Strategic Leadership in the Digital Business Economy

Most forward-looking CEOs have already made their move to prepare for the future that they foresee – where business technology is a key deciding factor for them to attain ongoing commercial prosperity. This new digital-propelled environment will profoundly change business processes, along with the need for accelerated tech-savvy human capital development across all industries.

Those leaders that catch the next wave of Internet-driven market development will reap the rewards of the expanding Global Networked Economy. They’ll achieve a quantum boost in performance. And they’ll reach their lofty goals by harnessing the unique competitive advantages of cloud computing services, mobile enterprise applications and other targeted business technology investments.

Welcome to the Internet of Everything

Worldwide IT spending is forecast to surpass $3.9 trillion in 2015 – that’s a 3.9 percent increase from 2014. Business technology spending will be driven by Digital Business practitioners, according to Gartner, Inc. This change of influence is having a dramatic impact on the legacy IT profession.

Gartner defines Digital Business as new commercial designs that blend the virtual world and the physical worlds -- changing how processes and industries work through the Internet of Things phenomenon.

“This year enterprises will spend over $40 billion designing, implementing and operating the Internet of Things,” said Peter Sondergaard, senior vice president at Gartner. “Every piece of equipment, anything of value, will have embedded sensors. This means leading asset-intensive enterprises will have over half a million IP addressable objects in 2020.”

Line of Business Leaders Take the Driver's Seat

Gartner believes that demand, procurement and control has already moved away from traditional IT organizations -- toward Digital Business units and closer to the ultimate end-customer of business technology applications. Clearly, there’s been a significant shift in IT spending power. Gartner estimates that half of all major vendor salespeople are actively selling direct to business units, not IT departments.

“Thirty-eight percent of total IT spending is outside of IT already, with a disproportionate amount in digital. By 2017, it will be over 50 percent,” Mr. Sondergaard said. “Digital startups sit inside your own organization, in your marketing department, in HR, in logistics and in sales. Your business units are acting as technology startups.”

Speaking at the Gartner Symposium/ITxpo in Orlando this week, Sondergaard used the example of smart machines to highlight the disruption caused in Digital Business. Smart machines are an emerging super class of technologies that perform a wide variety of work, of both the physical and the intellectual kind.

Smart machines will automate decision making. Therefore, they will not only affect jobs based on physical labor, but they will also impact jobs based on more complex knowledge worker tasks.

The impact will be profound. By 2018, digital businesses will require 50 percent fewer business process workers. However, by 2018 Digital Business will drive a 500 percent boost in digital commerce related jobs.

Sondergaard explained to the CIOs in the symposium audience, “The new digital startups in your business units are thirsting for data analysts, software developers and cloud computing vendor management staff, and they are often hiring them faster than IT.”

He insists that CIOs must move with a sense of urgency, to avoid further disruption. Companies must build talent for the digital organization of 2020 now. Not just the digital technology organization, but the whole enterprise. In essence, savvy multifaceted digital-native talent is the key to Digital Business leadership and sustainable competitive supremacy.

Focus on Vision-First Digital Business Leadership

As the technologies and trends that power digitalization move to center stage, traditional IT leaders are being presented with a unique opportunity to become forward-thinking Digital Business leaders, according to the latest global survey of CIOs by Gartner.

The latest survey uncovered that CIOs are fully aware that they will need to change in order to succeed in Digital Business -- with 75 percent of respondents acknowledging that they’ll need to adapt their leadership style within the next three years.

According to the survey findings, 89 percent of CIOs agree that in addition to the considerable opportunities afforded by digitalization, the digital world engenders new, vastly different and higher levels of risk. Moreover, 69 percent said that the discipline of risk management is not keeping up.

The average IT budget will grow by just one percent from 2014 to 2015. CIOs estimate that 79 percent of IT spending will be "inside" the IT budget (up slightly from last year), but much digital innovation can and will be funded outside of the planned IT spending.

Seventy-three percent of surveyed CIOs say that they have changed their leadership style over the last three years, and 75 percent say they must change it over the next three years -- to essentially flip their leadership style from control-first to more of a vision-first orientation.

"During the second IT era of industrialization, people leadership was honed to emphasize precision, discipline and tight control," said Graham Waller, vice president and executive partner for Gartner Executive Programs. "Therefore, through both nature and nurture, CIOs have evolved into control-style pragmatic leaders. Given the characteristics of the new digital era, this bias is dangerous. CIOs must invert their style to be more vision-led and inspirational."

The worldwide Gartner survey included responses from 2,810 CIOs, representing more than $397 billion in IT investment and operating budgets, within 84 countries.