CEOs no longer question the need to embrace technology at the core of their business in order to create value for customers, but 58% still see the rapid pace of technological change as a challenge. So we learn from the 18th annual PwC CEO survey. It’s based on 1,322 interviews with CEOs in 77 countries, conducted between September and December 2014.
Digital transformation is both a challenge and an opportunity. Digitization has blurred or even eliminated rigid industry boundaries starting with the media, content, and communications industries and now spreading everywhere. The new digital business world has no pre-defined boundaries, no industry-based rules or limitations.
Indeed, 54% of CEOs have entered a new sector or sub-sector, or considered it, in the past three years, according to PwC. More than half (56%) of CEOs think it likely that companies will increasingly compete in new industries over the next three years. Unlike in the past, when “unrelated diversification” was the business strategy of only large conglomerates, PwC found that 51% of the smaller firms (revenues up to $100 million) included in the survey, have entered a new sector or subsector, or considered doing so, within the past three years, compared with 64% of the largest firms, with revenues of over $10 billion.
What technologies CEOs think are the most strategic in facilitating the digital transformation of their companies and industries? Leading the list are mobile technologies for customer engagement (81%), data mining and analysis (80%), cyber security (78%), the Internet of Things (65%), socially enabled business processes (61%) and cloud computing (60%). Most interesting here is the inclusion of the Internet of Things, somewhat new on the scene as a business buzzword, but it’s possible that the survey respondents have either referred to what they see as its future potential or to the value they have already derived from established technologies such RFID and machine-to-machine communications.
The pace of digital transformation has a lot to do with the return on investment CEOs and their companies have enjoyed from the digital technologies they have deployed in the past. 86% say a clear vision of how digital technologies can help achieve competitive advantage is key to the success of digital investments. 83% say the same for having a well-thought-out plan – including concrete measures of success – for digital investments.
The majority of CEOs think that digital technologies have created high value for their organizations in areas like data and data analytics, customer experience, digital trust and innovation capacity. Surprisingly, however, most CEOs point to operational efficiency as the area where they have seen the best return on digital investment. 82% think value has been created in this area, with half of these CEOs seeing “very high value.” The PwC report explains this finding as follows: “The transformation of cost structures is a symptom of the digital transformation that companies are undergoing as they align their business and operating models to new ways of delivering stakeholder value. Indeed, 71% of CEOs also tell us they’re cutting costs this year – the highest percentage since we began asking the question in 2010.”
It’s clear from these findings that digital technologies are used not only for generating new revenue streams from existing or new customers, sometimes in completely new lines of business, but also as tools CEOs used to automate existing work flows (and reducing headcount) and streamlining existing business processes. To make sure digital technologies are deployed for both expansion and efficiency, CEOs now understand that they need to take charge: 86% think it’s important that they themselves champion the use of digital technologies.