A decade of digitalKeeping pace with transformation2017 Global Digital IQ®Survey: 10th anniversary edition22017 Global Digital IQ®SurveyLooking back to look forwardThe world was a simpler place when PwC first set out to measure Digital IQ 10 years ago. “Digital” was just another name for “IT.” The CIO was not generally regarded as a strategic leader. And although huge shifts were occurring in the ways technology and information were usedthink Web 2.0 and startups like YouTube and LinkedInthis innovation had yet to find its way into the enterprise. There, putting technology to work to improve productivity was a relatively straightforward, and siloed, job. And the lack of IT and business alignment was a common refrain.A decade later, the scope and scale of digital-driven change has grown immensely, and organizations of all types have spent a lot of time and money to keep up. CEOs have embraced digital as part of their mandate. Enterprises have also (nearly) closed the gap between the IT and business sides of the house. Today, youd be hard-pressed to find a modern organization that doesnt see technology as integral to business strategy as well as operations. 32017 Global Digital IQ®SurveyYet despite these notable advances, in some ways company leaders are no better equipped to handle the changes coming their way than they were in 2007. In fact, Digital IQthe measurement of an organizations abilities to harness and profit from technologyhas actually declined since we began asking executives to self-assess their own organizations. Enterprises arent so much falling behind as struggling to keep up with accelerating standards. And looking ahead, it is clear most are not ready for what comes nextand after thatas technologies continue to combine and advance, and new ways of doing business go from inception to disruption seemingly overnight.How, then, can company leaders be expected to consistently unlock value from digital investments in a rapidly advancing world? The answer is at once simple and infinitely complex: Focus on the human experience. That entails rethinking how you define and deliver digital initiatives, considering employee and customer interactions at every step of the way, investing in creating a culture of technology innovation and adoption, and much more.Focus on the human experience: Rethink how you define and deliver digital initiatives, consider employee and customer interactions at every step of the way, invest in creating a culture of tech innovation and adoption, and much more.42017 Global Digital IQ®SurveyIn the most basic sense, people have been the missing variable in the digital transformation equation. Instead of the prior decades obsession with business-IT alignment, enterprises must now pursue a more balanced approach to digital transformation thats equal parts business, experience, and technology. What weve learned, in our own work with clients and by analyzing a decades worth of data, is that focusing on the human experience can raise an organizations Digital IQ. And we know it will only become more critical as emerging technologies like artificial intelligence (AI) and the internet of things (IoT) define the next decade of digital and fundamentally change the way man and machine work together. Unlike so many aspects of technological change, how you shape the human experience is something thats in your control. You have the power to create a flexible, sustainable approach to innovation in an era of constant transformation. That is the deeper meaning of Digital IQ in the next decade.52%In our last survey it was 67%, and before that 66%.of companies rate their Digital IQ as strong.Source: PwC, Global Digital IQ®SurveysBases: 2,216 (2016), 1,988 (2015), 1,393 (2014)52017 Global Digital IQ®SurveyDigital IQs link to financial performanceOur analysis of data from the 2,216 business and technology executives we surveyed in late 2016 points to a connection between organizations that have more comprehensive digital strategies and those that achieve stronger financial performance.The top performers in our surveythose reporting revenue growth and profit margin increases above 5% for the past three years and expected revenue growth of at least 5% for the next three yearstend to have broader definitions of digital, encompassing customer-facing technology activities and going beyond technology and into an organizational mindset. Just 16% of top performers say digital is synonymous with IT (the most basic description), compared with 30% of other companies.These top performers also have a better understanding of the human experience that surrounds digital technology (82%, vs. 69% of other companies). They are more likely to resource digital projects with cross-functional teams of business, technology, and user experience specialists (74%, vs. 65%), and to use agile methodologies for the majority of non-software projects (22%, vs. 7%). More of them say creating better customer experiences is a top expectation from digital investments.Top performers prioritize innovation and emerging technology. They are higher on most measures of innovation, including dedicated innovation teams (59%, vs. 42%). Three-quarters of them (75% vs. 61% of others) say their innovation process includes identification and commercialization of digital products, and well over half regularly build prototypes to explore new business ideas that involve emerging technologies. 62017 Global Digital IQ®Survey20072017: A decade of Digital IQ Digital progress is fairly consistent. In 2007, the average Digital IQ was similar across industries. The same largely holds true today, with some exceptions (agribusiness and mining have fallen behind).Yesterdays technology investments are todays building blocks. Data mining and analysis, search technologies, service-oriented architecture, and virtual collaboration were top-of-mind technologies in 2007. Attention shifted to mobile technologies, data security, and cloud in the intervening years. Today, emerging technologies like the internet of things and artificial intelligence are seen as the next big things, and other next-generation tools are at their heels.CEOs have become champions for digital. Just 33% of the executives in our 2007 survey said their CEO was a champion for digital; that number climbed through the years to reach 68% today. The CIO has earned a seat at the table. A mere 40% of executives said the CIO was significantly involved in strategic planning in 2007; today the CIO has strong relationships with other senior leaders and often oversees digital strategy and investments. With the growing importance of digital, the CIO is also joined by new roles like the chief digital officer or chief data officer, whose roles also focus on the strategic use of technology. Attention to the human experience indicates superior strategy. In 2007, a focus on the customer experience correlated with high strategic Digital IQ. Respondents that focus on creating better customer experiences today also report better digital strategiesand stronger financial performance.72017 Global Digital IQ®SurveyWhy Digital IQ is a moving targetCompanies have done a lot to prepare themselves to profit from technology change since we began the Digital IQ program in 2007. The CIO role has grown in stature, organizational charts have sprouted new positions dedicated to innovation, significant investments have been made in technology, and entire business models have been transformed. 82017 Global Digital IQ®SurveyYet most organizations still are not ready for the latest round of technological advance, or the one that comes nexta reality acknowledged by respondents to our latest global survey. The confidence in their organizations digital abilities is at an all-time low: Just over half rate their Digital IQ as strong or very strong (a score of 70% or greater), down from two-thirds of executives in 2014 and 2015. “Digital refers to all technologyinnovation-related activities.” “Digital is synonymous with IT.”“Digital refers to all customer-facingtechnology activities.”“Digital refers to all the investments we aremaking to integrate technology into all parts of our business.” “Digital goes beyond technology alone to reecta mindset that embraces constant innovation,at decision-making, and the integration oftechnology into all phases of the business.” “Digital refers to all data and analyticsactivities.” 32%29%14%14%6%5%The changing denition of digitalHow does your organization dene digital?Source: PwC, 2017 Global Digital IQ®SurveyBase: 2,21692017 Global Digital IQ®SurveyWhat accounts for this disparity between effort and outcomes? Start with the fact that Digital IQ is not measured against a static scale but instead tracks organizational preparedness in a fast-evolving environment. So while companies are smarter about technology adoption than they were previously, the questions keep getting harder. Powerful new tools continue to crowd into the marketplace, even as organizations struggle to digest the foundational technologies like cloud, mobile, and analytics on which next-generation innovations depend. At the same time, “digital” has evolved from a synonym for IT to a more expansive approach to technology and its impact on customers, culture, and business outcomes, raising the complexity and stakes of the game while it is in progressand diminishing the confidence of the players along the way.Why companies struggle to keep paceMost organizations have not done enough to keep up with the digital revolution. While technology has become a CEO-level concern (68% say their CEO is a champion for digital, up from just 33% in 2007) and the CIO has attained strategic stature, many other senior executives and the functional areas they lead are not yet fully engaged in the project of digital transformation. Most tasks related to digitalincluding digital investment prioritization, innovation, and the development of new products and servicesrest with either the CIO or CEO, and very few functions outside of IT and operations have a leading role in emerging technology exploration.Despite slow progress in developing strategies for digital and exploring new technologies, executives remain committed to digital as a driver of growth. Nearly three-quarters (73%) cite revenue growth as a top benefit of their digital initiatives, followed by increased profits (47%) and reduced costs (40%). Disruption is less of a focus, despite growing evidence that new technologies and new business models will continue to remake entire industries.102017 Global Digital IQ®SurveyInnovation and emerging technology adoption A decade of Digital IQ has seen increased awareness of the business value of new technology adoption, but companies have not adapted quickly enough to stay ahead of constant change. In some ways, they have regressed, as many organizations still take a passive approach to seeking out innovation: In 2007, they most often turned to technology vendors and consulting firms to explore how to apply emerging technology to their business. Today, despite a profusion of resources (for example, incubators/startups, crowdsourcing, makers, open source, university labs), most still rely on old-school voices like industry analysts, competitive intelligence, and vendors. Fewer companies today have a team dedicated to exploring emerging technology than in years past. The rest rely on ad hoc teams or outsourcing, and many (49%) still determine their adoption of new technologies by evaluating the latest available tools, rather than proactively exploring new innovations with specific business needs in mind (40%). And few are focused on how these emerging technologies change the relationship between man and machinecreating new roles, bringing new conflicts, and redefining trust.A decade of Digital IQ has seen increased awareness of the business value of new technology adoption, but companies have not adapted quickly enough to stay ahead of constant change. 112017 Global Digital IQ®SurveyYet most companies are confident in their approach to new technology assimilation, and strategies for digital investments are more developed than they once were. Two-thirds (66%) of companies say they have a single, multiyear roadmap that includes business and IT processes, up from 54% in 2015. A similar number say they consistently measure outcomes from innovation efforts. These behaviors demonstrate again that, by and large, companies are improving their efforts around digital every yearbut that might not be fast enough to keep up with the next wave of emerging technology.To what extent do you agree with the following statements about innovation? (agree/strongly agree)80%43%Innovation talk but few resourcesSource: PwC, 2017 Global Digital IQ®SurveyBase: 2,216Identifying opportunities to digitize our enterprise is a critical part of our innovationprocess.We have a dedicated team for digital innovation.122017 Global Digital IQ®SurveyThe CIO stays in the pictureThe chief information officer has become more strategic, connected, and visible during the past 10 yearsand remains so despite predictions to the contrary. Chief digital officers, for example, were expected to move from the media and agency world to the broader corporate scene. Yet despite hype over this new entrant to the C-suite in the last few years, only 7% of organizations have a leader with the CDO titleand the vast majority of organizations do not plan to add the position. Often, the job of digital leadership still falls to the CIO.The CIO and CEO are the digital leaders for their organizations in most respects. Most companies say the CIO and CEO have near-exclusive control over digital strategy and investments (IT still commands the biggest share of technology spending28% on average), and those roles lead the way in emerging technology investments and the development of new products and services. It is helpful, then, that most companies report strong relationships between the CIO and other top executives.While the CIO takes on increasing responsibility for digital activities, the role is becoming more internal-facing. In three years, 49% expect the CIO to be primarily responsible for leading all internal efforts, including innovationup from 43% today. Does this mean the CIO role will finally yield power to other C-suite executives and business unit leaders? Perhaps, but the pace of change and centrality of digital strategy have kept the CIO in the spotlight for a decadeand that seems unlikely to change in the near future. Where change might occur in the C-suite, however, is in the attention paid to the human element through the introduction of more chief experience officers (CXOs) or another C-level executive focused on experience. Will the CXO join the CIO and CEO in leading digital, ensuring that the all-important lenses