north american success in digital business · north american success in digital business 5 how...

The TCS 2020 Chief Information Officer Study

Digital Leadership for Business Transformation

North American Success in Digital Business

Regional Report from the TCS CIO Study

TCS Business 4.0TM Institute

2

Contents 3 Digital Leadership for Business Transformation 4 Key Highlights for North American Companies 5 Digital Leaders vs. Digital Followers 7 Revenue and Success in Digital Business 9 North American Corporate Cultures 11 Future Digital Opportunities 14 Technology’s Impact on Transformation 16 Legacy vs. Innovation20 How We Conducted This Study

North American Success in Digital Business 3

Digital Leadership for Business Transformation

The TCS 2020 Chief Information Officer (CIO) Study seeks answers to central questions facing information and technology executives across industries in North America and Europe: How are these leaders helping their enterprises navigate a complex and fast-evolving digital landscape? Where are their companies focusing

their digital initiatives? What traction have they gained this decade from those efforts?

In this report, data from the surveys of CIOs in North America (representing 608 companies) is analyzed to determine how success in digital business relates to revenue, what are the foci of North American corporate cultures, and to what degree other corporate leaders—board directors and top management—perceive digital opportunities.

Other reports in this series examine these and other issues across industries and within other industries.

W Key Findings: How CIOs Are Helping Their Companies Navigate the Digital Ecosystem

W Roles & Responsibilities in Digital Business

W Data Priorities & Practices

W Threats & Opportunities: Industry vs. Ecosystem

W Master Report: Study Results, Trends & Best Practices

Additional reports will look specifically at the consumer packaged goods, banking, financial services, insurance, retail, media, entertainment and information services industries, as well as the viewpoints of CIOs at European firms.

All reports currently available from the TCS 2020 CIO Study can be found at: sites.tcs.com/bts/tcs-cio-study


Key Highlights

Digital Business in North AmericaW North American companies’ revenues from digital businesses, products

and services rose to nearly half of all revenues by 2018, up from about one-third of revenues in 2010.

W The “digital leaders” among these companies—those most advanced in the digitization of their businesses and reaping the rewards—tend to have higher revenue overall than the “digital follower” companies.

W North American firms’ corporate cultures are focused primarily on product and service innovation, followed by customers, brand image and marketing, operations, and competitors.

W CIOs in North America say, on average, they spend approximately half their time (51%) on digital business model innovation and the other half on managing existing IT infrastructure.

W But CIOs for Digital Leader companies say they spend 61% of their time on digital business models; Digital Followers’ CIOs spend only 43% of their time on such innovation.

W The management at Digital Leader companies are unlikely (only 7%) to see their future digital opportunities as “limited.” However, management at two-thirds of the Digital Follower firms are feeling boxed in.

W Over the past decade, cloud computing has had the greatest impact on transformation in North America. Looking ahead, CIOs expect artificial intelligence to have an equal or greater impact.


How Digital Leaders Are Different: Context in the CIO Study Across 11 industries in North America and Europe, we analyzed the survey answers of 1,010 CIOs and other IT executives to understand the differences between firms that are leading and trailing in the digital transformation of their businesses.

Leaders vs Followers

Among North American firms

Using these criteria, we found that the number of Digital Leaders in North America was slightly higher than the number of Digital Followers:

W North American firms that are Digital Leaders (147) represent 24% of all North American companies in the study.

W North American firms that are Digital Followers (138) represent 23% of all North American firms surveyed.

34%66%

41%59%

53%47%

61%39%

Digital Leaders -220 Digital Followers -219

Digital Leaders vs Digital Followers

We’ve been not very successful increasing digital revenueWe’ve been not at all successful increasing digital revenue

Digitization is limited to a few business units so farWe’re still in pilot phase for digital transformation

New digital businesses, offerings, business and operating models Enterprise-wide digitization, strong leadership, major initiatives

We’ve been highly successful increasing digital revenueWe’ve been hugely successful increasing digital revenue

60% of the 1,010 CIOs we surveyed worked for North American-based companies


Looking at data on leaders and followers by industry, it’s clear that companies in nearly every industry have opportunities to elevate their game. For example, of the 48 North American industrial manufacturers in the study, only 3 qualified as Digital Leaders. There were only 11 consumer packaged goods leaders compared to 19 followers. Other industries—such as travel, transportation, hospitality, media, entertainment and information services—show similar ratios of leaders to followers.

Digital Leaders vs Digital Followers

% Leaders % Followers

Digital Leaders and Followers in North American industries

4% 63%16% 40%

17% 39%35% 27%

25% 25%11% 22%

21% 19%27% 17%

25% 15%23% 13%

33% 6%

High-tech

Automotive

Telecommunications

Insurance

Banking & financial services

Healthcare & life sciences

Retail

Travel & transportation

Media, entertainment, information

Consumer packaged goods

Manufacturing


2010 2018

North American Firms Report Rise in Digital Business RevenueNorth American companies’ revenues from digital businesses, products and services rose to nearly half of all revenues by 2018, up from about one-third in 2010.

North American Digital Leaders have made more progress on this front. They passed the 50% threshold over the last decade, from 45% of revenues in 2010 to 63% by 2018. But followers’ digital revenue as a percent of total barely budged, moving from 32% in 2010 to 38% in 2018. Within the followers group, only an eighth reported that more than 50% of their revenue comes from the digital aspects of their business.

% of revenue from digital business

35%

45%

32%

47%

63%

38%

North American companies

NA Leaders

NA Followers

Revenue & Success


North American Digital Leaders Have Higher Revenues Than Followers You don’t have to be small to succeed in digital business. Perhaps surprisingly—given their reported growth rates in revenue from such transformation work—Digital Leaders in the study, in both North America and Europe, were likely to have two to three times the annual total revenues of Digital Follower firms.

Revenue & Success

RevenueNorth American companies North American Leaders North American Followers

$500 million to less than $1 billion

$5 billion to less than $10 billion




$50 billion or greater

25%13% 29%

35%

31%

38%

16%

17%

17%

13%

16%

10%7%

14%

4%4% 10%2%


North American Companies Emphasize Innovation, Customer FocusWhen asked to characterize their company’s culture, CIOs in North America said their organizations were most focused on product and service innovation, followed closely by four additional emphases: customers, brand image and marketing, operational processes, and competitors. (Respondents could pick more than one answer.)

North American Digital Leader companies give particular attention to selling and marketing to customers. They were far more likely to say their corporate culture focuses on customers and the company’s brand image.

The cultures of North American Digital Followers look more generic, resembling the answers for all North American companies taken together. The most popular choice—focusing on products or service innovation—was said to characterize the corporate culture at these firms by only 71%. That’s fewer than any of the top five choices at leader companies—for whom product or service innovation ranked fourth yet was still deemed more important than at other companies.

Corporate Cultures


Focus of corporate culture(high/greatest degree)

Corporate Cultures

North American companies NA Leaders NA Followers

Product/service innovation

Operations

Customer experience

Customers

Brand image

Distribution

Competitors

71%79%

71%69%

81%67%

57%63%

56%68%

82%66%

69%82%

70%53%

63%

67%

77%

40%

63%

Looking more broadly, Digital Leader companies appear to be firing on more cylinders across their organizations. CIOs at North American leader companies were likely to claim that five or more of the seven named focus areas either highly or greatly characterized their corporate cultures, whereas North American follower companies could only say that about four—and were more than twice as likely to say an area figured very little or not at all into their company’s priorities.


Opportunities May Be in the Eye of the BeholdersAsked to assess their top management team’s attitude about future digital business opportunities, North American CIOs were split. Thirty-six percent said their management teams felt “we have covered a lot of ground, but there is still a lot more to do,” while 35% said their leadership sees limited opportunities to further digitize their business. The remaining 29% indicated their digital opportunities were largely in front of them.

The management outlook is much more positive at North American Digital Leader companies than those at the region’s follower companies. Only 7% of leader firms’ CIOs said their top management teams see limited opportunities for further digitization, signaling they view the field as ripe for more business. The attitude at North American follower firms is a near mirror image, by contrast: 65% see limited opportunities and only 7% say they have accomplished much to date.

Management’s view of digital opportunities

NA Leaders


NA Followers There are limited opportunities to further digitize our businessWe have not even started our journey; we are just at nascent stagesWe have covered a lot of ground, but there is still more to do

Digital Futures

7%

29%

26%35%

65%28%

67%

36%

7%


Most North American Leaders Think Expansively About Their Digital FuturesEven as a sizable portion of North American CIOs in the study point to their leaders’ limited expectations for the future of their digital businesses, a majority—57%—also said their companies’ board and top management think expansively or very expansively about digital opportunities. The other 43% said top management thinks “narrowly or more than narrowly” about these opportunities.

(This response contrasts with European CIOs in almost reverse proportion: 44% of these IT leaders said their boards and top management think expansively, while 56% said their leaders think narrowly or more than narrowly.)

Among North American Digital Leader CIOs, two-thirds said their board and top management team members thought expansively about the company’s digital opportunities. At North American follower firms, less than half of boards and management teams are thinking expansively about the digital future.

How board and management think about digital business

NA Leaders


NA Followers

More expansivelyMore narrowly

Digital Futures

43%

34%

66%

57%

46%54%


CIOs Regard IT Security and Service Most Ripe for DigitizationAsked about their views on future digitization opportunities, North American CIOs said they see the most potential in an area that is familiar to them: information security and IT service management. Other areas that CIOs ranked as having high potential include:

W Procurement and vendor management

W Technology and process development

W Product or service development

W Marketing and sales processes

W Human resource management

Digital Futures

How digital can these be by 2030?

78%77%77%

76%76%76%

75%74%

70%69%

68%68%

Information security/ITSM

Procurement/vendor management

Technology/process development

Product/service development

Marketing/sales

Human resources

Finance/accounting

Legal

Customer support

Our products/services

Production/manufacturing

Logistics/supply chain


Transformational Impact

The Cloud Computing Decade Is Expected to Lead to the AI DecadeWe asked CIOs to rate the impact of certain technologies on their digital transformations over the last decade, from cloud to artificial intelligence (AI), the Internet of Things (IoT) and 3D printing. Cloud computing was considered the technology with the most impact in the last 10 years.

North American Digital Leader and Digital Follower CIOs’ answers only varied a few points from the overall responses for all North American CIOs.

In looking ahead to the next decade, however, the view starts to diverge. More than half of North American leader CIOs expect to see “extreme impact” from cloud computing, AI, and mobile devices. And nearly half (48%) expect embedded (IoT) technologies to have a similar effect.

Cloud computing

IoT/embedded tech

Artificial intelligence

Machine learning

Mobile

Virtual/augmented reality

3D printing

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5

Impact of these technologies over the past decade(1=no impact; 5=extreme impact)


Transformational Impact

The Digital Follower CIOs are less likely to see a major impact from these technologies. Certainly some—but on average, not as much. The one exception: for both the leader and follower companies, AI is the technology to keep the closest eye on.

Cloud computing

IoT/embedded tech

Artificial intelligence

Machine learning

Mobile

Virtual/augmented reality

3D printing

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5

Expected impact over the next decade(1=no impact; 5=extreme impact)

NA Leaders NA Followers


North American Digital Leaders Expect More from Their CIOsIn North America, Digital Leader companies expect their CIOs to oversee more activities than CIOs do at follower firms.

The four top responsibilities for CIOs at North American leader companies include:

W the development of embedded systems in their company’s products and places of doing business, such as using IoT technologies

W researching emerging technologies and their potential value to the company

W managing existing IT infrastructure and legacy information systems

W data security

Legacy vs Innovation


Existing/legacy IT

New systems for existing processes

Embedded/IoT technologies

Researching emerging tech

Data analytics

End-user tech support

Data security

Other


NA Leaders NA Followers

What CIOs oversee

North American Digital Follower companies put managing legacy technology at the top of the list of CIO responsibilities (three-quarters of these companies’ CIOs do so). Developing new technology systems to support existing business processes was the second-most mentioned; developing IoT-related systems was third. And while leaders’ CIOs listed data security as a key responsibility, the CIOs of Digital Follower companies rated it last on their to-do lists, behind end-user tech support.

61%

56%

67%

74%

49%

49%62%

54%

58%

29%

1%

37%

29%

28%

28%

1%


Digital Leader CIOs Devote More Time to InnovationThe most precious executive resource? Time. We asked CIOs to estimate the time they spend on digital business model innovation compared to managing the company’s existing IT infrastructure. For North American CIOs, on average, about half their time (51%) is spent on digital business model innovation and the rest on legacy systems. But those working at Digital Leaders and Digital Followers pursue starkly different paths. The Digital Leaders’ CIOs spent 61% of their time on digital business model innovation and only 39% on the company’s present IT infrastructure. Digital Followers allocate their time in nearly inverse proportion: 57% of CIOs’ time on legacy IT and only 43% on new business models.


Where North American CIOs spend their time

NA Leaders

NA Followers

% on digital business model innovation% on managing present IT infrastructure

57%

39%

61%

43%


The differences are also apparent by industry. In the high-tech industry—where the CIO’s role can seem less incomparable to the rest of the senior management team—CIOs share some responsibility for the company’s strategy and future. In the travel, transportation, and hospitality industries, that may be true to a degree, but more of their time is dedicated to managing legacy systems.

% on managing present IT infrastructure % on digital business model innovation

Where North American CIOs spend their time

41% 59%

46% 54%

46% 54%

48% 52%

49% 51%

50% 50%

50% 50%

51% 49%

53% 47%

53% 47%

54% 46%

High-tech

Healthcare & life sciences

Retail

Insurance

Banking & financial services

Automotive

Manufacturing

Telecommunications

Media, entertainment, information


Travel & transportation



How We Conducted This StudyThe TCS 2020 CIO Study asked senior IT executives in 11 industries about their work, their company’s digital success, and where they’re focused strategically for the future. Among the 1,010 companies represented in our study, 60% (608) were based in North America.

The IT budgets under these CIOs in North America ranged from less than $25 million to more than $1 billion, with 44% of them falling in the $25 million to $100 million range.

North American companies surveyed

IT budgets

Less than $25 million

$25 million to less than $50 million





$750 million to less than $1 billion

$1 billion or more

18%

6%8%

10%

17%

6%

26%

9%

Banking & financial services 12%

Insurance (life, property &

casualty, health, etc.)12%

Retail (online, physical store, catalogs)12%


(food & non-food)14%

High-tech (hardware &

software)8%

Telecommunications services

6%

Media, entertainment & information services/data providers10%

Travel, transportation & hospitality8%

Healthcare & life sciences6%

Industrial manufacturing8%

Automotive4%

21North American Success in Digital Business

About the TCS Business 4.0TM InstituteThe TCS Business 4.0 Institute is a research-driven center with a mission to deliver practical, forward-thinking technology and business insights that inform the strategy of TCS prospects and clients. Our data-driven research provides best practices and recommendations that lead the way for transformational journeys.

To learn more about TCS Business and Technology Services, visit: info.tcs.com/bts-home

About Tata Consultancy Services (TCS)Tata Consultancy Services is an IT services, consulting and business solutions organization that partners with many of the world’s largest businesses in their transformation journeys. TCS offers a consulting-led, Cognitive powered, integrated portfolio of IT, Business & Technology Services, and engineering. This is delivered through its unique Location Independent Agile delivery model, recognized as a benchmark of excellence in software development. A part of the Tata group, India’s largest multinational business group, TCS has a global footprint and is listed on the BSE (formerly Bombay Stock Exchange) and the NSE (National Stock Exchange) in India.

For more information, visit us at www.tcs.com.

Copyright © 2019 Tata Consultancy Services Limited. All content/information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content/information contained here is correct at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form without prior written permission from TCS. Unauthorized use of the content/information appearing here may violate copyright, trademark and other applicable laws, and could result in criminal or civil penalties.

Authors

Akhilesh TiwariGlobal Head of Enterprise Application Services

Dinanath KholkarGlobal Head of Analytics & Insights

Nidhi SrivastavaGlobal Head of Business and IT Consulting Practices

Santha SubramoniGlobal Head of Intelligent Process Automation

@TCSDigitalTech | @TCSDigitalBiz | @TCSCognitiveBiz

http://info.tcs.com/bts-home

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