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Digital IQ in companies is dropping

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PwC report shows a decline in how business rank their strategy, with only 5% achieving “transcender” status.

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Businesses are struggling with the pace of change and while organizations rank their “digital IQ” at almost 66% today, that number dropped from almost 72% in 2015, according to the findings of PwC’s annual Digital IQ survey.

Additionally, some 26% of senior executives still equate digital with IT, the report said.

“It’s become clear that many executives associate digital strategy with IT, which is problematic,” said Tom Puthiyamadam, global digital and BXT leader for PwC. 

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“Perceiving the two as interchangeable negates the impact digital technologies can have to improve the employee experience, customer experience, and operational efficiency.”

If leaders think they’re implementing a digital strategy, but in reality, just have an active IT department, they will quickly fall behind competitors instead of capitalizing on technologies that can propel them to the front of the pack, Puthiyamadam added.

In terms of their top-prized technology, executives ranked robotic process automation (RPA) first at 36%; followed by IoT (25%); AI (19%); and blockchain (9%). The numbers shift when asked about what they need for the future, with 42% citing AI, followed by IoT (21%); blockchain (11%); and RPA (9%).

When asked what their biggest digital transformation challenges are, 36% of executives cited cybersecurity and privacy, followed by a lack of skills in the marketplace (36%); lack of collaboration between IT and the business (37%); and inflexible or slow processes (34%).

Don’t just transform—transcend

The ultimate goal for a digital organization is to transcend—not just transform, the PwC report said. A truly digital company is a never-ending process, and these organizations not only redefine how they operate in functional areas, but they also reshape industries, shift categories, and invent new business models, the report said.
 
“We like to say that the ultimate goal for an organization isn’t to just digitally transform—but to transcend,” Puthiyamadam said.

Yet, digital ROI can be difficult to obtain because these initiatives take time to implement, and “businesses can’t digitally transform overnight,” he said.  

There is a small group (5%) of companies that PwC refers to as “Transcenders,” which it defines as are those that consistently generate payback on their digital investments and have been implementing digital for at least five years.
 
While Puthiyamadam said he has always known that digital transformation yields better outcomes for organizations, he was surprised to see how well the data bore this out.
 
“Transcenders, the businesses that are currently winning in digital, invest differently, and see a consistent ROI,” he said. “These companies see 26% higher margins than their counterparts, truly separating them from the competition.”
 
There are four things transcenders do to build winning companies: mandate change; invest like they mean it; make people their superpower; and build a resilient culture that doesn’t fear extinction, according to the report.

How to improve the digital transformation experience

Businesses that make the commitment to digital can see ROI in all areas, from growth and profits to innovation, customer experience, people retention, and more, the report said. 

“Organizations need to put employees front and center when it comes to implementing digital,” Puthiyamadam said. “Understanding what your employees want out of different emerging technologies and knowing how this tech will benefit them is the first step to transcending. Transcenders think of this as ‘make people their superhero.'”
 
Aiming to perfect the employee experience is non-negotiable for leaders looking to implement effective digital strategies, he added. 

Additionally, mandating change is necessary. Ninety-two percent of Transcenders act on ideas from everyone, not just bosses, Puthiyamadam said. Ninety-six percent of these businesses also have a clear direction for digital success.

“Not fearing the unknown of tech and making smart investments is the only way leaders can continue transcending efficiently and effectively,” he said.  

The results are based on a PwC survey of 2,380 senior executives in 76 countries at organizations of all sizes, between July 2019 and September 2019, PwC said.

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