Kiwi execs say digitalisation important, but need to ‘walk the talk’

HindSight Forum survey finds a 'lukewarm' embrace of leading-edge digital technologies - but businesses that want to harness digitalisation need to invest in at least two critical areas in the coming year, says Peter Hind, CEO of the research and advisory group.

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Organisations across New Zealand and Australia are conveying mixed messages bordering on ambivalence in their attitudes to digitalisation.

The latest HindSight Application of Technology Study (HATS) reveals that while a solid majority of local businesses say that digitalisation is either a critical business issue or key element in their business strategy, their actual practices appear to contradict this belief.

This includes a lukewarm embrace of leading-edge digital technologies such as 3D printing, a business focus more on operational efficiency rather than transformation and a recognition that their analytical capabilities to harness the growing volumes of digital data are poor, says Peter Hind, CEO and founder of The HindSight Forum.

Hind says the survey, conducted in January to March this year, had 222 IT executives across Australia and New Zealand as respondents.

He says a third of the respondents came from organisations with more than 1000 staff, and 15 per cent of the organisations had annual revenues over $1 billion. Nearly a quarter (23 per cent) of respondents were from New Zealand.

The study finds New Zealand organisations may be better placed to succeed than their Australian counterparts on the digitalisation path.

A greater proportion of Kiwi respondents reported that their organisation sees digital technologies as key elements of their business strategy, (58 per cent compared to 44 per cent of Australian respondents). They also seem to have more flexibility within their IT budgets to test the waters of new technologies. The HATS survey showed the discretionary spend levels in New Zealand IT budgets are a median average of 10 per cent which contrasts with 5 per cent in Australian IT budgets.

“Embracing digitalisation requires an organisation to challenge conventional thinking and this entails a willingness to empower a CIO to experiment with new technologies to see if they can help a business do things differently,” says Hind. “The evidence is that more New Zealand IT executives appear to have been entrusted with the flexibility to be able to do this”.

Nevertheless, Hind notes progressing towards being an effective digitalised organisation will be not achieved by just trying to make current work practices more efficient.

He equates this to "paving the cow path".

Instead, he argues it requires a willingness to investigate how technology might present a new way of working. “Being an effective digitalised organisation is as much about an attitude of mind than it is about the technologies that are being deployed."

Agenda for the next 12 months

Hind says there are at least two things businesses need to embrace in the coming year if they are going to harness digitalisation.

First, “they must instil a culture of experimentation with IT.”

“I suspect to do this businesses will have to separate the corporate role of running an IT department from an R&D role of assessing how new technologies can be harnessed by the business,” Hind tells CIO New Zealand.

“As a corporate unit the focus will always be on doing things more efficiently and this mindset will see experimentation as unproductive if it doesn't produce results immediately,” he states. “Yet in the long-term, the very survival of many businesses will be dependent on them embracing digitalisation."

Second, he says “more consideration needs to be given to the data scientist role especially considerations like what skill sets you need in a data scientist, where are they based in the business, how are they funded and what is their reporting line?”

“Harnessing the data resources will be increasingly more critical in a digital world as it will enable marketing and client service functions to be more focused," he adds. "Leveraging the data resources is not going to be done effectively if it is just another task tacked on to all the other things a CIO needs to do.”

Leveraging the data resources is not going to be done effectively if it is just another task tacked on to all the other things a CIO needs to do.

Peter Hind, The HindSight Forum

The Agile advantage

The HATS study highlighted that there was one group of local CIOs who seemed ahead of the curve on the digitalisation journey.

These were those who had begun using Agile application development and project management practices, says Hind.

Just over a half of total respondents, (57 per cent of New Zealand respondents), reported that they had embraced Agile. However, those that had were much more likely to advise that their executive saw IT as the epicentre of the business.

Moreover, whenever there was a need for strong engagement between IT and the business the indications were that this engagement was stronger when an organisation was using Agile.

Respondents in these organisations were much more likely to report that they had project management offices, (PMOs), in place to supervise IT related initiatives.

They were also more likely to undertake strategic planning around IT and these strategic plans were updated more regularly.

Hind says the report finds there were more IT Steering Committees among respondents using Agile to guide the use of IT by the business.

“For much of my 30-year career in IT there has been an us-and-them divide between IT and the business it serves. Many in the business were critical of the IT department as it seemed to consume significant resources and frequently failed to deliver on what it promised.

“On the other hand many in IT complained that the business seemed to think that all that was needed to deliver new business systems was to wave a magic wand and shout abracadabra.

“The evidence from the HATS study is that the engagement between IT and the business that is fostered by Agile is starting to break down this mistrust.”

The study also looked at IT staff turnover. There was a significantly higher percentage of staff turnover revealled by New Zealand respondents compared to their Australian counterparts (8.7 per cent of total IT staff compared to 4.5 per cent in Australia).

“Staff turnover is usually a reflection of the buoyancy of the IT market,” says Hind. “People move on because there are more opportunities available to them. They stay put if they can’t see alternative jobs available”.

When asked about the major challenges confronting CIOs over the next 18 months, the predominant response was meeting user expectations, says Hind.

Hind says this was not surprising.

“Businesses may be faster, incredible new technologies may be appearing, there may be new ways of doing things and the disruption created by digitalisation may be seismic,” he states. “However, in the end, the task for IT executives everywhere remains the same.”

“They need to ensure business is satisfied that their significant investment in IT is worthwhile”.

More than 60 per cent of respondents report they have no plans to implement 3D printing, virtual reality, gamification or artificial intelligence in the next five years.

Highlights of the New Zealand results:

58 per cent from New Zealand said that digital technologies plus the Internet have a significant impact on the business and are key elements in their business strategy. This contrasts with a 44 per cent response level from Australia.

62 per cent believe their executive see IT in terms of how it can make the organisation operationally efficient while only 27 per cent say IT is at the epicentre of the business and integral to how it will evolve in the future.

The reported median level of discretionary expenditure in the local New Zealand IT budget is 10 per cent compared with with 5 per cent in Australia. This offers New Zealand IT executives more opportunities to pilot and experiment with digital technologies.

More than 60 per cent of respondents report they have no plans to implement 3D printing, virtual reality, gamification or artificial intelligence in the next five years.

Over half of the respondents classify their organisation’s analytical capabilities in harnessing data from most online and mobile activities as either weak or non existent.