

KPMG has identified four steps to guide its clients’digital transformation journeys. Each has thepotential to deliver true value.

1. Understand industry-specific opportunities fordigital disruption

2. Create a business strategy that starts from theoutside-in

3. Articulate an enterprise-wide operational strategythat connects the front, middle and back office

4. Embed culture change programs throughoutdigital transformation

Digital Transformation - Dealing with uncertainty


Understand industry-specific opportunities fordigital disruption

Digital disruption impacts different industries in avariety of ways. It creates unprecedentedopportunities to adopt alternative business modelsbut every industry is unique in the approach itrequires. All businesses can now leverage digitalinnovations such as mobility, digital labour, internetof things and data and analytics. What matters is howthey apply them to business challenges. Competitiveadvantage comes not just from identifying theinnovations and implementing them in isolation, butfrom using them in new combinations to addressindustry-specific challenges and drive transformation.

Harnessing the power of multiple disruptors givesbusiness the opportunity to transform and thrive bycreating new pathways to value. These might be newbusiness models, new markets, new products or newservices.

Create a business strategy that starts from theoutside-in

True digital transformation starts with the customer and works inwards, connecting capabilities to ensure that every part of the organization is built around delivering great customer experiences.

This is about far more than ‘putting the customer first’. Empowered by digital technology and a wealth of information, modern consumers can compare, share and shop 24/7. What’s more, they take expectations created during their best online experiences into all areas of their lives.

In order to meet and set expectations, companies must avail themselves of the same technologies their customers are using, while also capturing, analysing and acting quickly upon the insights derived from customer data.

However, the outside-in approach doesn’t mean significantly over delivering against these expectations or delivering excellent customer service at any cost. When a business truly understands its customers and the speed at which their desires now change, the costs of over-delivering are reduced. Value is created by meeting their customers’ expectations – no more, no less.

Articulate an enterprise-wide operational strategythat connects the front, middle and back office

In our view, the fully realized digital enterprise willencompass not just customer-facing digital platforms,but distribution, billing, the supply chain, IT,operations and business services such as humanresources and finance.

Taking an enterprise-wide approach facilitates whatIDC describes as one of the foremost requirementsof the digital age: customer intimacy at scale.Meeting the universal expectation of a customized,consumer grade experience across all transactionsrequires overhauling both the digital front-office andthe operational middle and back offices.

Improving transparency and connectivity in thesupply chain is integral to a seamless customerexperience. Meanwhile, the effective and highlyresponsive use of individual data is absolutely criticalto the delivery of the personalized service themodern customer demands.

Concerned about driving profitable growth, CEOshave focused on execution – making organizationalimprovements to deliver on customer expectations.According to KPMG’s US CEO Outlook 2017, morethan half (52 percent) have aligned middle and backoffice processes to reflect a more customer-centricapproach to front-office operations.

...In the front-office

Understanding customers and their needs is centralto successful digital transformation. According to aHarvard Business Review study, customers who hadthe best past interactions with transaction-basedbusinesses spent 140 percent more than those whohad negative experiences. By implication, theremust be a willingness to relinquish products, servicesand business models that don’t contribute to bettercustomer experiences. Equally there will be newtools, built on advanced data capture and analytics,which can track and anticipate behaviour in near-real-time, as well as smart technologies capable ofdelivering personalized products and experiences.



...In the middle-office

The meaning of middle-office varies depending onindustry but it’s always about following through on thebrand promise and delivering a great experience forboth customers and employees. Here, digitaltransformation is all about reducing friction, andimproving connectivity, agility and transparency. Inmanufacturing, for example, middle office might bethe supply chain. Connecting the supply chaindigitally end-to-end provides visibility into events thatrequire a real-time response, such as factoryclosures, unexpected market disruption or front-officedemand.

...In the back-office

Businesses are under ever-increasing pressure todrive down operating costs. In back-office, thistranslates to increasing automation, including the useof digital labour and intelligent systems, freeing thehuman workforce for expert tasks and high-leveldecision making. Many businesses will need toabandon or realign legacy technology and develop amore scalable IT production environment, most likelybuilt around cloud technology. Perhaps mostimportantly, will be a major enabler in providing real-time data that supports predictive decisions

Embed culture change programs throughoutdigital transformation

By its nature, digital transformation requiresoperating model change and blurs boundariesbetween different teams and functions. That meansthe final critical component to a successful digitaltransformation is a robust and integrated culturechange program.

Just as digital disruption is industry-specific, culturechange is contextual, meaning a one-size-fits-allmodel is unlikely to bring the required results. And itcannot happen piecemeal, especially when there isan increasing need for agility and cross-boundarycollaboration.

Successful culture change depends on sharing aunified vision, and engaging and inspiringemployees. But companies should consider theimpact on all stakeholders (internal and external) andprioritize efforts carefully to enable the “quick wins”that encourage buy-in and support.

Of all the interventions that move culture in the rightdirection, the most critical is change leadership.More than 56 percent of initiatives fail due to lack ofleadership. Many leaders will benefit fromdevelopmental support in building their capabilities.Other studies show that structured and specificcommunication is a key contributor to the success ofchange initiatives.

Encouraging innovative thinking at all levels of anorganization empowers people to take risks,embrace experimentation and champion inventiveideas. In such an environment, digital disruption isnot a threat but an opportunity to create smarterproducts and services.

Putting it all together

Approaching the uncertainties around digitaltransformation with confidence means understandingthat it’s not a single change but a journey: acollection of decisive actions that jointly move anorganization forward to achieve its vision.

Embracing digital must be driven by much more thana desire to appear cutting edge. Instead it should beabout harnessing innovation and disruption totransform what a business is and how it remainsrelevant to customers. There is a strong and growingcorrelation between enhancing customer andemployee experiences and improving top-linerevenue.

Tackling digital transformation reactively, with asiloed view, or with a technology-first approach willnot work. Instead of engaging in a series of digitalexperiments, companies need to redefine theirbusiness transformation to be a digitaltransformation. Taking account of wider industryissues, and the specific mix of disruptors that canimpact them, companies must set forth a vision andstrategy for the entire business.

Culture change must be considered, as must the roleof advanced data and analytics in informing alltransformation decisions. From this position, itbecomes possible to create a fully connectedenterprise that delivers value profitably – all with anunwavering eye on the customer.



Today’s businesses are innovating across businessmodels, products, services and customerengagement while disrupting markets and entireindustries. Much of this innovation is driven byapplying emerging technologies throughout the valuechain. It creates great opportunities but at the sametime presents significant challenges and unknownrisks and consequences to organizations.Competitors can completely disrupt an industry, or anorganization can disrupt itself first and lead a newphase of growth.

This pursuit of everything digital is happening at anaccelerating pace. Speed has become a huge sourceof value whether measured by faster decision-making or how quickly an organization can go fromideation to revenue. This need to deploy digitalcapabilities quickly and at scale is the antithesis ofIT-led projects that are typically months or years longand, as a result, often out of frustration, the businessis increasingly sidestepping the IT function to procurenew technologies. The combination of anincreasingly tech-savvy population combined with theproliferation of cloud-based software as a service(SaaS) solutions has greatly simplified this process.In this race to harness emerging technologies andinnovate it is easy to forget about governance andthat can lead to significant costs and risks.

Understanding when, how, why, and what newtechnologies are introduced to an organization iscritical to both maximize the opportunities that theypresent and minimize the inherent risks.

Establishing a governance framework that embracesdisruptive technologies and encourages innovationwhile ensuring risks are identified and managed isessential to an organization’s ability to survive andthrive in a digital world. Innovation / EmergingTechnology Councils comprised of the right mix ofinternal and third party experts can ensure that theright approach is taken, investment is available andprioritized, and opportunities can be scaled.

The unique characteristics of emerging technologies- their diverse applications, the myriad concernsraised by some new capabilities, the need for publicengagement, and the challenge of effectivecoordination between governance players - createthe need for a new governance approach and a newlens through which to view risk management.

Emerging tech creates opportunities …

Emerging technologies have been used byentrepreneurial start-ups as well as long-establishedcorporations to innovate and generate value in manyways. In a recent KPMG survey of C-level and Headof Business-Unit executives2, over 60% identified fiveemerging technologies including cloud, mobilesolutions, AI/machine learning, social media, andinternet of things as having a high or very high impacton their business over the next five years. Forexample, these impacts include:

– Innovative business models are disruptingentire industries. Over the past few years newbusiness models built on emerging technologieshave disrupted the media industry including recordcompanies, video rentals, magazines, andnewspapers. Digitizing content puts it in the hands ofconsumers more quickly and cheaply (sometimesfree), increases its portability, and in some casesdisintermediates the traditional distributors.Musicians can now record music in their own homestudio and release it directly to consumers. Thesharing business model has disrupted thetransportation and lodging industries, and onlineshopping is causing massive disruption in retail.

Ecosystems have given rise to platform businessmodels where value is created by facilitatingtransactions through connections, providing a way fororganizations to create new revenue streams byexposing their digital assets to external partners, andcollaborate with individuals and other entities to co-create new products.

Several legacy automobile manufacturers havecreated connected car platforms that enable them toperform remote diagnostics and directly downloadupdates or enhancements. Furthermore, it provides aplatform for partners to provide add-on products andservices including streaming music, maps, real-timetraffic updates, restaurant reservations, and more,providing new revenue streams.

Tech Risk Management - The paradox of emerging technologies


– Digitization and automation are transformingoperating models. Many internal businessprocesses are being digitized while still others arebeing automated, with robotic process automation(RPA) reducing costs and cycle times and at thesame time improving customer satisfaction. Onelarge insurance client applied RPA within theiraccount processing function and were able to shortena three hour data reporting process down to justthree seconds. Not only do they realize significantreductions in cost, but the access to more timely andaccurate data improves decision-making as well

– Everything as a service is expanding revenuestreams. Using the internet of things (IoT) combinedwith powerful analytics, tangible products are beingconverted into digitally enhanced services.Everything from washer machines to jet engines cannow be purchased as a service (i.e., pay by the load,pay by the hour flown) converting one-off lump sumpayments into annuity streams. Sensors constantlymonitor performance and transmit the data in real-time while powerful predictive analytics assess thedata, detect potential problems and automaticallydispatch service technicians to perform preventivemaintenance before the device fails.

– Mobile devices, data and analytics aretransforming customer engagement. Mobiledevices, social media, and analytics are innovatingthe way that companies engage with their customersby creating more intimacy, personalized marketing,and highly customized products delivered on demandanytime and across any channel. Walk into a storeand it knows who you are, your preferences, yoursize and automatically sends you offers. Therestaurant senses when your car pulls into theparking lot and has your takeout order ready for youas you walk in the door.

… but not without risks

Using emerging technologies to innovate can lead tobreakthrough performance and significant growth, butthey can entail proportionally higher risks whencompared with more mature technologies. Accordingto the 2017 KPMG / Forbes Emerging Tech Risksurvey (Disruption is the new norm), there isevidence that organizations are making significantinvestments and adopting emerging technologies butare not including them in IT risk assessments. Theemerging technologies most often cited includemobile apps / devices, IoT, and cloud computing (seeFigure 2a and 2b). This can lead to significantexposure as there are many potential internal andexternal risks to contend with including:

Internal risks

Misalignment with strategy. With so manyemerging technologies to choose from and so manyopportunities it is easy to go off in many differentdirections at once. But with limited resources thisfragmented approach will most likely end with a fewsmall wins and many failures. It is important tomaintain focus and limit pursuits to ones where theusage of the technology is aligned to the strategy.For example, if increased customer engagement is akey strategic objective, investments should befocused on the use of mobile, social media andpotentially other technologies which will drivecustomer engagement.

Lack of adequate funding. Pursuing innovation withemerging technologies is filled with uncertainty withunknown outcomes and timeframes. With so muchcompetition for funding, safer initiatives with well-defined business cases and positive ROIs can edgeout more risky innovation ones, making it difficult toobtain enough funding for a truly innovative program.

Lack of executive support. Client experiences haveshown that without high level executive commitment,it is difficult to launch or sustain innovationopportunities. Furthermore, mid-level managers withP&L responsibility are more inclined to stick with thestatus quo.

Perceived insufficient returns (ROI). Often, wheninitially deploying emerging technologies, highercosts are incurred due to the lack of experience andknown good practices. However, over time theassociated learning, skills development andexperience (intangibles) have value that can beleveraged later in future projects.



Taking a short term view and failing to include theseintangibles in an ROI analysis may result inabandoning and writing-off promising initiatives.

Limited skills and experience. Emergingtechnologies often require new skills. Because theyare new, these skills tend to be in short supply. Thereis also a paucity of experience in deploying thesetechnologies. Organizations often find that they donot have staff with the skills they need and areunable to successfully develop or procure them.Alternatively, going outside the organization andcontracting with third parties potentially adds yetanother layer of risk.

Cultural (fear of failure). Successful serialinnovators have a culture that celebrates andencourages failure. If you are not failing, you are nottrying and you are not learning. A certain amount offailure is expected. The key is to fail fast and learnfrom it. However, in most organizations the culture isone where failure is considered a negative and oftenpunished. A fear of failure can sometimes be thebiggest risk and barrier to overcome.

External risks

– Regulations are inconsistent, non-existent, oroutdated. Depending upon industry and geographicsector, there are a plethora of regulations that mustbe complied with. When it comes to new innovativebusiness models, products, and services they mayfall under regulatory regimes that never anticipatedthem. For example, the sharing business model hasfound new companies competing against establishedregulated industries such as taxis and lodging,raising questions about whether these newcompanies must comply with existing regulations or,because of their radical new business models, areexempt. Having run up against these issues, Uberrecently lost its license to operate in London in theUK and Quebec, Canada. Cloud service companieshave run into similar problems with respect to cross-border data flows where each country has its ownregulations and there is no consistency across them.What may be legal in one country could be illegal inanother. Then there are issues relating to how toregulate drones and autonomous vehicles. Often,regulations need to catch up with technology andinnovation but until they do it puts companies at risk.

– Brand equity can evaporate overnight.Companies spend years and millions of dollarsbuilding up the value of their brand(s) eventuallyenabling them to enjoy premium pricing andcompetitive differentiation. But it only takes onemisstep that goes viral on social media to destroy allthat brand equity in a single day. Whether the resultof poor quality, a regulatory lapse, or a securitybreach, once it occurs social media goes intooverdrive and by the end of the day the damage isdone.

– Cyber threats are ubiquitous. While cyber threatshave been in existence for years, their variety andnumber are increasing at an accelerating rate drivenby two technology trends – the internet of things andthe explosion of data (both of which are on our list ofemerging technologies). Emerging technologies aremore prone to cyber threats because they have notundergone the same rigorous testing and scrutiny ofmore mature technologies.

– Many risks are still evolving. Because many ofthese technologies are new and we have limitedexperience with them, some risks are evolving orhaven’t been discovered yet. For example, as AIsystems become more autonomous, there is anongoing debate about what risks they may poseranging from human extinction from a race of superintelligent machines to unintended consequencesmade because of a wrong decision from poor data orflawed logic. The severity of the impact of this risk isdependent upon the application. For example, an AI-based mortgage review system might deny orapprove a mortgage incorrectly which could result inan eventual default or a lawsuit. This is seriousenough, but a medical diagnosis system could makean incorrect diagnosis that could lead to the actualdeath of the patient. Overall, the greatest risk is thatthere is still so much that is unknown about how AIwill continue to evolve and how it will be used.



And not all emerging technologies are createdequal

There is no definitive list of emerging technologies,and what’s more they come in different formsincluding hardware (e.g. 3D printers), software (e.g.blockchain), networks (e.g. IoT), and combinations ofthese (e.g. AI, VR). Some are general (e.g. cloud, AI)and have broad applicability across all industries andgeographies, while others are more limited in scope(e.g. blockchain, VR). The bottom line is that not allemerging technologies are equal and when it comesto their governance, one size does not fit all, i.e.governance must be adaptable and proportionalbased on several factors. KPMG has defined fourattributes that can be used as guidelines whenconsidering the appropriate level of governance, seeFigure 3. These attributes include:

Maturity – Measures how established and stable thetechnology is in its lifecycle. Maturity is deemed to bein one of four states: introductory, growth, mature, ordecline. Since we are only consideringemerging/disruptive technologies in this report, theywill either be in an introductory or growth state.

Adoption – Measures how widely a technology hasbeen embraced and deployed in organizations. Thestandard five states of adoption are used here andinclude: innovators, early adopters, early majority,late majority, and laggards.

Opportunity – This is a subjective measure of thepotential opportunity to be realized by deploying thetechnology and is covered in more detail in the nextsection. An opportunity can be one of three states,low means it is typically limited to a single productline, medium means it is limited to a single businessline, and high means it has benefits across most orall the enterprise.

Risk – Measures the level of risk which is acombination of the impact and the likelihood that therisk will occur. There are four states of risk: low,medium, high, and critical.



Designing a framework to govern emergingtechnologies involves overcoming some uniquechallenges. Digital business’s need for speed, agility,and scale means that critical decisions must bemade quickly in an environment where potentialbenefits are harder or impossible to quantify andrisks are potentially greater. Furthermore, manyorganizational cultures are wired to avoid or at leastminimize risk. By subjecting emerging technologyinitiatives to existing governance protocols,organizations are more than likely to reject them at atime when they desperately need to innovate toremain competitive, but not subjecting them to anygovernance could expose the organization tounacceptable risks. A different approach is required.

Key elements of emerging tech governance

An emerging technology governance frameworkconsists of a number of key elements. First, whileemerging technologies are recognized as different,they can’t be managed in isolation. Second they mustbe evaluated within the confines of how much risk theorganization is willing to accept. Third, because oftheir newness and the uncertainty that entails, theyrequire an explicit funding mechanism; otherwisethey risk constantly losing out to more predictableinitiatives. Finally, the governance approach shouldbe adapted to enable the business to be astechnology self-sufficient as possible within clearboundaries.

Categorize innovation as a continuum

To break away from the inclination to view emergingtechnologies in isolation, organizations need to takea broader view that is aligned with the businessstrategy and organizational culture, of how thesetechnologies can be used to underpin innovation.With many emerging technologies available (andmore on the way) and the potentially significantopportunities they enable, it is easy to becomeenamoured with the technology rather than whatvalue and impact it will have on the business.Furthermore, as we noted earlier, not all thetechnologies have the same impact or risks and theyare at different stages of maturity and adoption. As aresult, organizations must view emerging technologyand innovation as part of a continuum with all theother initiatives that are planned. For example

Use a common portfolio to plan and track bothbusiness as usual investments and innovation.Organizations find it hard to manage resources ifeveryday investments and emerging technology-driven innovation are kept in separate, unrelatedportfolios. While emerging technology-driveninnovation needs to be treated differently, especiallyin the early stages, initiatives along the entirecontinuum impact the same elements tracked in aportfolio, i.e. business structures, businessprocesses, technologies, IT resources, risk, partners,and customers. Tracking them in one holistic portfoliomakes it easier to manage resources, schedules,and relationships.

Don’t waste emerging tech innovation funds onlimited opportunities. Looking at the opportunitiesas a continuum also allows for prudent use of funds.Preserve emerging tech innovation funds for ideasthat have the highest potential to deliver downstreamvalue to the business or end customers.

Resist the urge to pursue every idea. Rememberthat not all innovation is good. Ideas should bealigned with the overall strategy and culture of theorganization, or they can become distractions thatdrain precious resources from the overall effort.Success is more likely when innovation is laser-focused on strategic objectives that providecompetitive differentiation.

Establish the risk appetite When it comes toemerging tech-driven innovation, good governancerequires both a strategic and operational approach tomanaging risk. While the operational approachfocuses on the day-to-day activities around managingand mitigating risk, a strategic approach requiresdetermining the risk appetite and risk tolerance of theorganization. This will articulate how much risk theorganization will accept and what level of risk willtrigger an operational response. Risk appetite andrisk tolerance are related, but they are not the samething. An organization’s innovation risk appetite is asubset of its overall enterprise risk appetite andtherefore cannot be developed in isolation. It isultimately the responsibility of the board of directorsto define an organization’s risk appetite based on theinput and recommendations of an EmergingTechnology Council.

A framework for emerging tech governance


Failure to define risk appetite and toleranceundermines any risk management process becauseit leaves the organization with limited guidance as towhen and how to address risks as they arise.Furthermore, it means that any response to risk islikely to be an isolated action and not aligned with theoverall enterprise approach to risk.

In practice, the risk appetite and risk tolerance will beused to determine if and when the organizationresponds to specific risk events. Operational riskgovernance will then categorize the risk event anddetermine exactly how the organization responds.

Enable innovation with separate funding

It’s not enough to recognize emerging tech-driveninnovation opportunities. They must be handleddifferently to maximize the opportunity for success.Innovative ideas are new and have no track record,so they are difficult to value, especially at thebeginning. If they are forced to compete for fundingand resources with all other initiatives, few if any arelikely to make the cut. To facilitate getting innovativeinitiatives started, organizations should fundemerging tech innovations from a separate pool.Fighting for capital budgets is one of businessleadership’s favourite games, and there are neverenough funds to cover everyone’s day-to-day wishes– much less truly innovative opportunities withuncertain payback. To keep new ideas from beingcaught up and crushed in this competition, set up aseparate fund for investing in innovation. This cancome from the CEO’s discretionary budget, beannually funded by the executive committee, or comefrom the CIO’s budget. Data from the Harvey Nash /KPMG CIO survey reveals that organizations spendon average between 4% and 6% of their IT budgetson technology-based research and developmentactivities.

Change the governance approach: ‘rules’ to‘guardrails’

The past was about IT organizations buildingtechnology-enabled solutions that the businessordered, a relationship that was often strained byprojects that were delivered late, over budget, andwith poorer functional capabilities than expected. Insome cases, the business responded by directlyprocuring solutions without IT’s involvement - so-called shadow IT.

However, the pace required by digital business,coupled with the availability of virtualized and publiccloud infrastructure, a large and growing portfolio ofSaaS solutions, and maturing tools for automatingoperations, are now being leveraged to promote adifferent flavour of shadow IT.

CIOs are now working closely with the business tomake it as technology self-sufficient as possiblewithin well-defined boundaries.

This is accomplished in several ways including: anenterprise architecture that ensures IT investmentsare aligned with business priorities with consistentusage of technology across the organization; agovernance approach that clearly articulates whatareas the business has autonomy to pursue its owntechnology enabled capabilities, and the processesto be used to integrate solutions with the rest of theenterprise; a published catalogue of approvedsolutions and vendors that have gone through anevaluation and certification process with pre-negotiated contracts and pricing; and former IT roleslike business analysts, programmers, data baseadministrators, and quality assurance (QA) becomingembedded with the business. Senior level businessrelationship managers provide guidance and facilitatethe interchange between IT and business leadership.

Underlying this new model of business and IT is ashift away from rules – specifying exactly what andhow all technologies are adopted and applied tobusiness problems, and business then complying –to guardrails, where strict rules are maintained forthe technologies that matter at the core of thebusiness and a more flexible approach is taken for allother technology, giving the business units who needit greater autonomy. The difference between rulesand guardrails may seem small, but it is significantfor how they are both viewed:

Rules take away flexibility. Rules are simple: if this,then do that. Rules in their clearest form are easy tounderstand and easy to enforce. Because they areone-size-fits all, they are contentious to define – andfor the same reason allow pressure to build withoutan easy release.

Guardrails provide flexibility within bounds.Guardrails are rules that define the boundaries. Theymay restrict complete flexibility, but the evident trade-off of some flexibility for less cost and risk is easierfor outliers in business or IT to accept as reasonable.

A framework for emerging tech governance (II)


Organizations looking to harness emergingtechnologies to drive innovation need to create anenvironment where experimentation is encouraged,failing fast is celebrated, and boundaries are testedwithout exceeding its risk capacity. To get startedKPMG recommends the following next steps:

1. Get the C-Suite and board engaged andcommitted

We want to purposely make a distinction between‘support or buy-in’ and ‘engaged and committed’. Theformer is mostly passive while the latter isaggressive. Success with emerging technologiesrequires more than just tacit approval or noddingacceptance. It requires senior executives and boardmembers to roll up their sleeves and actively help.Interviews with subject matter experts repeatedlystressed the need for CEOs and the Board to beactively engaged with emerging technologies.Because the stakes can be so high from both agrowth and risk perspective, and organizations tendto be risk adverse and fear failure, a lack of high levelexecutive engagement can be fatal. Seniorexecutives must encourage people to push theenvelope and go beyond their comfort zone, reinforcethe premise that failure is part of the innovationprocess, and regularly communicate the importanceof innovation to the long-term success of theenterprise. Steps to take include:

Name an executive sponsor. Each emergingtechnology or key initiative needs an executivesponsor who will function as its champion. This alonetelegraphs to the rest of the organization howimportant it is. The sponsor can also ensure that theteam has the resources and political cover it needs tosucceed.

Make emerging technology a board level topic.Because of its critical importance to digitaltransformation and competitive differentiation,emerging technologies require board levelengagement. Boards typically have sub-committeesfor audit, compensation, and increasingly fortechnology. The technology committee shouldincrease its focus on emerging technologies and theirimpact on the industry, competitive environment, andopportunities. Committee meetings can also includean update from one of the executive sponsors, ademonstration of a promising prototype or pilot, or apresentation from an outside expert about a specifictechnology. The committee can also ensure thatemerging technologies and innovation are tied tobusiness objectives.

Formalize success. Make sure to take a moment torecognize successful initiatives and communicatethem across the enterprise. Rewards andcelebrations do not need to be elaborate orexpensive. Much of this is cultural change so it isimportant to incentivize and promote the newbehaviours so that everyone can see what the newdefinition of “good” is.

2. Charter the governance structures

Governance is the act of responsibly makingdecisions, and while it depends on solid processes,ultimately people make the decisions and are heldaccountable for them. Governance structures relateto the organizational/people mechanisms createdaround the decision process. They include reportingrelationships; governance-specific positions; andcommittees, councils, and working groups eithercreated specifically for, or repurposed to execute thegovernance processes. Effective governancerequires having the appropriate organizationalstructures, assigning responsibility to make therequired decisions, and holding parts of theorganization accountable for the outcomes of thosedecisions.

When it comes to emerging technology governance,the two most important governance structures arethe Emerging Technology Council as a decision-making body and the Program Management Office(PMO) as a facilitation and support body.

Create a Separate Emerging Technology Council

The Emerging Technology Council that makes thedecisions and drives the emerging technologygovernance process should be different than the onethat deals with business as-usual decisions – eventhough a common portfolio should containinformation about both. The goal of this separatecouncil is to creatively review emerging technology-driven innovative ideas and reduce the hurdles theyhave to clear before they are tested and allowed todevelop roots and grow, rather than have themcompete with all of the mainstream initiatives beforethe regular steering committee – see Figure 4. Thecouncil should:

Four steps to emerging technology governance


Draw membership from across the organization.Build the emerging technology decision-makingcouncil staffed by creative individuals from across theorganization including IT, business, and functionalleaders – and invest them with the appropriatedecision-making authority. It is critically importantthat emerging technology decisions are linked tobusiness objectives and strategy.

Strongly consider adding external members.Given the newness of emerging technologies and thestakes involved, getting expertise and perspectivefrom someone outside the organization makes a lotof sense and can create an external, unbiased,outside-in view of the opportunities and riskspresented to the organization. In addition to abackground in the application of emergingtechnologies and wide market perspective, membersshould have a good cultural fit but be strong enoughto ask tough questions.

– Have a clear mandate to promote and fosterinnovation. The steering committee owns theresponsibility for implementing the innovationprocess and the ongoing management andcoordination of innovation across the company. Thecommittee decides the portfolio of innovation projectsto pursue, delegates authority for individual efforts,allocates resources, and monitors the developmentprocess through its various stage-gate review points.

– Communicate progress and results. Thesteering committee develops and maintains aninnovation scorecard to capture and report keyinnovation metrics. This scorecard is made availablethrough the intranet.

Technology Governance – Emerging Technology Council


Use a PMO to facilitate emerging technology-driven innovation Traditionally, the PMO hasfocused on project management planning,methodology, and tools. Next-generation PMOs haveextended that focus, taking a more strategicapproach to portfolio management, providing supportfor business-driven projects, and providing visibilityinto demand for non-project work. The next-generation PMO also empowers organizations byproviding greater insight into business andtechnology portfolios and providing visibility to scoutout fertile ground for developing innovation. Next-generation PMOs support emerging technology-driven innovation by:

Creating a safe place for ideation andexperimentation. Development teams – especiallythose involved with emerging technologies – findinnovative ways to create valuable software. Byfolding ideation exercises into the portfolio planningprocess, the PMO gives teams a platform forexperimentation and a way to elevate ideas andoutcomes to the appropriate management level to getfunding.

Reserving a portion of the portfolio forinnovation to spur “empowered problem solving.”Next-generation PMOs that play a strategic role inportfolio management help the business think longerterm regarding technology change. While funding isstill dedicated to operations and maintenance,companies now understand that innovation is notsolely the provenance of new applications or systemdelivery.

Working closely with key stakeholders to involvethe right people at the right time. Ideation is notjust an IT exercise. Part of the next-generationPMO’s responsibility is to ensure integration betweenstrategic planning processes and the portfolio to drivethe execution of the right investment initiatives at theright times. The PMO, business analysts, and theappropriate business stakeholders assess ideas todetermine how to fund the right ones.

Technology Governance – PMO for Emerging Technology


3. Implement an agile innovation process

Enabling opportunities for innovative ideas while atthe same time managing risk requires an incrementaland iterative approach. Using agile methods, cross-functional teams work in small increments to buildand test a product or capability and then demonstrateit. The Emerging Technology Council reviews theoutcomes and decides to either terminate it, makechanges or let it move to the next phase, at whichpoint additional resources and/or funding may berequired.

The challenge for innovation is that traditionaldevelopment processes require a business caseearly in the life cycle, which is problematic for manyinnovation initiatives because there is no trackrecord. Therefore, innovation initiatives should take amore granular and incremental approach. Forexample, many stage-gate processes call for abusiness case in phase two. For innovation projects,a business case this early would either be highlyspeculative or lead to rejection due to a lack ofsufficient value.

By applying agile methods, innovation projects canfirst attempt to do a proof of concept and then moveto a small-scale pilot for further validation of both theopportunity (demand or need) and the ability todeliver. Upon completing a successful pilot, enoughinformation should be available to build a crediblebusiness case with quantifiable value to justifycontinued funding.

The business case phase is the first time that valueand risks are addressed for innovation initiatives. Theresults from the pilot phase should provide enoughinformation to support a quantitative assessment ofthe potential return if the idea is implemented as wellas the risk. If the business case is approved, theproject should then move into the mainstreamportfolio

4. Set up a centre of excellence (CoE)

By definition emerging technologies are new sopeople with relevant skills are hard to find, and usecases and best practices are non-existent. At least inthe early stages, setting up an emerging technologycentre of excellence (CoE) or even a technologyspecific CoE is a way to leverage scarce resources,and apply learning across the enterprise.

The KPMG / Forbes Emerging Tech Risk Survey ofC-level and Head of Business Unit executivesrevealed that almost half of the companies surveyed(43%) have a designated CoE responsible foridentifying and assessing technologies.

CoEs foster collaboration. Business staff memberswho are developing solutions for their own needs willwant to tap collective expertise, understand whatworks for other business areas, and get help for theirwork. More importantly, they will want to find the pathof least resistance when complying with policies andguardrails. A CoE focused on these needs will makethis easier. This may take a while to get off theground but will develop a momentum of its own ifboth business and IT find it an easy way to see whatothers are doing.

Coaching makes it easier to solve problemswithin the guidelines. Ideas depend upon thepresence of strong advocates to overcome thenatural resistance to change inherent in everyorganization. These advocates will need expertiseand resources to turn these ideas into functioningsolutions. They can acquire their own consultants,but easy access to experts within a CoE will helpthem avoid barriers like data accessibility andsecurity or availability of appropriate applicationinterfaces.

Inspection provides education as well as audit.Inspection is based on the HERO compact; businessareas pursuing innovations on their own must showthat they are being responsible to both their businessmanagement and established technology guidelinesrelating to architecture, security, standards, etc. TheCoE can play the role of the inspector, with claritythat they are acting on the behalf of both businessand IT management. Using standardized checklistsmakes this inspection more objective and enterpriseconcerns more transparent.

The strategic deployment of disruptive and emergingtechnologies is critical to the success of any digitalbusiness transformation. At the same time, they cansignificantly elevate the level of risk. By adaptingenterprise governance to acknowledge the uniqueattributes of emerging technologies, organizationscan effectively drive innovation and manage risks foroptimal value.

Agile Innovation supported by a Centre of Excellence


ISACA Conference – Enabling Trust in a Digital Economy

Presenters

Kees-Jan is a Senior Manager in our IT Advisory practice in East Africa, based inNairobi He worked as a Senior Project Manager in the CIO-office of Royal DutchShell, and was a Senior Manager at KPMG in The Netherlands. He has over 10years of experience and ran multiple large scale programs around the globe in thearea of Digital Transformation, IT Strategy, IT Service Management and ITInfrastructure Service Development Kees-Jan performed engagements at the NICBank Ltd., National Bank of Ethiopia, Dashen Bank, Global Collect/ Ingenico andKees-Jan has been IT Auditor and member of the Transaction Banking StrategicPlanning department of ABN Amro Bank in The Netherlands. Some of Kees-Jan’sselected experience in advisory includes:

Amongst others, Gerald has been involved in the following projects which are ofrelevance to the services required by NIC Bank :

• Dashen Bank SC - Formulation of an IT strategy and roadmap• National Bank of Ethiopia - Development of NBE IT Strategic Roadmap &

Implementation Plan• NIC Bank Ltd. – Omni Channel Digital Banking Platform selection• ING Group – Global Separation Banking & Insurance• Global Collect (Payment Services Provider): Project & Engagement

Manager, responsible for the overall delivery of the KPMG services andperforming an IT Service Management and Governance, Risk & Complianceassessment, developing the roadmap and implementation of improvementsto ensure compliance with leading payment services regulations anddirectives.

• Royal Dutch Shell – CIO Office: Project Manager for IT FunctionalExcellence:

Kees-Jan van der Molen

Education • MSc Economics – Business &

ICT, University of Groningen, The Netherlands

• General Education Banking & Insurance (NIBE)

• General Education Transaction Banking (NIBE)

• Certified Payments Specialist – Payments Association of Kenya / Payments Association of South Africa

• PRINCE2 Practitioner and Foundation (APMG)

• Lean Practitioner (RDS -equivalent to Lean Green Belt)

Senior Manager – IT Board Advisory KPMG Advisory Services Limited

Gerald is a partner with over 20 years' experience in technology advisory across thecontinent, mainly in South Africa and East Africa. He has also worked on multiple projectsacross different countries. He has served a large number of clients in the banking andfinancial sector, including Citibank, Deutsche Bank, Barclays Bank/ ABSA, Nedbank,Investec Bank Ltd, the National Treasury of South Africa, the Financial Services Board(South Africa) and Reserve Bank of Namibia. Gerald has led several engagements formajor organizations as MTN Group, and South African Airways. Gerald is the Head ofAdvisory for KPMG East Africa with overall responsibility for Consulting, Deal Advisory andInternational Development Advisory Services. Gerald leads the IT Advisory Practice inEast Africa.

Amongst others, Gerald has been involved in the following projects which are ofrelevance to the services required by NIC Bank :

• ABSA Group / Barclays assurance - broad range of Technology advisory and riskassurance engagements

• Dashen Bank SC - Formulation of an IT strategy and roadmap• National Bank of Ethiopia - Development of NBE IT Strategic Roadmap &

Implementation Plan• NIC Bank Ltd. – Omni Channel Digital Banking Platform selection• Neotel, South Africa – Internal Audit co-sourcing & project management over assets

lifecycle management system• Botswana Telecommunications Ltd- Development of a Technology strategy• MTN Group – Information Security and Business Continuity Strategy formulation and

implementation• Project assurance over the implementation of new ERP system and various advisory

projects

Gerald Kasimu

Education • Master of Business

Administration (MBA)• BSc. Computer

Science (Hons), University of Nairobi

• Certified Public Accountant (CPA)

• Certified Information Systems Audit (CISA)

Partner, Head of AdvisoryKPMG Advisory Services Limited


KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We work closely with our clients, helping them to mitigate risks and grasp opportunities. Member firms' clients include business corporations, governments and public sector agencies and not-for-profit organizations. They look to KPMG for a consistent standard of service based on high order professional capabilities, industry insight and local knowledge.

KPMG member firms operates in 154 countries and territories and have 200,000 people working in member firms around the world.

We pride ourselves on outperforming expectations as can be seen from the quotes above. Our ability to provide you with senior practitioners that are on the ground, enables us to guide you through this exciting project. Our team will be supported by our global experts thereby ensuring we will be able to work with you to deliver and implement a regulatory environment that captures global best practice.

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in 155 countries

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About KPMG | Global


KPMG has been providing financial services in Kenya for over 60 years. Our involvement in Kenya goes back to 1949 when we operated as Angus, Lawrie and Jeremy. In 1965, the name of the firm changed to Peat Marwick, Mitchell and Co. The firm operated as such until 1989, when, as a result of the international merger between Peat Marwick International and Klynveld Main Goerdeler, KPMG was created.

Regional expansion begun in 1995 with the setting up of offices in Dar-es -Salaam and Kampala. Within a short period, KPMG gained recognition as a leading provider of Audit, Tax and Advisory services throughout the East Africa region, namely Kenya, Uganda, Tanzania and Rwanda. There are 29 Partners and more than 1,000 professional staff who provide a full range of services to organizations in the region. The Nairobi office serves as the regional coordinating office providing the required networking to facilitate delivery of services on a timely basis to meet and exceed our clients’ expectations.

KPMG Kenya is well endowed with experience and specialists in certain key areas. The practice provides a full range of services across our major services lines of:

• Audit (both external and internal) and accounting;• Taxation;• Risk Consulting;• Management Consulting; and• Deal Advisory

KPMG in East Africa


At KPMG, we leverage on our global network to provide leading services to our clients across the globe. LocalKPMG offices contract directly with clients within their jurisdictional area and client engagements, with thesupport of other member firms, through sharing of resources, expertise, tool, methodologies and experiencesfrom engagements undertaken by other firms. Our market-leading skills in strategic, functional, operational andtechnology consulting are combined with a history of more than a century of experience in audit, risk andregulatory consulting, tax and mergers & acquisition issues. Our experience encompasses deep knowledgeacross a multitude of sectors. We have proven knowledge and experience that from in IT advisory in and out ofAfrica in the following main areas:• IT Strategy & Performance• Enterprise Architecture• Program & Project Management• Sourcing, SIAM and Vendor Management• Cloud Computing• Data Centre & IT Infrastructure Assessments• SAP, Oracle, and other ERP implementations• IT Deal services• Information Protection and Business Resilience• IT Audit• IT Internal Audit• IT Attestation• IT Governance, Risk and Compliance (GRC)/and Controls Integration• Information Governance ServicesWith tested and proven methodologies employed by KPMG and a strong Global Resources Business team thatexchanges leading practices knowledge across geographies, clients are assured quality and value.On the next pages, our KPMG IT Board Advisory services are described in more detail.

IT Advisory


IT Board AdvisoryKPMG IT Board Advisory

Today’s CIO agenda is largely focused around driving value through the IT organization and enabling thebusiness with technology and information.The current rapid pace of change threatens to overwhelm even the most competent IT organization:• Business change requires flexibility and agility of technology teams.• Market changes require a constant focus on cost and business value while managing risk and

compliance.• Technology change is driving innovation with the most significant and fundamental change across all of

these being the shift in the role of IT itself.• For today’s CIO, IT must advance the business, not just support it.

IT is expected to add value by improving business performance, by accelerating time to market, by openingnew markets, and facilitating mergers and acquisitions – all while keeping a sharp eye on costs and quality.

KPMG’s IT Board Advisory helps CIOs, technology leaders, and business executives harness technologydisruption and more effectively manage technology resources to drive agile and improved businessperformance and enhance strategic position. We improve the strategic value of our clients’ technologyinvestments, helping IT organizations become sources of innovation and business growth.

The KPMG approach focuses on the business benefits of technology. We support the CIO agenda throughservices, methodologies, and deep subject matter skills. We engage with senior business and IT executivesto support the optimization of existing technologies and develop the future technology vision, along withinitiatives that will support the future business agenda, transform the IT function to increase efficiency andeffectiveness, and improve its core future capabilities. On the next page is an overview of the IT BoardAdvisory Service Offering.

IT Strategy & Performance Management

Strategy alignment, definition, planning, implementation and continuous improvement monitoring

Enterprise Architecture &

Design

End-to-end enterprise architecture and design of capabilities and solutions

Requirements &Selection

Design &Architecture

Deployment

Integration

Development

Operations

Vision & Strategy IT Sourcing &

Bid Management

IT product and strategy due diligence, vendor evaluation, vendor selection, contract negotiation and project assurance

IT Performance & ITService ManagementDesign, Testing &

Transition to Support

IT Service Management, Policy and standards development and IT operations operating model design

Our service offerings span the transformation journey…


IT Board Advisory Service Offering

IT Strategy & Next generation ITOperating models: Aligning ITinvestments and capabilities with businesspriorities and needsServices IT Strategy IT Operating Model Planning & Design IT Governance IT Separation, Merger, and Acquisition IT Due Diligence IT Sourcing Strategy (with SSOA) IT Project, Program and Portfolio Management,

PMO IT Program Assessment & Assurance Business Technology Strategy & Transformation Enterprise Architecture Agile Management, DevOps and Lean IT

ITPerformanceandTechnology Business Management Managing the IT function withsound business and operational disciplinesServices IT Analytics and Performance Management IT Performance Assessment IT Cost Management & Optimization (TBM) IT Cost Takeout TBM Strategy, Design & Implementation TBM Tool Evaluation TBM as a Service (TBMaaS)

Service Management & Service Integration Designing, integrating, and delivering ITservices to the businessServices IT Service Management Assessment IT Service Management Transformation Application & Service Rationalization IT Asset & License Management Continuous Delivery Service Integration Strategy and

Transformation Service Management Solutions &

Platforms (incl. ServiceNow) Global Business Services (GBS)

Technology Infrastructure & Architecture Designing and provisioningtechnology environments for IT servicedeliveryServices Cloud Transformation and Compliance Data Centres and Technology Platforms Network Infrastructure Resilience, Recovery, and Contingency Cloud Architecture and Integration Cloud Migration and Management Cloud Strategy

CIO ADVISORY SERVICES

Technology Infrastructure& Architecture

IT Strategy& Operating Model

Service Management &

Service Integration

IT Performance&Technology BusinessManagement (TBM)

CIO ADVISORY SERVICES

Technology Infrastructure& Architecture


IDC MarketScape Recognizes KPMG as ‘A Leader’ in Digital Transformation Consulting and SystemsIntegration Services

Audit, tax and advisory firm KPMG is the only one of the Big Four professional services firms to be named aleader in the new IDC MarketScape: Worldwide Digital Transformation Consulting and Systems IntegrationServices 2017 Vendor Assessment (doc #US41523517, June 2017). The distinction underscores the extent towhich executives at the world’s leading organizations are calling on KPMG to guide them through the complexand challenging process of adapting and transforming their enterprises in a time of unprecedented businessdisruption.

“KPMG has not created a digital practice but, rather, a global digital community of resources with a broad setof capabilities,” said Ali Zaidi, research lead for worldwide and U.S. IT Consulting & Systems IntegrationServices at IDC. “Digital plays a role in almost every project KPMG delivers and all its resources have digitalskills with different areas of focus. Consider KPMG when you want a firm where the single largest focus it hasis on digital transformation. KPMG is a highly credible partner when you need to have a board-levelconversation about how not to get left behind by the forces of digital disruption in your industry.”

“Every day, we’re seeing a significant mismatch between executives’ aspirations to ‘go digital’ and theircapability to do this in the most strategic and coherent way,” said Rick Wright, Advisory principal, ExperienceDesign & Engineering, and KPMG U.S. Digital Transformation leader. “Clearly, the pace of business disruptionis not slowing down any time soon. Disruption is creating new customers and new opportunities fororganizations across industries to add value, but only if they understand how far and how fast they need totransform. At KPMG, given that we enable organizations to achieve business-wide digital transformation, it’sextremely rewarding to have our expertise in this area highlighted in the IDC MarketScape report.”

The report also noted that buyers rate KPMG highly for the structure and capability of its sales and distributionmodel, the pace and productivity of its R&D and innovation and for employee management. IDC rated KPMGhighly in terms of its employee strategy, its ability to offer customers a wide range of pricing options and thebreadth and scope of its digital transformation offering.

“In our recent Global CEO Outlook Survey, more than half of respondents told us they see technologicaldisruption as more of an opportunity than a threat,” said Lisa Heneghan, global head of Technology,Management Consulting at KPMG. “However, taking full advantage of those opportunities, when yourcompetitors are trying to do the same, doesn’t happen by itself. It’s about taking on enterprise-wide change toevolve an organization’s business and associated operating model, as well as the way its people work. Wehave built a world-class practice around doing just that enabled by technology and we are delighted to havethose capabilities recognized, not only by our clients, but by the IDC MarketScape.”

About KPMG Digital

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© 2018 KPMG Advisory Limited, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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The KPMG name and logo are registered trademarks or trademarks of KPMG International.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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Contact us:

Kees-Jan van der MolenSenior Manager, IT Board AdvisoryKPMG Advisory Services Limited

T: +254 715 189 131E: [email protected]

Gerald KasimuPartner & Head of AdvisoryKPMG Advisory Services Limited

T: +254 709 576 676E: [email protected]

mailto:[email protected]

mailto:[email protected]

Documents

New Enabling Trust in a Digital Economy - ISACA Kenya Chapter der-Molen... · 2018. 5. 8. · In this key-note speech of KPMG, we will highlight: - What Digital means and what makes