Why CEOs are in-sourcing digital transformation

Around 40% of companies have begun digital transformation projects, according to Gartner, with business growth the number one concern.

In the analyst firm's latest survey of 388 CEOs and senior business leaders worldwide, 58% of CEOs cited growth for the reason they have embarked on transformation projects, up from 42% in 2016.

It also found that product improvement and technology are the biggest rising priorities for CEOs in 2017, with 47% of CEOs being challenged by the board of directors to make progress in digital business, while 56% said that their digital improvements have already led to better profits.

Mark Raskino, vice president and Gartner fellow, said that IT-related priorities, cited by 31% of CEOs, have "never been this high in the history of the CEO survey".

Bringing innovation back in-house

"Almost twice as many CEOs are intent on building up in-house technology and digital capabilities as those plan on outsourcing it (57% and 29%, respectively)," he said.

"We refer to this trend as the reinternalisation of IT bringing information technology capability back toward the core of the enterprise because of its renewed importance to competitive advantage. This is the building up of new-era technology skills and capabilities."

CEOs have also progressed in their digital business endeavours. A total 20% of CEOs are now taking a 'digital-first' approach to business change. "This might mean, for example, creating the first version of a new business process or in the form of a mobile app," said Raskino.

Another 22% are introducing digital elements to their core enterprise models. "That's where the product, service and business model are being changed and the new digital capabilities that support those are becoming core competencies," thre analyst added.

CEOs lack success metrics

However, while more CEOs are going digital, the survey revealed that nearly half of CEOs have no digital transformation success metric. "For those who are quantifying progress, revenue is a top metric: 33% of CEOs define and measure their digital revenue," said Raskino.

He added that deeper transformation can only be achieved at scale if it is systematically driven. "CIOs should help CEOs set the success criteria for digital business," he said. "It starts by remembering that you cannot scale what you do not quantify, and you cannot quantify what you do not define. You should also ask yourself: What is 'digital' for us? What kind of growth do we seek? What's the number one metric and which KPIs must change?"

CIOs and CEOs must work together

Gartner said it is time for CEOs to scale up their digital business ambition and let CIOs help them set and track incisive success metrics and KPIs, to better direct business transformation.

"CIOs should also help them toward more abstract thinking about the nature of digital business change and how to lead it," said Raskino. "The disruption it brings often cannot be dealt with wholly within existing frames of reference."