Future Enterprise

Digital-First: The Evolving Relationship of Business and Technology

The ongoing shift toward digital business models marks the next era of digital transformation.
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The relationship between business and technology is changing. Listen to any boardroom discussion today, and it’s become clear that C-level executives no longer see IT as merely an enabler to already-made decisions. Instead, ongoing conversations are about how technology can create and expand strategic options. Likewise, business executives look to technology leaders to understand how digital can better deliver business outcomes.

IDC sees this new relationship between business and technology as “digital-first”. Today, 91% of Asia/Pacific including Japan (APJ) organizations have adopted digital-first strategies to transform themselves into digital businesses[1].

A similar view is reflected in IDC’s recent C-Suite Sentiment Survey 2022. 82% of C-level executives in Asia/Pacific say that digital business is a critical component of their overall corporate strategy. At least two-thirds of executives say that digital business initiatives play a significant role in achieving their top business objectives. These comprise (ordered in rank priority):

  1. Increase profits (93%)
  2. Reduce cost (69%)
  3. Improve operational efficiency (78%)
  4. Increase revenue (85%)
  5. Improve customer experience (80%)

This is the dawn of the digital business era. Flip through the annual reports of leading organizations such as Inchcape[2] and Midea Group[3], and one can see that technology is now integral to strategic plans. Moreover, as our research shows, more are joining their ranks in integrating business and technology.

Comparatively, the pandemic-driven digital acceleration we’ve experienced is just the tip of the iceberg. Today, technology brings new possibilities in business, operating, and organization model design that will radically change how businesses create and innovate value. It’s plausible that within the decade, we will see many more new businesses that do not exist today, and those that do exist today, cease to do so.  

Digital Products, Services, and Experiences as Growth Enablers

Using digital channels to engage, sell, and service customers has changed traditional sales and marketing economics. The opportunity to reach more people with reduced costs and faster turnaround time is our new reality. For businesses, long tails of underserved segments and emerging markets are now seen as economically viable through digital content, social media, e-commerce, and self-service digital assistants.

Also, customers love digital products and services’ simplicity and real-time nature. This opens countless possibilities for businesses to use data to improve customer experience (CX). By reinventing CX delivered through web and mobile channels, leading organizations aim to create empathetic experiences to broaden reach and appeal while strengthening customer advocacy.

The same survey shows that customer-facing executives’ top priorities are to expand new sales channels (CSO), improve brand awareness (CMO), and systemize customer feedback (CXO). In addition, they are looking to technology to help them achieve these outcomes. These executives are looking at technologies in data management and analytics (24%) and, e-commerce, sales and marketing automation (20%) as critical for adoption in the next 12 months.

Democratizing Data and Data-Driven Decisioning for Better Operational Efficiency

Digital technology has also made real-time transactions and data analysis more accessible. For example, IoT (Internet of Things), artificial intelligence (AI), and automation allow business data to be collected and analyzed as transactions and events. These can reduce the supply chain’s bullwhip effect, while providing more accurate information to augment decision-making for all managers.

Through digital ecosystems, decision-making can be more comprehensive and strategized. In fact, AI can support business planning with simulations, data search, and discovery to unearth courses of action and predict outcomes. It could also update the situation picture as new data and information emerge. Such closed-loop capabilities change the unidirectional nature of strategic planning to one of continuous optimization.

One example is in finance. The survey shows that CFOs’ top challenges include aligning capital allocation to long-term plans and inefficient budgeting/forecasting processes. Along the same vein, CFOs’ top priority is to optimize planning, budgeting, and forecasting to improve enterprise decision-making. To this end, more than half of CFOs see their role evolving to be more involved in technology decisions regarding finance, ERP, and analytics.

Coming Together as the Digital Dream Team to Realize Technology’s Business Possibilities

Despite these possibilities, the C-suite must better prioritize technology investments that synergize and scale well to succeed. As the relationship between business and technology evolves, so must the C-suite relationships change to reflect this symbiosis.

CEOs must take up the mantle of leading digital with the C-suite. Technology leaders must evolve, beyond technology integration, to be orchestrators of digital initiatives across the business. Yet today, only 9% of organizations have CEOs who personally lead digital initiatives while having CIOs as technology orchestrators. This is partly reflected in failures of digital initiatives driven by lackluster ROI, the C-suite’s lack of technology know-how, and the inability to scale due to organizational silos.

While cliché, leadership does matter in an endeavor as extensible as business transformation. IDC research shows that organizations with CEOs who champion digital initiatives have a higher project success rate and derive greater business benefits from digital initiatives.

The era of the digital business will further put this adage to the test.

[1] IDC Worldwide CEO Survey 2022: The CEO Tech Agenda in a Digital-First World — An APJ Perspective, Part 2: DX Approaches, Investments, and Digital-First Strategies

[2] Inchcape 2021 Capital Markets Day presentation

[3] MideaGroup 2021 Annual Report

Lawrence is an Associate Research Director for IDC's Asia/Pacific Digital Business research program and is part of the digital transformation (DX) practice team. Based in Singapore, his work at IDC focuses on studying organizations' transformation into digital businesses. This includes examining organizations' maturity, technology investments, digital use cases, and key technology suppliers to help inform organizations in their transformation. Lawrence provides advisory services to both tech buyers and suppliers, leveraging primary and secondary research. He is also responsible for analyzing emerging market trends, the competitive landscape, market maturity, sizing, and tech buyer adoption trends.