Truth and Dare – The CxO Challenges
If one is asked the question of what is at the heart of any change for an organization, the response, more often than not, would be the consumer. Whether it relates to sustainable products, user experience, or value for money, the list is endless. While consumers come in all forms, such as end users, end consumers, wholesalers, and retailers, the outcome is the same. Consumers generate demand and cause a shift in the business ecosystem.
The example of the consumer is just one of many reasons businesses will react to challenges. Their reaction will be one of survival or adaption to change. In this chapter, we will look at what challenges businesses face on a day-to-day basis. To define a way forward, we will explore the characteristics of challenges in order to understand them, determine how to address them and find a solution, and examine how they impact the decision makers we know as the CxOs or the C-suite.
As you proceed to read through this book, you’ll see that it has been designed to give real examples of challenges and provide solutions based on RISE with SAP as the platform to deliver a S/4HANA transformation. Although we appreciate that digital transformations can take many forms and scopes, our objective is to first provide you with an appreciation of the challenges businesses face and how they impact businesses, and how CxOs can react to those challenges in determining a solution.
The challenges impacting the day-to-day activities of a business can be defined in eight broad categories:
- The market
- Financial challenges
- Regulation compliance
- Technology evolution
- Evolving customer perspectives
- Operational challenges
- Organizational challenges
- Environmental challenges
There are external factors that affect businesses and how CXOs are compelled to make decisions to avert any short- and medium-term effects. Market-related effects are impacted by many factors, and this list is by no means exhaustive but only a glimpse into some of those issues.
Uncertainty about the future
If we all had a crystal ball or the ability to have knowledge of the future, it would help to weather the storm of change, but more importantly, thrive under such conditions. Alas, those prophetic abilities are in short supply, but there is a serious point to the uncertain future. It remains a constant threat to organizations’ ability to deliver their services and products to market.
A business must determine ways in which to temper the constant flux in demand – changes in the market that can and do divert the organization’s focus and can be exhausting and exacerbating. As the world becomes more uncertain, those organizations that can thrive under such conditions will have an advantage.
If we look at the last 3 years, during COVID-19, we can clearly see a surge of activity in conducting meetings remotely, with little or no travel. If we look at the impact of global warming, it can be seen as one of the direct causes of the increase in energy prices. The point we are making is that any trend has a cause and an effect.
In a similar fashion, whatever the trend we see, whether induced by technological advancements, environmental factors, or global health-related, it forces a shift in demand and supply, which invariably impacts the organization’s ability to react.
According to Encyclopedia Britannica, the definition of glocalization has become more relevant than at any time before, where regional and global synergies are reflected at local levels. There has been a shift in developing global products and services at a global level that have local brand recognition, making them more relevant to the local market. For example, KFC is a global brand with common products available, but at the local level, you will find market-focused products.
If we look at this through the lens of an organization, it is acclimatizing its products and services created for the global market for its local market presence by adapting them to local cultures. For example, Frito-Lay, a division of PepsiCo, primarily uses the brand name “Lay’s” in the United States and uses other brand names in certain other countries: Walkers in the UK and Ireland and Smith’s in Australia.
The impact of localization is global and increases the challenges of ensuring the continuity of a brand, its quality, and the supply of its products and services.
The supply chain
There is a lack of supply chain diversity and the risk of multiple points of failure when relying on a globally distributed just-in-time supply chain. These are often broken, rigid, and have a myriad of regulations, increasing the threat of geo-political or climate-related disruption, with increased costs to sustain those supply chains, and making them less predictable. How do businesses protect their supply chain from becoming disrupted?
The financial effect on a business is all too apparent, whether it’s the effect of the rise in an interest rate in the US or the price of crude oil. The change in the value of the USD against the GBP determines the profitability of a company when it announces its results in USD. The value of a stronger USD gives a business greater purchasing power. In this section, we are going to understand the cost challenges businesses face.
CapEx versus OpEx
As is commonly understood, CapEx or Capital Expenditures (CapEx) derives from the purchases an organization makes that are for the long term or where the return on investment is seen over a long period of time. Conversely, Operating Expenditures (OpEx) are those expenses that are derived over a short period of time, that is, which are accounted for on a day-to-day, week-by-week, or month-by-month basis.
As consumers have adapted to the pay-as-you-go model of paying only on consumption of a service, the same has now happened with organizations where technology has moved rapidly in providing businesses a pay-as-you-go model for using traditional IT services heavily dependent on CapEx, and they can now be seen as IT as a service. The challenge here for organizations is to adapt to a differing financial model and accounting principles, along with managing those services.
The support and maintenance of infrastructure, whether bricks and mortar or hardware and applications, draw similar parallels. Both require constant maintenance, upgrades, and expansion as the business grows.
For IT applications that are at the core of supporting the operations of a business, two key challenges are always at the forefront:
- Keeping the existing systems going
- Adapting to new technologies without affecting the business
The question arises at what point do you stick to what you know and continue investing in existing initiatives and at what point do you divert and start to change the focus to new technologies?
The cost of living
It would have been unthinkable only a few years ago if the cost of living was quoted as a factor affecting decisions taken by the C-Suite. However, in recent times, it’s seen as the measurement of everyday items, such as fuel, energy, groceries, mortgages, travel, and many other things.
What is the cause of this cost-of-living crisis? The slow emergence from COVID-19 impacted supplies of raw materials and thus caused a surge in costs. The geopolitical impact in Europe of the war in Ukraine impacted energy supplies from Russia. The effects of Brexit affected imports from EU countries and compounded the already depressing situation regarding the surge in the cost of living. All of these things converged, creating a crescendo of uncertainty, and limiting the already regressed business recovery.
The CPI inflation forecast published by the UK government’s Office for Budget Responsibility provides an insight into the inflationary impact on the economy:
Figure 1.1: Inflation forecast in the United Kingdom issued by the Office for Budget Responsibility
The forecast nominal and real average earnings growth published provide an insight into the average earnings growth impact on the economy:
Figure 1.2: Earnings forecast in the United Kingdom issued by the Office for Budget Responsibility (https://www.instituteforgovernment.org.uk/publication/spring-statement-2022/cost-living-crisis)
Lack of investment
To some, a lack of investment in talent and innovation to support a business is an existential threat to its very survival. Looking at the last 3 years of the pandemic, the overnight adoption of remote working was like the flick of a switch. If your workforce is not ready to adopt change due to a lack of investment, then challenges are compounded. Similarly, if your organization is not set up to adopt new innovations, it will cause a huge upheaval when change is forced upon the organization. We have seen this with many tech companies that started sending thousands of laptops to their employees to cater to remote working. See this link to read more about it: https://www.zdnet.com/article/coronavirus-how-we-got-10000-staff-remote-working-from-home-in-just-one-weekend/.
The lack of the right talent has been steadily building up for years, and organizations are continually battling with attrition. We are now entering a digital era of accelerated change and organizations need to counter that with the right talent investment, not just in complex low-touch tech skills, but also basic tech skills just to keep up with all of the changes, such as working remotely and interacting using remote PMO tools such as Jira, Mural, Slack, and so on. If you don’t keep up with change, then there is every chance the organization will fall further behind, due to not reacting to demand and changes in technology focus, and not harnessing new talent with the skills required.
The failure to innovate will almost certainly leave many organizations behind. The ONS carried out a survey on the impact of the coronavirus pandemic and other events on UK businesses and the economy. This survey was based on responses from the voluntary fortnightly business survey (BICS) about financial performance, workforce, prices, trade, and business resilience. The following figure shows the stark reality that up to 26% of businesses were either temporarily or permanently closed. It can be presumed that some of those closures were a result of inaction, lack of innovation, inflexibility in business processes, and a lack of agility in technology:
Figure 1.3: Impact of COVID-19 on businesses (https://www.ons.gov.uk/businessindustryandtrade/business/businessservices/bulletins/businessinsightsandimpactontheukeconomy/8april2021)
The lack of investment in people and technology go hand in hand, and during times of economic, political, societal, and technological changes, it would be an unthinkable decision to not innovate and include technology within a business model, alongside the right talent to help accelerate the change from survival to prosperity. The COVID-19 pandemic is just one example of the myriad of challenges that impact businesses and how those challenges are met is the key to success. The number of businesses impacted by COVID-19 was beyond anyone’s imagination. Almost a million UK businesses were at serious risk of bankruptcy before April 2021. See the report by Peter Lambert and John Van Reenen here: https://blogs.lse.ac.uk/businessreview/2021/02/02/a-wave-of-covid-related-bankruptcies-is-coming-to-the-uk-what-can-we-do-about-it/.
There is not a single person today who has not experienced a recession. The reality is that recession will impact every single person in some way, and this includes businesses. If you take the current economic situation in the United Kingdom, the country is facing its highest inflation since the conversion to decimal currency back in 1971. We are all experiencing the impact of inflation, with increased prices of basic consumer goods, including energy prices, along with higher interest rates.
Pensions and investment portfolios have most likely been impacted by inflation and the threat of a recession, and this is yet another challenge for businesses when they must cut back to survival mode as they brace themselves for a sharp decline in consumer confidence and spending. As a result of a recession, unemployment goes up because businesses have to cut back their workforce in order to manage the challenges of reduced consumer spending.
Return on investment
For a business to invest in any opportunity, it must consider the return on investment (ROI). However, it’s important to first understand the expected outcome expected of the ROI. Here are some focus areas for a C-Suite to look at when considering ROI:
- Better customer experience and satisfaction and improved customer service and support
- Increased usability leads to increased sales
- Increased user satisfaction
- Improved/automated business processes
- Better access to data insights
- Improved digital executive dashboard
- Better forecasting
- Improved software vendor support
- Reduction in vendors and smoother service delivery
ROI is usually a metric that is used to understand the profitability of an investment. However, when it comes to understanding ROI in technology and solutions, it relies on measures made up of several other KPIs. Here are some examples:
- Revenue enhancement – where the investment results in increased sales
- Cost reduction – faster MRP runs and a reduction in operational and maintenance costs
- Cost avoidance – fewer outages and increased productivity
- Capital reduction – a shift from CapEx to OpEx
- Capital avoidance – divest investment from fixed assets
Accuracy cost estimation
Estimating the cost of a project or service being delivered is one of the most important functions in IT. The impact of a wrongly estimated IT program not only hurts the business financially but diverting key resources to the project means the loss of time on other initiatives, which would have otherwise driven growth.
With failed, overrun projects drawing away investment and resources away from the business, the challenges of cost estimation are largely centered around people, processes, and technology:
- Data-driven insight is critical to estimating the cost of a program
- Process adoption opportunities that would lead to greater returns and profitability
- Estimation requires strong and timely alignment across stakeholders
- ROI – time spent and the value generated in spending time on estimations
Regulatory compliance exists to ensure that organizations not only comply with the legal statutes laid down by the local laws in a country but there are additional laws that pertain to specific industries that require additional rules in order to maintain those policies.
There are local, regional, and global laws for all organizations to follow and comply with, however, in order to maintain transparency both operationally and financially, organizations are adopting more consolidated sets of rules, policies, and compliances.
There are typically six types of regulations:
- Laws that impose burdens
- Laws that directly confer rights and/or provide protection
- Licensing bodies and inspectorates
- Economic regulators
- Regulators of public sector activities
In other words, regulations and compliance are where a set of rules and policies are set by a body that forms a part of external factors that are deemed necessary for businesses to comply with. These can be standardization, regulations, and legislation. These cannot be bypassed or ignored as they will invariably cause issues in the long run. For instance, non-compliance with the net-zero carbon footprint goal may preclude a business from entering a market in Singapore.
The topic of regulatory compliance is vast. For the purposes of understanding the challenges faced by businesses, there are three regulatory compliances that may specifically affect how businesses are able to function in specific regions and countries that would impact their IT solutions. Let’s check them out in the following subsections.
The General Data Protection Regulation (GDPR) centers around privacy and security laws of individuals and consumers and it is seen as the toughest privacy and security law in the world. Although the laws apply to companies in the European Union (EU), its impact in terms of obligations organizations have is vast and covers businesses situated anywhere in the world, so long as they target or collect data related to people in the EU.
The consequences of ignoring GDPR can mean heavy fines for a business, which could result in reputational and financial damage or even exclusion from carrying out any business in the EU. Fines can reach tens of millions of euros.
The California Consumer Privacy Act (CCPA) was inspired by the work carried out in the EU for GDPR, and in the state of California, businesses’ privacy policies are required to include information on consumers’ privacy rights. The world’s largest and most successful electronic, big tech, financial services, and energy companies are headquartered in Silicon Valley, so where more appropriate to apply this act than the state where the impact is greatest?
Such laws, as described here, form the fundamental policy of businesses, and adherence is as essential as adhering to human rights laws pertaining to work and pay conditions.
Industry regulations are rules and policies applied by an expert agency in that industry that govern the behavior of businesses. These regulations are supplemental to the fundamental laws applied across all businesses and organizations relating to privacy, security, and ordinary common law rules. In summary, these additional laws ensure there are no gaps in compliance with any laws governing industry-specific regulations.
Whenever discussions are centered around business transformation, the subject of data residency is often not the most pressing issue to be addressed. However, it’s a topic that causes the most concern when it comes to compliance with regulatory and taxation laws and perhaps for policy reasons imposed by the business itself. This is when businesses specifically ask for their data to reside in certain geographical locations.
Another contrasting aspect is the consideration of data localization where the law of the country requires that data created within a certain territory stays within that territory. For example, Russian federal law dictates that both Russian and foreign companies that manage and collect the personal data of Russian citizens must have the data stored locally within the Russian Federation.
A recent IBV report stated that “An uneven response to the COVID-19 pandemic has taught us that to operate effectively in the presence of an unanticipated crisis, organizations need to be agile, robust, and secure. They need to be able to seamlessly engage customers and employees in both physical and digital domains. However, current events have been challenging —even painful—as industries and enterprises react and adapt.”
Flexible adoption of new technology
Today, when we refer to the flexibility of adoption of technology, it is not just centered around IT infrastructure, that is, the hybrid cloud. There are also a number of other considerations, such as the adoption of new processes, techniques, and innovations, including AI and ML.
From a digital transformation perspective, there are four characteristics that need to underpin any transformation and the adoption of new technology:
- Agile: Based on the fundamental principle of keeping the core clean, standardizing business processes provides agility in extending the business processes and integrating with other solutions without disruption.
- Flexible: A cloud infrastructure inherently provides flexibility in terms of services that are on offer. That flexibility goes further into the application layer when you want to increase or reduce the number of services provided. This is even more critical when you want to scale as the needs of the business change.
- Consumable: Switch from CapEx to an OpEx financial cost mode to pay for a service, whether related to infrastructure, software, or services.
- Software innovation: Innovating at the speed of external innovation comes with its own challenges and businesses have never been able to truly master this, with the disruption of maintaining business as usual and at the same time bringing in new enhancements and innovation.
- Business transformation rather than more of the same.
- Focusing on the value addition that the cloud brings. For example, opening up a technology platform to intelligent workflows accelerates moves to both enterprise platforms and the cloud.
- Innovating at the speed of external innovation. An enterprise platform must deliver new innovations without additional cost and with minimal impact.
- The number of options when adopting and adapting to the cloud when shifting core business processes, for example, hybrid migration in less time to preserve the investment.
- A consumption-based offering that compliments software application flexibility in delivering a complete solution.
- Greater emphasis on cost efficiencies, that is, lower TCO and shifting the cost model.
Emerging new technologies
With the emergence of Industry 4.0 technology (for instance, IoT, digital twins, and AI), products have become more connected, and OEMs and service providers now have ready access to products’ and equipment’s field performance data. This enables them to analyze, predict, and control the performance in order to maximize the efficiency at the customer’s end.
Integrating and keeping up with the evolution of technology is yet another example of how businesses are under immense pressure to continually re-invent themselves to remain relevant both for consumers as well as for stakeholders.
Evolving customer perspectives
Faster access to information, helping people to make informed decisions, and changing trends mean all of this has impacted the way businesses have had to adapt and react. At the same time, business are treating products/equipment not as CapEx anymore but as OpEx during the complete maintenance life cycle (from CapEx to OpEx).
Consistent customer service
A good customer experience is at the heart of business success and forms a key part of the business strategy to create and improve on a great customer experience through seamless, effective customer interaction.
Research by American Express found that the most common reason why customers take their business elsewhere is not that they are dissatisfied with the product or service they bought, but rather the post-sales customer service.
The challenge of maintaining consistent customer service remains a volatile endeavor, with fluctuating demand and the quality of products and services making delivering a brand identity associated with customer satisfaction just one of many considerations businesses need to incorporate in their strategy.
Operational challenges for businesses have become more acute in the last few years due to COVID-19; however, these pressures have always been present. The question remains as to what those operational challenges are and how you can determine where lies the greatest effort in overcoming them. Although operational issues cannot be bound to a mere few, the following are some challenges that have a wide impact on businesses through an IT lens.
Sustainable supply chain pressures
Every one of us has a story about how the pandemic impacted our daily lives, whether it was a lack of goods on the shelves, price increases for goods and services, a lack of availability of car parts, or a lack of critical medical services. All of these and so much more have been topics of discussion in our homes, in our businesses, and in every sphere of life.
Take any business today, and there will have been an impact on the supply chain, which can be determined by cause and effect. Take the motor industry as an example, which runs on the just-in-time approach. It cannot manage vast quantities of raw materials because the throughput would not change no matter how fast you delivered the raw material. Yet during the pandemic, we saw a lack of raw materials, which determined the pace at which cars could be manufactured.
Managing a myriad of factors, such as people, processes, partners, materials, services, and so on. determines how operationally effective a business is, and this is a key issue keeping our leaders awake at night.
Resourcing issues regarding raw materials, people, and skill gaps
There is a direct link between the cost of operations and the resources at a business’s disposal. No matter what business you are in, cost control, especially within IT operations, plays a significant role in operational efficiency. The following factors impact operations:
- The right talent: It does not matter how advanced technology has become if you do not have the right talent to harness that technology to your advantage. A vastly underestimated aspect that businesses only started to learn about a few years ago is that developing and nurturing talent is at the core of a business’s survival.
If we look at attrition in just the last 2 years, the IT industry has seen a surge since the passing of the peak of the pandemic.
Figure 1.4: Attrition trend in the IT services industry in India due to COVID-19 (https://www.businesstoday.in/latest/corporate/story/why-infosys-tcs-wipro-and-other-indian-it-giants-are-facing-record-high-attrition-rates-346139-2022-09-01)
As we came out of the pandemic, we saw demand outstrip supply as the economy started to recover. Organizations’ inability to be able to keep pace with demand, with the backdrop of attrition, was coupled with intense competition for skilled labor where the skilled workforce had a choice of taking up roles that suited their economic and personal circumstances better.
We saw the transportation and logistics sector hit particularly hard, with layoffs taking place due to the pandemic and then huge delays in the re-hiring process, which included following regulatory compliance and security protocols in hiring in sensitive sectors of the travel industry, causing numerous scheduled flights to be canceled as airlines were unable to cope with the demand: https://www.mckinsey.com/capabilities/operations/our-insights/navigating-the-labor-mismatch-in-us-logistics-and-supply-chains.
- The availability of technology: With the impending end of Moore’s law, we cannot simply rely on the availability of faster computers to give businesses the edge they need to be operationally efficient. Although speed is one factor, the availability of the right technology and the ability to adopt it and harness it is a challenge businesses are facing. What good would Facebook be if we did not have smart devices?
Taking it a step further, the availability of new and improved business application processes and solutions and adoption at pace is another challenge businesses are facing. After all, how is it possible to infuse efficiency without new technologies helping accelerate the pace of bringing in operational effectiveness?
- The availability of services: Since the launch of the smartphone, we have seen rapid changes in the services being developed and delivered to consumers. No one would have thought 20 years ago that the retail high street would no longer be required to purchase essential everyday items.
When AWS was launched in early 2002, an internal paper was published that determined what Amazon’s internal infrastructure should look like. It was suggested to sell it as a service and a business case was prepared for it. Two years later, Amazon implemented SAP for its internal businesses, and this gave rise to SAP applications being offered as a non-productive service to the masses. This also gave way to the pay-per-use model in consuming services.
If those services are not present, it is a hindrance to bringing in operation as a service. For businesses, the challenge remains adopting technology and services that are relevant today and can be adapted to suit the needs and requirements of the future.
The multi-vendor model
Traditional IT operations have been predicated on businesses interacting with multiple vendors and suppliers to deliver a service. For any IT solution, up to more than 10 suppliers can be seen interacting with the business. These can be suppliers of any of the following:
- Software licenses (OSs, databases, applications, security, network, storage)
- Hardware (laptops, servers, storage devices)
- Data centers (client-owned, vendor-owned, or in the cloud)
- Infrastructure service providers
- Implementation service providers
- Application-managed service providers
- Technical-managed service providers
- Network service providers
Each service contract will have different end dates, exit clauses, penalties, and SLAs. Managing the sheer complexity of services being delivered to the CIO’s office requires a lot of resources. As mentioned earlier, it also means having the right talent to support the whole IT operation. A multi-vendor lock-in, unless carefully managed, could pose a risk to the business in delivering value, and instead increase the total cost of ownership.
The pressure is immense in ensuring operational efficiency is balanced with technological advancement without compromising IT services delivered to the business itself as well as to its consumers.
Choosing a SAP service provider
In the previous section, we mentioned the choice of services provided to businesses in supporting their IT operations and how we now see thousands of providers delivering those same services. If we look at SAP partners, then there are over 26,000 SAP partners who deliver valuable IT services. A list of SAP partners can be seen here: https://www.sap.com/uk/partner/.
What’s the best way to choose a partner to deliver services? It all depends on the requirements, since many of them could be met through one or more similar services. So, what are the factors affecting the choice? It’s important to note that organizations are looking to deliver value in any transformation, and there are three factors that will affect the outcome:
Figure 1.5: Factors affecting transformation value
- Time: How long does it take to deliver the service? In this case, it could be serviced by a partner to deliver an implementation of new business processes, or an upgrade to the software, for example, the efficiency with which new business processes are implemented via an upgrade from SAP ECC 6.0 to SAP S/4HANA varies from customer to customer. Typical timelines vary from 4-12 months.
- Quality: It’s a misconception that IT operations must be of the highest quality. Just as we have the choice of buying a Rolls Royce or a VW Beetle, there are qualitative choices. These are usually determined by the category of partner you choose, experience in the particular industry, the talent pool, certifications, customer feedback, partner classification by vendor, brand, reputation, and so on.
- Price: Another misconception is that price is always a factor in determining your choice of partner to deliver a service. Wrong! You’ll have heard the old saying “cheap and cheerful.” Well, if you choose a cheap option, you will have to compromise on quality and time. Among the factors determining the value to the business, it requires a fine balance – if you compromise on one thing, you must give up on another. So, price is an important factor at a cost of quality or time.
Key considerations for businesses when opting for a cloud provider
When considering adopting cloud hosting providers for your business as the next evolutionary step in your transformation journey, along with improving operational efficiency, each provider is different in what services it offers, so careful consideration is needed.
Businesses may adopt the copycat approach and follow other organizations in similar industries, in the hope that it pays similar dividends. Is this the right approach? Can one company’s adoption of the cloud mean another would share the same fate?
According to a recent IBV report, for many companies, the journey to the cloud lacks transparency. It states that there is often a perception that leaders presume their organization is faring better than expected when adopting cloud transformation. The recent survey states the contrary.
The IBV report provides a transformation index on the state of cloud transformation, shown in the following figure, which organizations can use to gauge how well they actually fare against industry norms. The index is built on the research of more than 3,000 C-Suite decision-makers across 12 countries and 23 industries.
Figure 1.6: Transformation index (https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/transformation-index)
Keeping the lights on
Delivering business continuity and resilience is at the back of the mind of every CIO, and whether its COVID-19, war in Europe, or the impact of climate change, those businesses that do not pay enough attention to this are faced with consequences that result in the following:
- Damage to the brand and reputation, where consumers lose confidence. It is now expected that the delivery of services should be uninterrupted.
- Financial loss because of unexpected downtime and breach of contract.
- Failure to repair consumer confidence can result in business closure.
It’s said that culture and transformation are two sides of the same coin in an organization, intrinsically linked and going hand in hand when digital transformation is seen as a cultural change within the business. However, businesses that attempt to digitally transform to adopt new processes, new policies, and new approaches are faced with the challenge of transforming their own culture, attitude to technology, and people, since change is reflected in the needs of employees and customers. In this section, we will look at the factors affecting transformation, taking into account culture and people.
Transformation challenges – business- or IT-driven
Factors affecting transformation
- Talent shortage: we have already discussed the issues with attrition taking place due to the surge in demand since the pandemic. It’s not only that there’s a lack of skills but there’s a lack of the right skills to help with the transformation.
- Adversity to change: It’s a natural phenomenon that our initial reaction to any change is a negative one, and businesses are no different. It can sometimes feel like an uphill battle to change that mindset and move from a headwind to a tailwind toward transformation.
- Re-skilling: Investment is needed, as is the patience to re-skill the workforce to adapt to the new changes that the transformation will bring.
- Cost impact on the bottom line: This is one of the most critical factors in deciding whether the transformation will bring true ROI or TCO to, in effect, deliver the justification that it was all well worth it.
- Lack of stakeholder buy-in: If key sponsors are not aligned at the board level, then no amount of pushing from middle management will make this a success.
- Business versus IT: Transformation has always seen two opposing forces at work. More often than not, transformations are either business-led or IT-led, and the challenge remains to bring both together as no transformation can be a success without business or IT leaders.
- Finding the right transformation partner: Unless the business has the right skills, experience, and knowledge to carry out the business transformation it needs, finding the right implementation partner is vital. In the previous section, we discussed the challenges in finding the right partner.
- Lack of business strategy: It might seem strange to add business strategy as one of the factors affecting transformation, but if there is no clarity on how the organization would like to develop its business locally, regionally, or globally, it will become a hindrance to any investment in IT transformation.
- Transformation fatigue: Previous programs delivering business transformation can lead to resistance to change, and this is one of the key factors why innovating to the latest software and business process innovation is seen as more of the same.
Today’s business leaders must balance the long-term future of their businesses and environments, the top line and green line, alongside the short-term need to preserve the bottom line. A sustainable enterprise is no longer a nice-to-have ethos for a business; it’s a must and it’s driven by consumers as they use their power of choice to move away from unsustainable, environmentally damaging products and services. In this section, we will look at not just sustainability challenges but additional external factors that are environmental.
A report released by the World Economic Forum in early 2020 reported that 50% of Europeans and 75% of Chinese consider climate change a major threat to society (https://www.weforum.org/agenda/2020/01/climate-change-perceptions-europe-china-us/).
This was backed by Pew Research, which found similar concerns of the public in the US, putting the economy at the top but environmental issues being of significant concern and coming a close second (https://www.pewresearch.org/politics/2020/02/13/as-economic-concerns-recede-environmental-protection-rises-on-the-publics-policy-agenda/).
The IBV report also showed that 67% of organizations consider environmental issues of significant concern and they feature in strategic decision-making (https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/sustainability-consumer-research).
In fact, we do not have to rely on surveys and research anymore; we only have to look at the news to see for ourselves that climate change is here and it has started to impact all our daily lives. We can no longer hope to find a solution in the coming years – we must act now.
Businesses are now expected to deliver on the Paris Accords and COP26, and for each proceeding year to rapidly real sustainable products and services that are delivered with minimal impact on the environment.
As the COVID-19 pandemic becomes part of the new normal, one cannot ignore the devastating impact it has had on everyone. Millions died. Millions more were left with the long-term effects of COVID, and millions of livelihoods were at stake.
We may never truly be able to estimate or even fathom the long-term impact of COVID-19 but it has changed the way we do business forever. The question remains how do businesses adapt to change and build resilience to external forces to weather the storm and then return even stronger?
We are already seeing predictions made in IBV research come true, where it stated that when organizations emerge from the pandemic, there will be an environment of more disruption. That change is already at full pace in a hyper-dynamic environment. Business leaders cannot sit back and need to push forward to use the fluid business environment to their advantage.
Since 2016, we have seen increased polarization in politics, swinging from the extreme right to the left wing of the political spectrum. Political uncertainty since Brexit has led to there being five prime ministers in the UK since the Brexit referendum, leading to poor decision-making, and other recent events have both directly and indirectly impacted the economy. Economic indicators resemble an ECG scan, making forecasting very hard for the CXO suite. The abolition of the 45p tax rate and a reduction in corporation tax, in the hope of putting more money into the pockets of the top 1% of consumers, resulted in a run on the GBP, and this led to interest rate hikes on UK gilts and pensions, leading to the Bank of England investing £65bn in propping up UK bonds in pension funds.
With such devastating effects on the economy, for consumers and businesses alike, what can business leaders do to protect their top and bottom line?
Impact of the war in Ukraine
The war in Ukraine is in its eighth month at the time of writing and the impact of the war has been seen to affect its closest service markets, particularly in Eastern Europe. An IDC paper analyzed the impact of the Russia-Ukraine war on the services market, as well as the global impact of the conflict, as of 2Q22. It presented its findings in the near-term IT services forecast pertaining to Russia, Central and Eastern Europe, and Western Europe, as well as IDC’s assessment of how the crisis is affecting service providers sourcing locations.
In this chapter, we set out to understand what drives change in a business. It’s universally agreed that “the customer is king,” but change is orchestrated by effects on the business brought on by factors both internal and external, even though the consumer is at the heart of any changes.
We looked at eight levers of change that pose challenges for CXOs in a game of truth or dare on whether they believe such factors will truly test their business. These challenges have been laid out so that businesses can use them to test the capability of their organization and whether it would withstand the impact of change.
In the next chapter, we will look at some aspects of the levers of change impacting Spark4Life Ltd., the challenges it is facing, and how it is looking to overcome them in the context of business transformation.