BENCHMARKING COMPETENCIES for DIGITAL PERFORMANCE an EIU Study of Digital-Competency Hurdles and Solutions

BENCHMARKING COMPETENCIES FOR DIGITAL PERFORMANCE An EIU study of digital-competency hurdles and solutions

Commissioned by: Benchmarking competencies for digital performance: 2 An EIU study of digital-competency hurdles and solutions

Contents

3 About this report

4 Key findings

6 Chapter 1: Why digital competencies matter

9 Chapter 2: Mind the competency gaps

11 Chapter 3: Rising expectations for IT leaders

14 Chapter 4: The challenge of complexity

16 Chapter 5: Developing digital competencies for the future

19 Appendix

About this report Benchmarking competencies for digital performance is an Economist Intelligence Unit report, commissioned by Riverbed Technology.

This report draws on an Economist Intelligence Unit survey, conducted in January-February 2019, of 512 senior business and government leaders in North America, Europe, the Middle East and Africa, and Asia-Pacific. The survey aimed to assess the behaviours, skills and abilities that help organisations improve their digital performance and, ultimately, achieve their objectives.

We focused on nine digital competencies:

• analytics using customer and/or operational data from digital systems; • ability to manage and measure the user and/or employee digital experience; • digital product and service innovation; • digital talent recruitment, retention and management; • IT infrastructure modernisation/transformation; • automation of business processes with digital technology; • digital development techniques (eg, Agile, design thinking); • organisation-wide digital transformation strategy; and • workplace transformation with digital technologies.

We also conducted interviews with the following individuals and thank them for their time and insights:

• Patricia Conolly, MD, executive vice-president and chief information officer, The Permanente Federation • Sunil Gupta, professor of business administration, Harvard Business School • Shawn Fitzgerald, research director, Insights, worldwide digital transformation strategies, IDC • John Jendrezak, general manager, Core Services Engineering and Operations, Microsoft • Laura Young-Shehata, executive vice-president and interim chief information officer, CommonSpirit Health

Finally, accompanying this report is a digital competency assessment tool, which enables users to benchmark their organisation’s competencies against all survey respondents. The tool can be accessed at https://digitalcompetency.economist.com/.

Key findings

A majority of organisations that we surveyed Many organisations have say digital competencies are strategically digital-competency gaps. significant. However, many respondents remain More than half of respondents are unsatisfied dissatisfied with their digital-competency with their organisations’ progress on developing progress and say that’s why they struggle digital competencies. In addition, nearly two- to achieve key performance goals. High- thirds of all respondents also say their digital- performing organisations drive stronger competency gaps have negatively affected the business performance and user experience. user experience. However, when compared with others, they also see an even greater need for continual High-performing organisations improvement of their competencies. They also continually strive to improve their take unique approaches to developing their competencies. competencies, understanding that excelling as a digital business is an ongoing journey. Eight in ten high performers believe they’re ahead of their peers in all digital The most important takeaways of our competencies, compared with less than research are: two-thirds of others. But high performers also understand that digital transformation Digital competencies are vital to and improving digital competencies are achieving positive organisational an ongoing journey, not a destination. For outcomes. this reason, 57% of high performers on Eight in ten respondents say their organisation’s average want to improve across all digital digital competencies are either very or competencies, compared with 46% of others. extremely important to achieving outcomes The IT department plays a that include revenue growth, service quality, leading role in developing mission delivery, profit growth/cost reduction and customer satisfaction. This is relatively digital competencies, but poor consistent across all industry segments. communication with other parts of their organisation remains a Although all digital competencies stumbling block. are important, five stand out. More than half of respondents say their The competency most frequently cited IT departments have a leadership role by survey respondents for meeting goals in developing their organisation’s digital is data analytics—using customer and/or competencies, and IT transformation is the operational data from digital systems to most frequently cited digital competency measure performance, adoption and the for achieving goals among high performers. quality of new digital services. Rounding out However, more work is needed: nearly the top five competencies are workplace two-thirds of all survey respondents say transformation, product and service poor communication between IT and innovation, digital experience management other departments limits their progress on and IT infrastructure modernisation. developing digital competencies.

Organisations are going through High-performing organisations have profound changes in their digital a wider variety of approaches to transformations, and that’s developing their competencies proving to be a major challenge to than other companies. developing the right competencies. High-performing organisations are more Complexity of change was the most frequently likely than others to adopt many concurrent cited challenge in our survey when it comes to approaches, such as Agile development developing digital competencies, along with techniques, appointing a chief digital officer legal or security concerns, and rigid systems, (CDO), establishing a digital competency centre networks and infrastructure. But experience and hiring new executives. Any organisation brings confidence. Of those with digital looking to get ahead of the competition or just strategies in place for three years or more, nearly keep up with the relentless pace of change may three-quarters feel confident about their ability want to consider these approaches too. to overcome these challenges, considerably more than those with less experience.

Chapter 1: Why digital competencies matter

Digital transformation has gone from novelty where a majority of respondents described to norm, becoming “the single biggest business digital competencies in the strongest way, as shift since the industrial revolution,” according to extremely important for growth. Shawn Fitzgerald, Insights research director for Every company worldwide digital transformation strategies at Digital competencies have become much is worried about IDC. Indeed, as Microsoft’s CEO, Satya Nadella, more than nice-to-haves; they directly impact recently observed, every organisation in every business outcomes. While two-thirds (66%) how digital industry is becoming a digital organisation. of organisations say their digital strategies technologies have delivered measurable benefits, not all transform their Digital transformation offers huge potential, industries are equally satisfied. Among retailers, business...No one but with it come obstacles. “Every company for example, about three-quarters (74%) say wants to become is worried about how digital technologies they’ve enjoyed more benefits from their the next Kodak or transform their business,” says Sunil Gupta, digital strategies, compared with slightly more BlackBerry. professor of business administration at Harvard than half (56%) of respondents in healthcare. Business School. “No one wants to become the Advances in consumer technologies and Sunil Gupta, next Kodak or BlackBerry.” services that we all find in our daily lives, such professor of business as voice-activated assistants, chatbots and administration, Harvard When every organisation is using digital recommendation engines, are probably the Business School. technologies to get ahead, what sets them results of the top competencies among retailers: apart? This report contends that competencies data analytics and product innovation. are now a critical differentiator, and developing the right behaviours, skills and abilities can help Eight in ten organisations improve digital performance and, To what extent have your digital strategies respondents ultimately, achieve such strategic objectives produced measurable business benefits? say that digital as stronger revenue and profits, improved % respondents competencies customer satisfaction and faster time to market. are either very Few beneﬁts More beneﬁts or extremely More than a nice-to-have Neutral important to Chief among our findings: digital competencies achieving their have become vital to achieving positive organisational outcomes. Eight in ten respondents say goals that digital competencies are either very or extremely important to achieving their organisational goals, such as revenue growth, service quality, mission delivery, profit growth/cost reduction, user experience and customer satisfaction. The emphasis on digital competencies is found relatively consistently across the eight industries covered in our research. It is especially pronounced in the Source: The Economist Intelligence Unit retail, media and technology industries, © The Economist Intelligence Unit Limited 2019 Benchmarking competencies for digital performance: 7 An EIU study of digital-competency hurdles and solutions

In some cases, while digital strategies may not organisation-wide digital transformation deliver immediate business results, they can strategies; business-process automation; nonetheless transform entire industries. In talent management; Agile and other digital healthcare, for example, electronic medical development techniques; and workplace record (EMR) systems increasingly function transformation. Nonetheless, there were some as digital hubs, providing clinicians with a differences among industries. For example, centralised file containing detailed information more than half (55%) of respondents in media/ on every patient. That’s the case at Kaiser entertainment/publishing expect analytics to Permanente, a US healthcare system serving become more important in the next three years, more than 12m members. It works to ensure compared with only about a third (35%) of those that all clinical applications, whether developed in industrials/energy/materials. in-house or from third parties, must be able to connect to a central EMR. “When our One way of interpreting the shifting priorities clinicians—be they doctors, nurses, therapists is that competencies such as data analytics, or anyone else—go to the EMR, that’s the workplace transformation and innovation are source of truth,” says Patricia Conolly, who the foundations for other competencies that is an MD and executive vice-president of IT accompany more fundamental changes to and chief information officer (CIO) at The organisations. Permanente Federation, the national leadership That’s not to say every organisation should be and consulting organisation for the eight developing the same competencies to achieve Permanente Medical Groups that are part of their objectives at the same time. It would Kaiser Permanente. “They don’t have to worry be beneficial to know how differently high- about missing important information.” performing organisations may be approaching Which digital competencies are most important their competencies. For this study, we isolated today in helping organisations achieve their a group of organisations, representing 18% of business goals? The competency most all respondents, that we call high performers. frequently cited by survey respondents for They’re defined as respondents who say: meeting organisational goals is data analytics. Rounding out the top five competencies are • they’ve received measurable benefits from workplace transformation, product and service digital strategies; innovation, digital experience management, and • they’re confident about their ability to IT infrastructure modernisation. overcome digital competency challenges; and When respondents are asked to look three • their organisations either grew 2018 years into the future, their top five digital revenue by at least 6% (private sector) competencies shift. Respondents anticipate or over-delivered on performance the following will be the most important: targets (public sector).

High performers

Unlike other respondents, high performers The lesson here is not that data analytics say their top digital competency for achieving is less important if organisations aim to High performers goals is modernisation and transformation of be high performing. On the contrary, it’s say their top digital IT infrastructure, cited by nearly 78%. That is the foundation. But as organisations gain competency for much higher than the 56% of the remaining experience with data analytics, they can achieving goals is group of respondents. In addition, high leverage this capability to continually identify modernisation and performers actually place less emphasis on data other areas in need of course-correction. analytics (eighth place) compared with other In this way, data analytics become part transformation of respondents (first place), perhaps because they of the standard operating procedure. IT infrastructure, already leverage analytics on a regular basis. cited by nearly 78%. High performers also have more experience on their side. Among them, more than three- quarters (78%) have had digital strategies in Digital competencies that high performers place for more than three years. Among other say are important for achieving objectives organisations, less than two-thirds (59%) % of high performers have had digital strategies that long. For high

IT infrastructure modernisation performers, ensuring their organisation’s IT 78 infrastructure can support their digital needs Product and service innovation was clearly a priority, and they see the need 73 to continually advance this competency. Workplace transformation 71 The next sections of this report will explore how high performers compare themselves Digital experience management 67 with peers and their continual approach to improving competencies. We will also identify Digital transformation strategy 63 different approaches that high performers are taking to further develop their competencies. Talent recruitment 63

Development techniques 61

Business process automation 60 Data analytics 60

Source: The Economist Intelligence Unit. Respondents could select all that apply

Chapter 2: Mind the competency gaps

For many organisations, despite knowing that systems management capabilities. Respondents digital transformation is absolutely necessary, for whom their digital strategies have been Nearly progress has not been fast enough. About a in place for fewer than three years say they two-thirds (65%) are more likely to rely on data integration and third (34%) of organisations report only neutral of respondents IT employees with more digital technology or no measurable benefits from their digital say their digital- strategies, a disappointing figure. More than experience to improve digital competencies. competency gaps half (54%) say they’re unsatisfied with their IT respondents agree, but they also view have negatively organisations’ progress on developing digital upgrading IT infrastructure and business affected the user competencies. Even more (57%) say their applications as essential to moving ahead. experience. organisation struggles to achieve important Differences among industries exist, too. For goals because it lacks key digital competencies. example, half (50%) of technology and telecom respondents believe improved systems- Similarly, nearly two-thirds (65%) of management capabilities would help improve respondents say their digital-competency gaps their organisations’ digital capabilities, compared have negatively affected the user experience, with only a quarter (25%) of respondents in raising issues with employee productivity and/ media/entertainment/publishing. or customer satisfaction. This may explain why nearly half (48%) of respondents indicated they There were few differences among respondents need to significantly improve digital experience in different geographic regions when it came to management, the competency most relevant to the top digital competencies that are helping their organisations achieve objectives. However, monitoring application, network, infrastructure differences surfaced in areas to focus on for and device performance to measure and improvement. For example, 58% of North improve user experience. American respondents say their organisations What’s needed to improve digital competencies need to improve workplace transformation, can differ, depending on how long an compared with 43% of respondents in Asia- organisation has had its digital strategy in place. Pacific. Similarly, 52% of North American For example, early adopters, those with digital respondents see a need for improving their use strategies in place for more than three years, of Agile and other development techniques, but are more likely than others to place a priority on only 41% in Asia-Pacific feel the same way.

Progress on developing digital competencies has not been fast enough % of respondents Agree Neither agree nor disagree Disagree

Digital competency gaps have negatively impacted user experience

65 16 18

I am unsatisfied with my organisation’s progress on developing digital competencies

54 17 29

Source: The Economist Intelligence Unit. Data may not add up to 100% due to rounding

High performing, high minded

Most respondents describe their organisations employees better digital tools are important as ahead of peers when it comes to progress areas of improvement. CommonSpirit on digital competencies. Across all nine operates more than 700 healthcare sites and competencies, nearly two-thirds (63%) of 142 hospitals in the US. While CommonSpirit’s respondents described their organisation patients benefit from advanced technologies as ahead of others. Only about one in four that include digital therapeutics, data-driven consider themselves at the same level precision medicine and centralised EMRs, there of digital-competency progress as their was also a need to create a digital platform to industry peers. And no more than one in ten help its employees work better and smarter. respondents believes they’re inferior. “In their personal lives, our employees can do online banking, send text messages to their High performers, as would be expected, more children and stay in touch with friends on frequently say their organisations are ahead social media,” explains Laura Young-Shehata, of the competition. Eight in ten (81%) say their executive vice-president and CommonSpirit’s progress is running ahead of peers. interim CIO. “But when they came to work, High performers are also more than twice their digital experience wasn’t as engaging.” as likely to say they’re significantly ahead To reach employees where they access the of rivals in three digital competencies: IT information the most, Ms Young-Shehata infrastructure modernisation, automation created a multidisciplinary task force. The team of business processes and development is developing a personalised mobile app that approaches such as Agile. enables employees to use their smartphones While high performers see their own for communicating with managers, punching organisations as far ahead of the pack, they’re time cards, submitting trouble tickets to tech not complacent. In fact, more than others, they support, sending personalised messages understand that both digital transformation to other employees and departments, and and improving digital competencies require more. “We want to make sure we’re creating continual focus. That’s why 57% of high digital experiences that are relevant to our performers see a need to improve across all employees,” commented Ms Young-Shehata. digital competencies, compared with 46% of So identifying competencies that need others. In some areas, the differences are even improvement isn’t necessarily a sign of a lagging greater. For example, 61% of high performers organisation. Instead, it can be the mark of a feel their organisation needs to improve high performer. But once areas of improvement its digital product and service innovation, are targeted, whose job is it to actually develop compared with 46% of others. them? Someone or some department surely At healthcare provider CommonSpirit should have responsibility over such an important Health, workplace transformation and giving function. The next section explores that topic.

Chapter 3: Rising expectations for IT leaders

When it comes to developing digital Here, too, differences exist among industries. competencies, survey respondents say the IT For example, IT plays a leadership role in department and, more specifically, the CIO has developing digital competencies for 60% the lion’s share of responsibility. When asked of technology and telecom respondents, who is mandated with developing and delivering compared with only 43% of those in financial their organisation’s digital competencies, twice services. Similarly, CIOs lead the development as many respondents cited the CIO as the CEO. and delivery of digital competencies at 42% of Similarly, about half (51%) of respondents say professional-services firms, but for only 23% their IT departments already play a leadership of those in healthcare. These differences point role in developing their organisation’s digital to variations in the role that IT plays, the levels competencies. That’s twice as many as those of digital competence among non-IT staff, who say digital competency development is led and, more broadly, the differing progress that by their line-of-business heads. industries have made in undergoing digital transformation.

Placing the responsibility for developing digital Which departments have a leadership role competencies on the IT function makes sense, in developing digital competencies since that’s where technological expertise % of respondents is typically concentrated. In our survey, IT respondents say the top three ways for their IT / technology organisation to improve competencies are: 51 improved data integration capabilities; IT Digital team members with more digital technology 44 experience; and upgraded IT infrastructure Operations 24 and business applications.

Finance To be clear, organisations should not 24 automatically place the CIO in charge of Line of business heads developing digital competencies. There can 24 be advantages, for example, to having the HR CEO take ultimate responsibility. Respondents 22 from organisations where the CEO takes Legal the lead on developing digital competencies 20 more frequently say they are confident about Source: The Economist Intelligence Unit. overcoming development obstacles than

organisations where the CIO has the main features. The teams include IT professionals as responsibility (82% vs 64%). Mr Gupta of well as nursing leaders, business managers and More than two- Harvard Business School says that leading others. “Partnerships are how we’ve delivered thirds (68%) of the development of digital competencies care for more than 70 years,” says Dr Conolly. respondents should be shared among all pertinent “By applying that thinking to technology, we’re departments. “IT can help,” he says, “but since really leveraging an ongoing model.” say their IT the competencies help drive the business, the departments, particular functions need to be responsible Failure to communicate instead of and identify the competencies they need.” leading digital Even if IT teams are collaborating with others, competency In either case, the IT group must communicate how well can they disseminate knowledge in other and share its knowledge throughout their that helps their organisation develop the right departments, organisations. The critical question is whether competencies? The survey results suggest limit themselves IT departments are prepared to take on this this is another area in need of attention. to technology new role. Traditionally, IT departments have Nearly two-thirds (63%) of respondents say implementation focused on process and operations rather poor communication between IT and other and management. than cross-functional leadership of digital departments limits their organisations’ digital efforts. To make this shift, many IT groups competencies. This gap in communication and will need greater visibility into their own knowledge-sharing may also help explain why performance against organisational goals, as nearly as many (61%) say their non-IT leaders well as new key performance indicators that do not understand the technical complexity of measure customer satisfaction. Doing so will digital systems. be essential to what John Jendrezak, general manager of Core Services, Engineering and Operations at Microsoft, calls “making the Poor communication between IT and other transition from order-taker and execution arm departments limits digital competencies to a trusted partner of the business.” % of respondents

However, the research suggests that Agree Neither agree nor disagree Disagree only a minority may actually be ready for 63 18 19 assuming this leadership role. More than two-thirds (68%) of respondents say their Source: The Economist Intelligence Unit. IT departments, instead of leading digital competency in other departments, limit themselves to technology implementation and management. That leaves a lot of room for improvement.

Another approach has IT departments playing a more collaborative role, functioning as a peer among equal partners. The Permanente Medical Groups, for example, have embedded cross-functional teams to introduce and implement new technologies and digital

While no one expects non-IT leaders to while nearly three-quarters (72%) of IT be able to, say, code software or design respondents rate their organisations’ IT IT professionals a network, these executives do need to leaders as advanced in digital-transformation actually understand the business benefits, challenges strategies, only about half (54%) of non-IT overestimate the and impact of today’s digital technology. With respondents agree. A similar gap occurs in this in mind, IT leaders can help play a key their respective assessments of workplace level of digital role by educating, communicating, ensuring transformation; 71% of IT respondents rate competencies in adoption and sharing digital performance data their own understanding as advanced, while non-IT functions. across their organisation. only 54% of non-IT respondents agree. A similar trend exists regarding IT infrastructure IT and non-IT functions have very different modernisation (71% IT vs 64% non-IT), digital perspectives on their own knowledge experience management (71% IT vs 66% non- and capabilities. IT professionals actually IT), and the use of data analytics (72% IT vs overestimate the level of digital competencies 63% non-IT). in non-IT functions. For example, 58% of IT respondents describe their organisation’s non- While these gaps reflect communication IT staff as advanced at using data analytics, challenges between functions, they also raise while only 46% of non-IT respondents rate questions about how much collaboration themselves that high. Similar gaps were is really taking place, how organisations reported by the IT and non-IT respondents, measure their own competencies and, respectively, for digital experience ultimately, whose responsibility is it to ensure management (61% vs 45%), product/service an organisation’s digital competencies are innovation (61% vs 46%) and enterprise-wide driving performance. “IT definitely owns digital transformation (62% vs 47%). figuring out what the right technology approach ought to be,” says Mr Fitzgerald of Conversely, non-IT respondents generally IDC. “But full realisation of digital competency, have a lower estimation of their IT to be successful, is a multi-discipline, multi- department’s competencies than IT departmental and multi-functional effort.” professionals do themselves. For example,

Chapter 4: The challenge of complexity

Developing digital competencies isn’t easy. Neither is implementing an organisational Most significant challenges to developing digital strategy. Both can require profound digital competencies changes, including changing an organisation’s % of respondents entire culture—how work gets done, projects are led, decisions are made and even how Complexity of change 43 funding is assigned. “Once people got into digital transformation, they found that it’s a lot harder Legal or security concerns 37 than expected,” contends Mr Fitzgerald. “It’s not just about implementing new hardware or Rigid systems, networks, infrastructure 32 software. It’s foundational and pervasive.” Lack of digital understanding, talent and skills The top challenge to developing digital 30 competencies is the complexity of change Insufficient funding itself, cited by 43% of respondents. That’s twice 29 as many as those who cited the challenge of Lack of organisational agility lacking enough support from executives and 27 organisational leaders. In fact, complexity is the Lack of data and insight to inform digital strategies most frequently cited challenge for seven of the 26 eight sectors covered in the study, as well as for Inability to measure or monitor digital effectiveness high performers. Other top challenges include 24 legal or security concerns (37%); rigid systems, Lack of leadership and executive support networks and infrastructure (32%); lack of digital 22 understanding, talent and skills (30%); and Source: The Economist Intelligence Unit. insufficient funding (29%). Respondents were allowed to choose all that apply

Once people got into digital transformation, they found that it’s a lot harder than expected... It’s foundational and pervasive.

Shawn Fitzgerald, research director, Insights, worldwide digital transformation strategies, IDC

A measure of confidence

The complexity of change isn’t going away Along the same lines, 45% of the early adopters anytime soon. However, some organisations say they’re confident their organisations deliver feel more confident than others about their an exceptional digital experience to customers, compared with less than a third (31%) of ability to overcome this and other challenges. late adopters. Some industries are more More than half (52%) of high performers confident, too. For example, 84% of media/ say they are extremely confident about entertainment/publishing respondents believe overcoming challenges, compared with 22% their organisation leads its peers in managing of others. Conversely, not even one high the digital experience, compared with only 48% performer says they are not confident or only in professional services. Meanwhile, differences somewhat confident, compared with 41% of are evident between the private and the other respondents. public sectors, with 60% of private-sector respondents describing their IT modernisation/ Again, the additional years of experience transformation as advanced, compared with enjoyed by high performers probably accounts only 45% in the public sector. for their superior levels of confidence. Among While years of experience clearly make respondents with digital strategies in place a difference, how does that help those for three or more years, nearly three-quarters organisations struggling to develop their (72%) say they’re confident about their ability competencies? The next section will take a to overcome challenges. That’s considerably closer look at how organisations are developing more than the 60% of organisations with digital their digital competencies—and what high experience spanning fewer than three years. performers do differently.

How confident are you that your organisation can overcome challenges to developing digital competencies % of respondents Entirely confident Very confident Somewhat confident Not very confident Not at all confident

High performers

52 48

Other respondents

22 38 36 4 1

Source: The Economist Intelligence Unit.

Chapter 5: Developing digital competencies for the future

Given the challenges of keeping up For high performers, IT teams play a leading with technology’s rapid pace of change, role in developing and delivering the right organisations need effective ways to develop competencies. In addition, IT transformation their digital competencies. itself is in fact their top competency for achieving performance goals. To do this, organisations are using a wide range Besides employee training, other of approaches. The two top approaches are IT popular approaches to developing digital transformation and employee training, cited competencies include management training, by 51% and 50% of respondents respectively. adoption of Agile development methods, the The importance of overhauling the IT creation of digital competency centres, getting department to meet the needs of the digital help from third-party consultants, and even economy is a recurring theme of this report. acquiring other companies.

How do you get better? Approaches used to develop digital competencies High performers % of respondents Others

66 Employee training in digital-related competencies 47

63 Transforming our IT department 48

57 Adoption of Agile development methods 34

53 Establishing a digital department or competency centre 39

53 Appointing a chief digital officer 36

Executive and/or management training 53 in digital-related competencies 43

52 New executive and/or management hires 37

46 Third-party consultancy services 40

44 New non-management hires 31

41 Acquiring another company or companies 27

Source: The Economist Intelligence Unit.

In the area of Agile development techniques, according to a report from Strategy&. The role DevOps is an approach that combines is likely to continue evolving, too. As the digital More than half development and operations to create benefits ambitions of organisations grow, CDOs may get (53%) of high that include shorter development cycles and involved with upgrading legacy IT architecture, performers faster fixes and patches. At Microsoft, DevOps making investment decisions and improving say their also means that the developer of an internal governance and compliance systems. organisations software program is also expected to support Another tactic, establishing a digital department have appointed it, creating a greater sense of accountability and or competency centre, has been used by more CDOs, making it easier to solve problems. “DevOps is a than half (53%) of high performers, compared compared sea change,” says Mr Jendrezak. “In part, because with only 39% of everyone else. Digital with a third it puts a lot of responsibility onto the software competency centres are also more commonly engineer to build a system that’s robust.” (36%) of other found among public-sector organisations respondents. (49%) than among those in the private sector What high performers do differently (40%), perhaps reflecting awareness within the Which are the most effective approaches public sector that it lags in IT modernisation/ to developing digital competencies? To transformation. A digital competency centre answer this, we looked at areas in which of excellence is a team of subject-matter high performers are particularly focused. In experts that helps the organisation improve this regard, five development approaches its digital competencies and focus on digital stand out: adopting Agile development transformation. Such centres, by centralising an techniques, training employees, appointing organisation’s digital efforts, can deliver greater a CDO, establishing a digital department or digital speed, efficiency and effectiveness. competency centre, and hiring new executives. A centre of excellence can also act as an information and digital-tools hub for an More than half (53%) of high performers organisation’s employees, suppliers, partners say their organisations have appointed and even customers. CDOs, compared with a third (36%) of other respondents. A CDO is generally responsible These centres can also provide leadership for delivering technology-enabled products and act as role models, for example, Establishing and services; they are the executive who leads by incorporating Agile approaches or a digital experimenting with new and emerging their organisation’s digital agenda. By contrast, department or technologies, such as machine learning a CIO focuses more on designing, developing competency or serverless cloud computing. Finally, and implementing the IT systems that run an centre has organisation’s business processes. by recruiting members from different organisational disciplines—not only IT, but been used by The CDO role is relatively new, but it has also HR, marketing, lines of business and more than half spread quickly in organisations keen on either elsewhere—a digital competency centre (53%) of high digitising specific segments of their operations can help institutionalise a multi-function performers. or completely transforming. Nearly one in approach to digital competencies. Given five global companies have a CDO, and 60% the way nearly every organisation is quickly of them have been appointed since 2015, becoming digital, that’s vital.

The way forward

Google Trends, a method of tracking popular When it comes to digital competencies, search terms, shows that global interest in there are no limits on improvement. digital transformation took off five years High performers know how far ahead of their ago and hasn’t looked back since. Over peers they are, yet they still feel a greater- that time, for some, it’s already become than-average need to improve their digital a hackneyed phrase. However, for nearly competencies. They understand that both every organisation, digital transformation digital transformation and developing digital is the daily reality for which there are no competencies are perpetual processes. alternatives. To distinguish their organisations, many business and government leaders IT plays a pivotal role. High performers are developing digital competencies. understand that extraordinary digital performance requires IT transformation This report has shown the strategic importance and modernisation of legacy systems to of developing digital competencies, such as support digital strategies and improve digital data analytics, digital experience management, experience. They also know that greater and product and service innovation. It’s also communication and collaboration between shown the importance of modernising and the IT function—where digital competencies transforming IT to support organisational objectives. Digital competencies matter are naturally common—and the rest of the to the bottom line—as well as to so much organisation (where those competencies may more. Many executives, despite knowing the still be scarce) will be increasingly important, too. importance of digital competencies, say a lack Now’s the time. High performers tend to of these skills prevents their organisations from be more experienced at pursuing digital achieving strategic goals. While IT departments strategies than other respondents, and that are generally recognised as storehouses experience seems to give them higher levels of technological know-how, when they fall of confidence. The sooner an organisation short on communication and collaboration, develops its digital competencies, the sooner it that can limit how well digital knowledge is spread throughout their organisations. can deliver exceptional digital experiences to its customers, employees, partners and others High performers give us hope, though. in the value chain. They’ve figured out how to benefit from their digital strategies, remain confident about Let there be variety. Most organisations overcoming challenges, and show real results focus on transforming their IT departments in their organisations in terms of business and employee training to improve their digital performance and the end-user experience. competencies. While those are undoubtedly The key differences between high performers important, high performers also stay ahead with and other respondents draw four important other approaches, including appointing CDOs lessons for all organisations to consider: and establishing digital competency centres.

Appendix: Survey results

Q1. In which country are you Q2. What is your organisation’s personally located? primary industry? [INDUSTRY] Select one. % respondents Select one. % respondents

Australia Industrials, Energy & Materials Canada Financial services France Retail Germany Media/Entertainment/Publishing Singapore Technology/Telecommunications United Arab Emirates Healthcare United Kingdom Professional services United States of America Government

Q1. In which country are you personally located? [REGION] Select one. % respondents

APAC North America

EMEA

Q2. What is your organisation’s Q2. What is your organisation’s primary industry? primary industry? [SECTOR] Select one. % respondents Select one. % respondents

Aerospace/Defence Government Private Sector Agriculture and agribusiness Automotive Business/Professional services Chemicals Construction Energy, utilities, natural resources Financial services Food/Beverages/Consumer packaged goods Federal, state and local government and education Healthcare and life sciences/pharmaceuticals/biotechnology

Manufacturing Media/Entertainment/Publishing Real estate Retail Technology/IT Telecommunications Transportation, logistics and distribution Other

Q3. How many employees work for your Q4. Which of the following best describes organisation globally? your title? Select one. % respondents Select one. % respondents CEO or equivalent Fewer than employees CFO/Head of ﬁnance or equivalent to employees CIO/Head of IT or equivalent to employees CTO/Head of technology or equivalent , to , employees CISO/Head of information security or equivalent COO/Head of operations or , to , employees productionor equivalent , or more CMO/Head of marketing or equivalent

Chief human-resources or talent ocer/ Do not care to respond Head of HR/talent or equivalent Other C-level executive, specify

Managing director

EVP/SVP/VP Q3. How many employees work for your organisation globally? [COMPANY SIZE] Director Select one. % respondents Department head + - employees employees Other

Q4. Which of the following best describes your title? [SENIORITY] Select one. % respondents Director+ C-Suite

Q4/Q5. What is your main Q4/Q5. What is your main functional role? [FUNCTION] functional role? [FUNCTION] Select one. % respondents Select one. % respondents

Audit and compliance General management (incl. marketing, sales, strategy/BD) Customer service Operations/production (incl. supply chain) Finance IT/tech General management R&D Human resources/talent Product development R&D HR IT/technology Customer service Legal Finance Marketing Operations/production Portfolio management Procurement Product development/management Risk Sales Strategy/business development Supply chain management Other

Q6. Which of the following best describes Q8. How long have your organisation’s your business’s operational footprint? digital strategies been in place? Select one. % respondents Select one. % respondents

My organisation doesn’t have any Government Global digital transformation initiatives

Less than year

to years

More than years

Don’t know MNC

Q7. To what degree are you familiar Q8. How long have your organisation’s digital with your organisation’s overall digital strategies been in place? [DIGITAL STRATEGY] strategy initiatives? Select one. % respondents Select one. % respondents years+ Less than years Not at all familiar

Not very familiar

Moderately familiar

Very familiar

Data does not add up to 100% due to rounding

Q9. To what extent have your digital Q9. To what extent have your digital strategies produced measurable business strategies produced measurable business benefits (eg, revenue growth, operational benefits (eg, revenue growth, operational efficiency, customer satisfaction, efficiency, customer satisfaction, employee employee productivity)? productivity)? [Q9HID]

Answer on a scale of 1 to 10, where 1=no measurable Answer on a scale of 1 to 10, where 1=no measurable benefit so far and 10=significant benefit. benefit so far and 10=significant benefit.

% respondents % respondents

Few beneﬁts More beneﬁts Neutral

Q10. Which of the following digital competencies are important in helping your organisation achieve its objectives today? Select all that apply. % respondents

Analytics using customer and/or operational data from digital systems Workplace transformation with digital technologies Digital product and service innovation Ability to manage and measure the user and/or employee digital experience IT infrastructure modernisation/transformation Digital development techniques (eg, Agile, design thinking) Organisation-wide digital transformation strategy Digital talent recruitment, retention and management Automation of business processes with digital technology

Q11. Which of the following digital competencies do you expect to grow in importance in the next three years? Select all that apply. % respondents

Organisation-wide digital transformation strategy Automation of business processes with digital technology Digital talent recruitment, retention and management Digital development techniques (eg, Agile, design thinking) Workplace transformation with digital technologies Ability to manage and measure the user and/or employee digital experience IT infrastructure modernisation/transformation Analytics using customer and/or operational data from digital systems Digital product and service innovation

Q12. How important are having these digital competencies to achieving the following objectives at your organisation? Select one in each row. % respondents

Not at all important Not very important Somewhat important Very important Extremely important Don’t know Revenue growth [BASE: Q = PRIVATE SECTOR] Proﬁt growth/cost reduction [BASE: Q = PRIVATE SECTOR] Competitive advantage [BASE: Q = PRIVATE SECTOR] Customer satisfaction [BASE: Q = PRIVATE SECTOR] Product/service quality assurance [BASE: Q = PRIVATE SECTOR] Mission delivery [BASE: Q = GOVERNMENT] Cost reduction [BASE: Q = GOVERNMENT] Citizen satisfaction [BASE: Q = GOVERNMENT] Service quality assurance [BASE: Q = GOVERNMENT] Employee satisfaction Talent acquisition Organisational agility

Q12. How important are having these digital competencies to achieving the following objectives at your organisation? [Q12HID] Select one in each row. % respondents

Less important Somewhat important More important Don’t know Revenue growth [BASE: Q = PRIVATE SECTOR] Proﬁt growth/cost reduction [BASE: Q = PRIVATE SECTOR] Competitive advantage [BASE: Q = PRIVATE SECTOR] Customer satisfaction [BASE: Q = PRIVATE SECTOR] Product/service quality assurance [BASE: Q = PRIVATE SECTOR] Mission delivery [BASE: Q = GOVERNMENT] Cost reduction [BASE: Q = GOVERNMENT] Citizen satisfaction [BASE: Q = GOVERNMENT] Service quality assurance [BASE: Q = GOVERNMENT] Employee satisfaction Talent acquisition

Organisational agility

Q13. How would you rate your organisation’s progress compared with peers on its digital competencies? Select one in each row. % respondents

Signiﬁcantly behind Somewhat behind Same Somewhat ahead Signiﬁcantly ahead N/A Analytics using customer and/or operational data from digital systems Ability to manage and measure the user and/or employee digital experience Digital product and service innovation Digital talent recruitment, retention and management IT infrastructure modernisation/transformation Automation of business processes with digital technology Digital development techniques (eg, Agile, design thinking) Organisation-wide digital transformation strategy Workplace transformation with digital technologies

Q13. How would you rate your organisation’s progress compared with peers on its digital competencies? [Q13HID] Select one in each row. % respondents

Behind Same Ahead N/A Analytics using customer and/or operational data from digital systems Ability to manage and measure the user and/or employee digital experience Digital product and service innovation Digital talent recruitment, retention and management IT infrastructure modernisation/transformation Automation of business processes with digital technology Digital development techniques (eg, Agile, design thinking) Organisation-wide digital transformation strategy Workplace transformation with digital technologies

Q14. To what extent do you feel that your organisation needs to improve the following digital competencies? Select one in each row. Answer on a scale of 1 to 10, where 1=no improvement needed and 10=significant improvement needed. % respondents

N/A

Analytics using customer and/or operational data from digital systems Ability to manage and measure the user and/or employee digital experience Digital product and service innovation Digital talent recruitment, retention and management IT infrastructure modernisation/transformation Automation of business processes with digital technology Digital development techniques (eg, Agile, design thinking) Organisation-wide digital transformation strategy Workplace transformation with digital technologies

Q14. To what extent do you feel that your organisation needs to improve the following digital competencies? Select one in each row. % respondents

No improvement needed Neutral Improvement needed N/A Analytics using customer and/or operational data from digital systems Ability to manage and measure the user and/or employee digital experience Digital product and service innovation Digital talent recruitment, retention and management IT infrastructure modernisation/transformation Automation of business processes with digital technology Digital development techniques (eg, Agile, design thinking) Organisation-wide digital transformation strategy Workplace transformation with digital technologies

Q15. Which of the following are the primary ways your organisation has developed or plans to develop its digital competencies? Select one in each row. % respondents

Has used Plans to use No plans to use Don’t know Third-party consultancy services New executive and/or management hires New non-management hires Executive and/or management training in digital-related competencies Employee training in digital-related competencies Adoption of Agile development methods Acquiring another company or companies Appointing a chief digital ocer Establishing a digital department or competency centre Transforming our IT department

Q15. Which of the following are the primary ways your organisation has developed or plans to develop its digital competencies? [Q15HID] Select one in each row. % respondents

Has used Has not used Don’t know Third-party consultancy services New executive and/or management hires New non-management hires Executive and/or management training in digital-related competencies Employee training in digital-related competencies Adoption of Agile development methods Acquiring another company or companies Appointing a chief digital ocer Establishing a digital department or competency centre Transforming our IT department

Q16. Which of the following are the most Q17. How confident are you that significant challenges to developing digital your organisation can overcome competencies in your organisation? these challenges? Select all that apply. % respondents Select one. % respondents

Complexity of change Not at all confident Not very confident Legal or security concerns Somewhat confident Rigid systems, networks, infrastructure Very confident Lack of digital understanding, talent and skills Entirely confident Don’t know Insucient funding Lack of organisational agility Q18. Which board-level executive is Lack of data and insight to inform digital strategies mandated with developing and delivering the digital competencies your organisation Inability to measure or monitor digital eectiveness needs overall? Select one. % respondents Lack of leadership and executive support Chief executive ocer or equivalent Chief executive ocer/Director-general or equivalent Q17. How confident are you that Chief information ocer or equivalent your organisation can overcome these challenges? [Q17HID1] Chief operating ocer or equivalent Select one. % respondents Chief human resources ocer or equivalent Not confident Chief marketing ocer or equivalent Somewhat confident Chief sales ocer or equivalent Confident Don’t know Chief technology ocer or equivalent Director of civic engagement or equivalent Other board-level executive (please specify) No board-level executive is mandated with this

Q19. How would you describe the skills and understanding of non-IT leaders in your organisation in the following digital competencies? Select one in each row. Answer on a scale of 1 to 10, where 1=very early stage/developing and 10=very advanced. % respondents

N/A

Analytics using customer and/or operational data from digital systems Ability to manage and measure the user and/or employee digital experience Digital product and service innovation Digital talent recruitment, retention and management IT infrastructure modernisation/ transformation Automation of business processes with digital technology Digital development techniques (eg, Agile, design thinking) Organisation-wide digital transformation strategy Workplace transformation with digital technologies

Q19. How would you describe the skills and understanding of non-IT leaders in your organisation in the following digital competencies? [Q19HID] Select one in each row. % respondents

Early stage/developing Neutral Advanced N/A

Analytics using customer and/or operational data from digital systems Ability to manage and measure the user and/or employee digital experience Digital product and service innovation Digital talent recruitment, retention and management IT infrastructure modernisation/ transformation Automation of business processes with digital technology Digital development techniques (eg, Agile, design thinking) Organisation-wide digital transformation strategy Workplace transformation with digital technologies

Q20. How would you describe the skills and understanding of IT leaders in your organisation in the following digital competencies? Select one in each row. Answer on a scale of 1 to 10, where 1=very early stage/developing and 10=very advanced. % respondents

N/A

Q20. How would you describe the skills and understanding of IT leaders in your organisation in the following digital competencies? [Q20HID] Select one in each row. % respondents

Early stage/developing Neutral Advanced N/A

Q21. What role do the following departments play in developing the digital competencies of your organisation? Select one in each row. % respondents

Not involved at all Limited support Signiﬁcant support Shared responsibility Leadership role Don’t know

Marketing [BASE: Q = PRIVATE SECTOR] Sales [BASE: Q = PRIVATE SECTOR] Customer service [BASE: Q = PRIVATE SECTOR] Line of business heads [BASE: Q = PRIVATE SECTOR] Policy [BASE: Q = GOVERNMENT] Citizen service/engagement [BASE: Q = GOVERNMENT] Finance IT /technology Operations Legal HR Digital [BASE: Q = HAS USED = TO ESTABLISHING DIGITAL DEPARTMENT OR COMPETENCY CENTRE]

Q21. What role do the following departments play in developing the digital competencies of your organisation? [Q21HID] Select one in each row. % respondents

Less involved Support More involved Don’t know

Q22. To what extent do you agree or disagree with the following statements?

Select one in each row. % respondents

Strongly disagree Somewhat disagree Neither agree Somewhat agree Strongly agree Don’t know nor disagree

I am unsatisﬁed with my organisation’s progress on developing digital competencies Digital competency gaps have negatively impacted user experience I am conﬁdent my organisation is delivering exceptional digital experiences to its customers My organisation is struggling to achieve its performance goals because we lack key digital competencies. Poor performance of IT systems has limited my organisation’s digital competency Our IT department’s contribution to digital competencies is limited to technology implementation and management Poor communication between IT and other departments limits digital competencies Non-IT leaders in my organisation do not understand the technical complexity of digital systems

Q22. To what extent do you agree or disagree with the following statements? [Q22HID]

Select one in each row. % respondents

Disagree Neither Agree Don’t know I am unsatisﬁed with my organisation’s progress on developing digital competencies Digital competency gaps have negatively impacted user experience I am conﬁdent my organisation is delivering exceptional digital experiences to its customers My organisation is struggling to achieve its performance goals because we lack key digital competencies. Poor performance of IT systems has limited my organisation’s digital competency Our IT department’s contribution to digital competencies is limited to technology implementation and management Poor communication between IT and other departments limits digital competencies Non-IT leaders in my organisation do not understand the technical complexity of digital systems

Q23. Which of the following would most help you to improve the digital competencies of your organisation? Select all that apply. % respondents

Improved data integration capabilities IT employees with more digital technology experience Upgrading IT infrastructure/business applications Improved cyber-security capabilities Improved systems management capabilities Improved digital experience management capabilities New senior leadership in IT Improved co-ordination of digital initiatives by the business Other (please specify) Don’t know

Q24. Which of the following best describes your company’s primary customer base? Select one. % respondents

Mostly consumers Mostly businesses (including governments and/or non-proﬁt organisations) Both consumers and businesses

Q25. What is your company’s actual or expected annual revenue growth for the following years? Select one for each. % respondents

Negative Flat . to less to less to less to less to less or more Don’t know than than than than than

Year ending Year ending

Q25. What is your company’s actual or expected annual revenue growth for the following years? [Q25HID] Select one for each. % respondents

Negative + Flat Less than or more Don’t know Year ending Year ending

Q26. How well did or will your organisation deliver against its performance targets for the following years? Select one for each. % respondents

Signiﬁcantly Somewhat Roughly meet Somewhat Signiﬁcantly Don’t know underdeliver underdeliver our objectives overdeliver overdeliver

Year ending Year ending

Q26. How well did or will your organisation deliver against its performance targets for the following years? [Q26HID] Select one for each. % respondents

Under deliver Roughly meet Over deliver Don’t know Year ending Year ending

About the sponsor Riverbed®, The Digital Performance Company™, enables organizations to measure, manage and enhance digital experiences so they can deliver richer and more powerful human experiences — for customers, employees, partners, patients and citizens. Riverbed’s Digital Performance Platform includes a combination of Digital Experience Management and Next-Generation Infrastructure solutions that maximize digital performance, provide superior user experiences, deliver new levels of operational agility and accelerate business outcomes. Learn more at riverbed.com

Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in the report.

© The Economist Intelligence Unit Limited 2019 LONDON GENEVA 20 Cabot Square Rue de l’Athénée 32 London, E14 4QW 1206 Geneva United Kingdom Switzerland Tel: (44.20) 7576 8000 Tel: (41) 22 566 2470 Fax: (44.20) 7576 8500 Fax: (41) 22 346 93 47 Email: [email protected] Email: [email protected]

NEW YORK DUBAI 750 Third Avenue Office 1301a 5th Floor Aurora Tower New York, NY 10017 Dubai Media City United States Dubai Tel: (1.212) 554 0600 Tel: (971) 4 433 4202 Fax: (1.212) 586 1181/2 Fax: (971) 4 438 0224 Email: [email protected] Email: [email protected]

HONG KONG SINGAPORE 1301 Cityplaza Four 8 Cross Street 12 Taikoo Wan Road #23-01 Manulife Tower Taikoo Shing Singapore Hong Kong 048424 Tel: (852) 2585 3888 Tel: (65) 6534 5177 Fax: (852) 2802 7638 Fax: (65) 6534 5077 Email: [email protected] Email: [email protected]