Just as the industrial revolution changed the world and brought substantial increases in production, technology has brought enormous business advancements and is redefining how businesses operate. The proper use of recent technologies is radically improving business performances.
However, it’s not all a rosy picture. Technological advancement brings with it a lot of disruption and is creating a great divide between winners and losers. Compelling studies show clear contrasts between individuals that are highly skilled and educated as real winners with other individuals losing out and being replaced by technology. The same thing is happening in business where those companies that are properly embracing technology in this second machine age are winning and those trying to win through traditional business methods are losing.
MIT has segmented companies into levels of digital transformation maturity quadrants based on those companies that have digitally transformed, those that have not, and those that fall in between the two. The companies that have digitally transformed have invested well in both technology enabled initiatives and leadership capabilities needed to create digital transformation. Those companies that have digitally transformed are 26% more profitable than their average industry competitors. Companies that have invested well in technology enabled initiatives but not leadership capabilities have seen revenue increase but profits fall. Companies that established the leadership capabilities but are not making adequate technology investments are improving profits but are experiencing double digit declines in revenue. Companies in the bottom left quadrant are losing big all the way around.
We have seen similar outcomes in our work with companies. We have seen that overall technology spend, when managed correctly, can generate returns on investment to the business from advancements in technology over recent years. To further assess this, we undertook an extensive research effort in which we interviewed and surveyed hundreds of financial executives throughout the United States and Europe. In a nutshell, we found that businesspeople have been frustrated with the black-box nature of IT. They have viewed IT as an expensive cost center that fails to promptly deliver everything that the business needs. And in talking with them, we concluded that this happens particularly when IT is not properly connected with and driven by the business.
However, despite this general sense of frustration, these business people must embrace technology to be competitive. The second machine age in which we find ourselves is causing a fascinating transition in how to be a leader. The difference between the CEO of yesterday and the CEO of tomorrow is night and day. The CEO of yesterday discussed results generated after month end with the executive team about what went right and wrong. The CEO of tomorrow operates the business with real-time comprehensive information and instant global communications, and understands what is happening as it is happening and acts accordingly. But this transition is not easy, and CEOs today are moving through it with varying degrees of speed and success. And those that have established highly integrated teams that bring together business, finance, and technology are able to make the proper technology investments – and outperform the competition.
Author: Meade Monger, Global Leader of Information Management Services at AlixPartners
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