CIOs lead digital transformation projects, but companies still fail to innovate

While most businesses are digitally transforming, challenges like legacy technology and lack of talent are preventing many from making strides, according to an Altimeter report.

More businesses are investing in digital transformation strategies to gain new opportunities for growth—but most companies are still failing to invest in key areas where customers are flocking, like mobile, according to a new report from Altimeter.

In the The 2017 State of Digital Transformation report, Altimeter surveyed more than 500 executives and digital strategists to understand the current challenges and opportunities they face as they undergo a digital transformation.

More for CXOs

Report: 2018 IT budgets are up slightly; spending focus is on security, hardware, and cloud

In a recent Tech Pro Research survey, 39% of respondents said their 2018 budget would increase slightly. This report and infographic has more information about how that money will be spent.

While businesses cite "evolving customer behaviors and preferences" as the top driver of digital transformation, fewer than half invest in understanding digital customers, the report found. And only 35% of businesses said they have fully mapped the customer journey within the last year—down from 54% the year before.

While most companies report having digital transformation plans underway, many are not as far along into those plans as they think, Altimeter principal analyst and report author Brian Solis told TechRepublic. "The 'digital' in digital transformation implies technology of course," Solis said. "But the most advanced companies are also learning how digital is affecting customer and employee behaviors, expectations, and preferences."

SEE: IT leader's guide to achieving digital transformation (Tech Pro Research)

Many businesses are failing to invest in digital or mobile due to legacy mindsets, processes, or boards, as well as risk-averse company cultures, Solis said. Other challenges to digital transformation across organizations include a lack of digital talent and expertise (31%), the perception that digital transformation is a cost center and not an investment (31%), and general culture issues (31%), the report found.

Only 37% of businesses view digital transformation as an investment in fighting against market disruption. When companies do invest in digital transformation projects, they tend to be short-term ones with limited budgets, rather than long-term investments for continued success, the report found.

Those that are most successful in their digital ventures are ones that enter a project with a clear purpose, Solis said: For example, modernizing the customer journey for mobile. That way, teams across functions can collaborate with a goal and metrics in mind.

"More companies are starting to realize that they need to 1) become technology companies regardless of industry and 2) focus investments on initiatives that fix critical problems, modernize friction points, and explore opportunities for 'little bets' to innovate and grow new opportunities," Solis said. "Everything must be tied to a before and after state to demonstrate progress and success."

At some point, digital transformation must become cross-functional, with regular reports going to the C-suite or the board, and executives involved as stakeholders, Solis said. But only 40% of companies operate with an executive-mandated steering committee responsible for organizational transformation, the report found.

Digital transformation ownership shifted from the CMO back to the CIO this year, the report found: More than 28% of respondents said that the CIO or CTO is responsible for digital transformation, compared to CMOs at 23%. CEOs came in third place, at 20%, followed by chief digital officers at 13%.

In terms of the department responsible for digital transformation, IT ranked ahead of marketing/digital, at 34% compared to 30%.

However, "it's not about IT," Solis said. "Digital transformation is about competing differently as employee and customer behaviors, and everything else, evolve. It's an enterprise-wide effort and the CIO is instrumental but so are other key stakeholders. Companies need to move in the right direction together and be aligned on vision and purpose and what success looks like along the way."

Want to use this data in your next business presentation? Feel free to copy and paste these top takeaways into your next slideshow.

  • The CIO or CTO leads digital transformation efforts at 28% of businesses, while the CMO leads those efforts at 23% of businesses. -Altimeter, 2017
  • The top challenges to digital transformation across organizations are a lack of digital talent and expertise (31%), the perception that digital transformation is a cost center and not an investment (31%), and general culture issues (31%). -Altimeter, 2017
  • Only 37% of businesses view digital transformation as an investment in fighting against market disruption. -Altimeter, 2017
Image: iStockphoto/chombosan

Also see

About Alison DeNisco Rayome

Alison DeNisco Rayome is a Staff Writer for TechRepublic. She covers CXO, cybersecurity, and the convergence of tech and the workplace.

Editor's Picks

Free Newsletters, In your Inbox