- Digital initiatives must be aligned to business objectives and metrics
- CIOs face increasing data volumes; difficulty convincing board members of initiatives
TM ONE, the enterprise and public sector business solutions arm of Telekom Malaysia Bhd (TM) recently organised its inaugural LEAP Summit 2018 with the theme “Transformation Through Intelligence. Are You Ready?”.
The summit was aimed at providing a platform for the enterprise and public sector segments to share their thoughts and experiences in the industry. Ajay Sunder (pic), the ICT Vice President of Frost & Sullivan, delivered a talk entitled “How They Did It & Lessons Learned from Other’s Digital Transformation Journey”.
Based on Frost & Sullivan’s interviews with 600 chief information officers (CIOs), 25 of which were Malaysian, Sunder offered valuable insights into the realities of other businesses as they attempt to go digital.
“Most enterprise IT decisions are no longer just a CIO decision. Top management is playing a greater role in governing outsourcing decisions,” he said.
The ideal way to digitally transform
Although most company C-suites recognise the need to go digital, an astounding 60% of enterprises are not confident of their digital transformation results. Since most companies are unsure of the right digital approach to take, Sunder advises: “The first step has to be defining the business objectives. The key is to define what exactly you are trying to achieve in going digital, whether it is more revenue, cost savings or a better customer experience index.
“If you are embarking on digital transformation for the sake of ticking a checklist and there is no KPI you are trying to chase, then you are bound to fail,” he warns.
Ideally, businesses should identify and map innovations to its objectives but limited resources and a tight budget often get in the way. Although most CIOs reported an increase in budgets by about 15%, Sunder said “It is important to prioritise and focus on the top five to ten areas that match your goals.”
Sunder goes one step further and tells companies to prepare a digital roadmap once objectives are set. “Most projects fail because there are no clear timelines. For example, if you have a three year window, be clear about what you need to do in the first 90 days. Break it down into trackable milestones.”
In addition to keeping abreast of progress, this strategy also helps to “show board members and external customers positive footprints along the way and includes them in the journey”.
Challenges faced by CIOs
Since decision-making by a company’s board of directors is largely based on financial metrics, one of the major challenges faced by CIOs is convincing them to take on a particular direction.
“Defining how you measure the return on investment (ROI) for some projects – that is the big challenge to CIOs. How do you show your board the revenues or cost optimisations?”
Sunder also highlights staff augmentation as another digital transformation challenge. “Traditional IT staff are not equipped to handle the complexities of digital transformation. We need more engineers who are software-capability driven,” he said, adding that companies face difficulties in augmenting their staff to the right skillset.
While training and development is one issue, the shift towards a more global and mobile workforce also creates problems for CIOs. “It is difficult to manage teams and projects that are located half a world away.”
Furthermore, CIOs are also burdened with an increase in data volume. “Most CIOs are struggling with data storage and finding meaningful insights from the large volume of data that different business units are generating.”
On top of the volume of data, CIOs are also overwhelmed by the neck-breaking speed of information. “With so much real-time data, the challenge lies in using this data to make appropriate real-time decisions.”
Learning from real case studies
To further demonstrate Frost & Sullivan’s insights, Sunder shared two case studies. The first was of a leading logistics provider based in Hong Kong and Malaysia. “This company generated US$100 million in revenue from APAC and is made up of 6,400 employees across the value chain and a large number of contractors.”
The company’s focus was on driving sustainable growth. “The key challenge of this company was to create value for customers in order to avoid being commoditised,” Sunder said, adding that the air-freight industry is heavily commoditised.
The company came to the realisation that its customers may not even notice the difference if its company name was replaced with one of its competitors. It set out to “create its services in a unique differentiation, streamline its fragmented delivery system and increase profit margins.”
With this problem statement in mind, the company embarked on its digital journey with a mobile first approach, a better transport utilisation platform and created a new digital business function helmed by a new chief digital officer (CDO). “However, the project failed. The chief digital officer was fired after a year,” Sunder shared.
He then delved deeper into what went wrong for the company: “One issue was unclear business objectives – there were no clear KPIs linked to this new CDO’s role. Secondly, there was no shared vision and intergration between all the different partners. Thirdly, the overall reporting structure from CDO to CIO created a big debate on the allocated digital budget.”
Sunder then presented a second case study of a successful digital transformation initiative by a non-Malaysian retail company with more than RM50 million in revenue and a 120% growth offline in the past four years.
“This company’s key challenge was consistency and reduced footfall to its stores due to e-commerce. They were looking at digital entertainment as a new form of revenue,” he shared.
With their competitors already doing digital commerce initiatives and dropshipping, this company was left behind in terms of digital transformation. “Nonetheless, the company employed the right mix of decentralised and centralised structures of automation. It also started an e-commerce division to complement its retail side.”
Sunder adds, “Today, the company is looked at as a role model for the successful implementation of digital initiatives.”
Upon presenting these two case studies, Sunder stressed the importance of establishing digital governance. “Budgets need to be clearly communicated and the digital and IT KPIs must be differentiated. The vision of going digital must be clearly articulated to all partners and ensure it is shared across the organisation.”
Using the failure of the first case study as an example, Sunder concluded by advising companies to periodically review and monitor their digital roadmaps to ensure success.