The 2017 CIO Agenda: Seizing The Digital Ecosystem …€¦ · 4% 3% 2% 2% 1% 2% (n = 544) (n = 2,598) Manufacturing 24% Government 15% Education 12% Banking 11% Services 11% Insurance

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The 2017 CIO Agenda: Seizing The Digital Ecosystem Opportunity

Andy Rowsell-Jones

1 CONFIDENTIAL AND PROPRIETARY I © 2017 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner and ITxpo are registered trademarks of Gartner, Inc. or its affiliates.

From Inside to Outside: The Next Digital Revolution

Information and Technology

Value and Risk

Leadership and Culture

Flipping to Digital Leadership

Building theDigital Platform

Seizing the Digital Ecosystem Opportunity

93 Countries

$9.4T Revenue

$292B IT Spend

2,598 CIOs

19 Countries

$3.0T Revenue

$48B IT Spend

544 CIOsAPAC (n = 544)


Global Average: 2.2%

0.5%

-0.5%-0.1%

1.0%

2.2% 2.2%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2012 2013 2014 2015 2016 2017

Global Average IT Budget Change

Enterprise IT Budgets Increasing

+1.8%North

America

+1.7%Latin

America

+1.4%EMEA

+4.3%APAC


Formal IT Budget

Business Unit IT

Shadow IT

Enterprise IT Budgets Increasing

Percent of Overall IT Spend, APAC(n = 476)

+1.8%North

America

+1.7%Latin

America

+1.4%EMEA

+4.3%APAC

20%

7%

73%

Participation From Around the Gartner World


Participation by Industry in APAC

31% 10% 6% 13% 12% 6% 5%

4% 3% 2% 2% 1% 2%

(n = 544)

(n = 2,598)

Manufacturing

24%

Government

15%

Education

12%

Banking

11%

Services

11%

Insurance

7%

Retail

5%

Transportation

4%

Media

2%

Communications

2%

Healthcare

3%

Energy/Utilities

3%

Wholesale Trade

2%

Industry Breakdown of All Survey Participants


7 Case Studies


Power Up Your Digital Ecosystem Readiness

Interoperability

External Mindset

Interdependence

Escape Velocity Master digital-ecosystem-ready leadership

Create a digital-ecosystem-ready organization

Extend your technology core to be digital-ecosystem-ready


Digitalization Spend IncreasingQ. Approximately what percentage of your IT budget is spent on digitalization (capital plus operations but excluding depreciation)?Q. By 2018, approximately what percentage of your IT budget will be spent on digitalization (capital plus operations but excluding depreciation)?

Sample sizes exclude "Don't Know" Today 2018

Average (Mean) Percentage of IT Budget Spend on Digitalization

Top(n = 135)

Typical(n = 1,427)

Trailing(n = 103)

43%

33%18%

28%

16%7%

APAC(n = 377)

33%

22%


79%

49%

24%

51%

Top Performers(n = 171)

Typical Performers(n = 2,083)

Trailing Performers(n = 166)

APAC(n = 513)

Digital Ecosystem Participation Is GrowingQ. Do you think your business/government or public entity participates in a digital ecosystem?

Percentage of Respondents Whose Organizations Participate in a Digital Ecosystem


Typical Performers (n = 712)

Digital Ecosystem Partners Are Becoming More NumerousQ. How many important digital partners did your company/business unit/government or public entity have two years ago? Have today? Two years from now?

Average (Mean) Number of Important Digital Partners

Top Performers (n = 105) Trailing Performers (n = 24)

CAGR 35%

CAGR 43%

CAGR 81%

78

38

19

2016 2018

143

78

62

27 CAGR 28%APAC (n = 189)

44


33%

38%

63%

13%

34%

45%

34%

41%

59%

36%

36%

70%

Selling (delivering) through it

Buying (consuming) through it

Running it (co-creating or providing)

Top Performers (n = 132) Typical Performers (n = 994) Trailing Performers (n = 38) APAC (n = 256)

Leaders Run, Buy and Sell Through Ecosystems

Percentage of respondents. Multiple responses allowed. Base: All answering, participate in digital ecosystem; n = 1,164

Q. How does your company/business unit/government or public entity interact with its principal ecosystem?

RUN

BUY

SELL


Ecosystem Case"It's about a superior sustainable solution that will have a positive social and environmental impact."

— Anders Torell, Head of IT and Digitalization



Rising to the Digital Ecosystem Challenge

Extend yourtechnology core

to bedigital-ecosystem-ready

Create a digital-ecosystem-ready

organization

Master digital-ecosystem-ready

leadership


Rising to the DigitalEcosystem Challenge: Create a digital-

ecosystem-ready organization


leadership



Technology


Top Performers Are Investing in BI, Not ERPQ. Please indicate the top three technology areas where your company/business unit/government or public entity will be spending the highest amount of

new/discretionary funding in 2016.

Percentage of respondents. Up to three responses allowed. Coded open-text responses.

Showing technology areas that were mentioned within top three by more than 10% of overall respondents

Top Performers

(n = 178)

Typical Performers

(n = 2,165)

Trailing Performers

(n = 171)

APAC(n =540)

BI/Analytics 47% 38% 31% 41%

Cloud Services/Solutions 34% 26% 29% 32%

Digitalization/Digital Mktg. 20% 17% 8% 20%

Infrastructure and Data Center 20% 22% 27% 19%

Mobility and Mobile Applications 16% 14% 16% 21%

Cyber/Information Security 13% 16% 20% 12%

Enterprise Resource Planning 8% 22% 30% 18%

Networking, Voice and Data Comms. 8% 12% 13% 7%


Key Technologies Will Deliver Change

Percentage of respondents to select each technology in top three (n = 2331)Percentage of APAC respondents (n = 499)

Q. In your opinion, which three of these technologies have the most potential to change your organization over the next five years?

81% 48% 43% 40%Advanced Analytics Internet of Things Digital Security Business

Algorithms

MachineLearning

VirtualCustomerAssistants

AugmentedReality

Blockchain AutonomousVehicles

Smart Robots

22% 19%13%

10% 7% 6%

APAC 54%APAC 74% APAC 35% APAC 32%

APAC 27% APAC 22%APAC 16%

APAC 10%APAC 8% APAC 7%


Technology CaseThe solution to competing in a global ecosystemis personalization through machine-learning technology.

"It will be a very smart student assistant."

— William Confalonieri, CDO



Digital Ecosystems Are Driving More In-House DevelopmentQ. For the most progressive digital initiatives, what percentage of the critical components (e.g., algorithms, intellectual property, platform) is sourced via each

of these ways?

Average Percentage of Critical Components for Digital Initiatives Sourced Each Way:

This question was not shown to respondents who do not have a digital initiative.

31%

39%

26%

4%

40%

34%

22%

4%

26%

34%

35%

5%

Have to build in-house Able to buy from existing partnersMust buy from new partners Must make an acquisition of another business to gain access to these capabilities




31%

37%

28%

4%

APAC(n = 436)


78%

16%

24%

13%

6%

65%

8%

15%

8%

23%

45%

3%

8%

6%

45%

73%

11%

21%

9%

14%

Engage them

Buy them

Invest in them

Create them(i.e., via spinoffs)

Ignore them

Top Performer (n = 176) Typical Performer (n = 2,158) Trailing Performer (n = 172) APAC (n = 528)

Expect to Engage More StartupsQ. What is your company/business unit/government or public entity's approach to startup companies as a source for key technology capabilities and skills?

Percentage of respondents. Multiple responses allowed.

78%

45%


Create Your Core TechnologyDigital-Ecosystem-Readiness Action Plan

DoneThisYear

Next3 Years

Later/Never

Extend BI and analytics to encompass unstructured data

Run data-led experiments to drive business performance

Re-evaluate ERP investments

Expose as many of your services as possible via APIs for internal and external "customers"

Build specific strategy for IoT and smart machines

Continue investment in technical and human factor security

Get a broader spectrum of emerging technologies onto your radar

Build a competency center for dealing with startups

Institutionalize experiments with DevOps and bimodal

Include business value of intellectual property into prioritization cases and funding allocation decisions

Adopt business-risk-based project prioritization of new projects and legacy assets


DoneThisYear

Next3 Years

Later/Never

Extend BI and analytics to encompass unstructured data

Run data-led experiments to drive business performance

Re-evaluate ERP investments

Expose as many of your services as possible via APIs for internal and external "customers"

Build specific strategy for IoT and smart machines

Continue investment in technical and human factor security

Get a broader spectrum of emerging technologies onto your radar

Build a competency center for dealing with startups

Institutionalize experiments with DevOps and bimodal

Include business value of intellectual property into prioritization cases and funding allocation decisions

Adopt business-risk-based project prioritization of new projects and legacy assets

Create Your Core TechnologyDigital-Ecosystem-Readiness Action Plan


Rising to theDigital Ecosystem Challenge: Create a digital-



leadership


to be digital-ecosystem-ready

Organization


Bimodal IT Adoption Is Increasing

68% 43% 17% 50%




Average bimodal adoption: 43%38%

2016 2017

APAC(n = 464)

Base: Total answering, excludes not sure

Q.Does your company/business unit/government or public entity explicitly have two parts in its IT organization or project portfolio — one more safe, predictable and industrialized, the other more innovative, fast and/or collaborative — in other words, a bimodal approach to IT?

Percentage of respondents who use a bimodal approach


6%

52%

41%

48%

62%

71%

8%

42%

46%

46%

62%

65%

7%

52%

47%

50%

60%

68%

2%

71%

42%

58%

52%

75%

Have not achieved benefits yet

More innovation

Culture change in IT

Faster time to market

Improved business perception of IT

Closer engagement between business and IT

Bimodal IT Has Benefits …Q. What benefits have been delivered from your organization's bimodal approach to IT?

71%

Percentage of respondents. Base: Have bimodal approach. Multiple responses allowed.

Benefits



… and Costs

Percentage of respondents. Base: Have bimodal approach. Multiple responses allowed.

Q. What are the additional costs your organization has incurred due to its bimodal approach to IT?


16%

13%

21%

47%

30%

43%

15%

8%

23%

27%

31%

54%

15%

12%

24%

41%

31%

45%

12%

10%

18%

47%

35%

45%

No additional costs have been incurred

Higher failure rates

Organizational chaos

Additional head count to run Mode 2 program

Culture of “haves” and“have-nots”

Technical debt

Costs


Organization Case"With the emergence of digitalization, we needed a different structure."

— Michael Newcity, Chief Innovation Officer and President



26%

The Biggest Barrier to Success Is SkillsQ: What is your biggest barrier to achieving your objectives in your role?

Percentage of total responses. Total answering: Top five responses, n = 2,299APAC responses in orange, n = 490Showing selected responses. Coded open-text responses.

Skills/Resources Funding/Budgets Management Sponsorship/

Understanding/ Relationships

Culture/Structure of Organization

TechnologyChallenges

(Legacy, Security, etc.)

17%

8% 8%5%

(28%)

(17%)

(11%) (7%) (7%)


13%

8%

8%

18%

7%

11%

15%

29%

14%

7%

11%

5%

4%

22%

14%

29%

10%

8%

7%

13%

10%

16%

12%

34%

10%

10%

10%

11%

11%

14%

14%

29%

Business Knowledge/Acumen

Innovation/Creativity

IT/System Architecture

Digital Business/Digital Marketing

Programmers/Developers

Security & Risk

Overall Lack of Skills/Knowledge

Information/Analytics/Data Science/Business Intelligence

Top Performers (n = 153) Typical Performers (n = 1,863) Trailing Performers (n = 153) APAC (n = 461)

Analytics Skills Are Universally in Short SupplyQ. What would you say is the biggest talent gap (i.e., lack of skills) related to information, technology or digital business your government or public entity/business

unit/company is trying to fill at the moment?

Percentage of respondents. Showing selected responses. Up to three responses allowed.

Build Organization Bench Strength With an External Mindset for Digital Ecosystem Readiness

DoneThisYear

Next3 Years

Later/Never

Develop collaborative teams and governance to enable ecosystem participation

Create a strategic workforce planning process to surface priorities

Shift focus from system of differentiation to systems of innovation to improve brand as employer

Consider unconventional sources of ecosystem talent (such as physical scientists and staff from other business units)

Begin rotation and cross-fertilization between IT, business units as well as between industries

Tap into wider resource pools through influence and orchestration

Consider "techquisitions" as a source of talent

Experiment using different funding model (such as innovation funds for Mode 2 investments)

Adopt bimodal metrics: Mode 1 — execution risk vs. cost for service; Mode 2 — time to market risk and business returns

Create a pipeline through a social network built around the "science" behind your product/service

DoneThisYear

Next3 Years

Later/Never

Develop collaborative teams and governance to enable ecosystem participation

Create a strategic workforce planning process to surface priorities

Shift focus from system of differentiation to systems of innovation to improve brand as employer

Consider unconventional sources of ecosystem talent (such as physical scientists and staff from other business units)

Begin rotation and cross-fertilization between IT, business units as well as between industries

Tap into wider resource pools through influence and orchestration

Consider "techquisitions" as a source of talent

Experiment using different funding model (such as innovation funds for Mode 2 investments)

Adopt bimodal metrics: Mode 1 — execution risk vs. cost for service; Mode 2 — time to market risk and business returns

Create a pipeline through a social network built around the "science" behind your product/service

Build Organization Bench Strength With an External Mindset for Digital Ecosystem Readiness


Rising to the Digital Ecosystem Challenge: Create a digital-



leadership



Leadership


Understand and Mirror Business Priorities

Showing priorities that were mentioned within top three by at least 7% of overall respondents

Top Performers (n = 177)

Typical Performers (n = 2,165)


APAC(n = 538)

Growth/Market Share 28% 21% 24% 21%

Digital Business/Digitalization 28% 20% 6% 22%

Technology Initiatives/Improvements 26% 25% 22% 25%

Customer Focus 22% 22% 11% 20%

Innovation, R&D New Products/Services 20% 13% 9% 15%

Corporate/M&A/New Business/Consolidation 18% 16% 23% 17%

Analytics/Data/Information 18% 12% 5% 13%

Operations Improvement/Efficiency/Excellence 14% 12% 12% 14%

Process Improvement/Optimization/Automation 10% 10% 8% 8%

Globalizing the Business/Geographic Expansion 9% 8% 12% 10%

Profit Improvement/Profitability 8% 6% 6% 7%

Product/Portfolio Improvements 7% 6% 12% 5%

Security, Safety and Risk 7% 11% 9% 10%

Percentage of respondents. Up to three responses allowed. Coded open-text responses.

Q. Please tell us about your government or public entity's/business unit's/company's top three strategic business priorities for the next two years (2016/2017).


2.00

2.50

3.00

3.50

4.00

4.50

5.00

3.20 3.40 3.60 3.80 4.00 4.20 4.40 4.60 4.80 5.00

CIO

CEO

CFO

CTOChief digital officer

Head of innovation

Chief data officer

IT staff

Business employees

CIO

CEO

CFO

CTO

Chief digital officerHead of innovation

Chief data officer

IT staff

Business employees

CIO

CEO

CFO

CTO


Chief data officer

IT staff

Business employees

Top Performers (n = 172) Typical Performers (n = 2,091) Trailing performers (n = 169)

*Note: Sample sizes differ for each segment and each rating. Size of bubble indicates percentage of responses for each. N/A and no answer are excluded from means calculation.

Q. How are each of these roles involved in leading digital business initiatives and digital innovation in your enterprise?Q. What is the attitude of each of these roles toward digital business initiatives and digital innovation in your enterprise?

Attitude — Scale of 1 (Highly Opposed) to 5 (Highly Supportive)

Invo

lvem

ent —

Scal

e of

1 (N

ot a

t All

Invo

lved

)to

5 (E

xtre

mel

y In

volv

ed)

Involvement and Attitude Are Key to Success


2.00

2.50

3.00

3.50

4.00

4.50

5.00

3.20 3.40 3.60 3.80 4.00 4.20 4.40 4.60 4.80 5.00

CIO

CEO

CFO

CTOChief digital officer

Head of innovation

Chief data officer

IT staff

Business employees

CIO

CEO

CFO

CTO


Chief data officer

IT staff

Business employees

CIO

CEO

CFO

CTO


Chief data officer

IT staff

Business employees

Top Performers (n = 172) Typical Performers (n = 2,091) Trailing performers (n = 169)

Q. How are each of these roles involved in leading digital business initiatives and digital innovation in your enterprise?Q. What is the attitude of each of these roles toward digital business initiatives and digital innovation in your enterprise?

Attitude — Scale of 1 (Highly Opposed) to 5 (Highly Supportive)

Involvement and Attitude Are Key to Success

CIO

CIO

CIO

CEO

CEO

CEO

CFO

CFO

CFO

*Note: Sample sizes differ for each segment and each rating. Size of bubble indicates percentage of responses for each. N/A and no answer are excluded from means calculation.

Invo

lvem

ent —

Scal

e of

1 (N

ot a

t All

Invo

lved

)to

5 (E

xtre

mel

y In

volv

ed)


To deliver innovation

0% 20% 40% 60% 80% 100%

APAC

top

typical

trailing Top

Typical

Trailing

To run day-to-day IT services

Leaders Prioritize Value Over Cost

To support digital business initiatives

0% 20% 40% 60% 80% 100%

APAC

top

typical

trailing Top

TypicalTrailing

To optimize IT costs

To optimize overall business costs

0% 20% 40% 60% 80% 100%

APAC

trailing

typical

top Top

TypicalTrailing

To optimize IT costs

APAC

APAC

APAC

Top performers (n = 179); Typical performers (n = 2,176); Trailing performers (n = 172), APAC (n = 542)

Q. For each pair, which is more important for your IT department?


… but Leaders Still Drive Cost-Efficiencies

Sample sizes exclude "Don't know."

Percentage of respondents whose organizations have an IT costreduction target

Mean percentage toward cost reduction target lT already achieved

Top(n = 179)

Typical(n = 2,176)

Trailing(n = 172)

76%

55%50%

68% 68%48%

Q. If your IT organization has a cost reduction target, how close to that target have you managed to get?

APAC(n = 539)

63% 51%

Focus Business Leadership Practices on Mastering Interdependence for Digital Ecosystem Readiness

DoneThisYear

Next3 Years

Later/Never

Identify key challenger(s) to mitigate key threats and drive competitive advantages

Decide on the role you will play in your ecosystem and map capabilities against it

Start extending your leadership focus beyond the boundaries of the business, to ecosystem partners, regulators and other ecosystem partners

Consider a "forcing project" to speed up ecosystem support

Use business KPIs to set IT targets in order to emphasize business links within your ecosystem

Align service portfolio services with main stakeholders so they can directly see how IT contributes, and take responsibility for yield

Set cost targets on established services first where process and cost-drivers arewell-known — do not include new services or projects

Flip leadership from cost to value

Continuously drive down cost on established services to reinvest in new services

Adapt your leadership style to handle complexity and uncertainty of ecosystem competition

Deploy "value engineers" to track benefits realization, and help evolve prioritization and funding processes

DoneThisYear

Next3 Years

Later/Never

Identify key challenger(s) to mitigate key threats and drive competitive advantages

Decide on the role you will play in your ecosystem and map capabilities against it

Start extending your leadership focus beyond the boundaries of the business, to ecosystem partners, regulators and other ecosystem partners

Consider a "forcing project" to speed up ecosystem support

Use business KPIs to set IT targets in order to emphasize business links within your ecosystem

Align service portfolio services with main stakeholders so they can directly see how IT contributes, and take responsibility for yield

Set cost targets on established services first where process and cost-drivers arewell-known — do not include new services or projects

Flip leadership from cost to value

Continuously drive down cost on established services to reinvest in new services

Adapt your leadership style to handle complexity and uncertainty of ecosystem competition

Deploy "value engineers" to track benefits realization, and help evolve prioritization and funding processes

Focus Business Leadership Practices on Mastering Interdependence for Digital Ecosystem Readiness


Create Your Digital Ecosystem Action Plan

Done This Year Next 3 Years Later/NeverEcosystem-Ready TechnologyEcosystem-Ready OrganizationEcosystem-Ready Leadership


Further Research

2016 CEO Survey: The Year of Digital TenacityMark Raskino (G00296113)

Building a Digital Business Technology PlatformHung LeHong, Chris Howard and Others (G00297286)

Build Alliances to Thrive in Business EcosystemsRemi Gulzar (G00314260)

Building the Digital Platform: The 2016 CIO AgendaDave Aron, Graham P. Waller and Lee Weldon (G00292133)

Special Report: Bimodal IT, Deliver on the Promise of Bimodal

Documents

The 2017 CIO Agenda: Seizing The Digital Ecosystem …€¦ · 4% 3% 2% 2% 1% 2% (n = 544) (n = 2,598) Manufacturing 24% Government 15% Education 12% Banking 11% Services 11% Insurance