China CIO: Avoid three pitfalls in digital business execution​

The 2023 Gartner CIO and Technology Executive Survey shows that 67% of the executives surveyed believe that their digital investments have failed to achieve expected business value. Digital business is a top priority for Chinese organizations, so chief information officers (CIOs) are keen to demonstrate the impact of digital investments on the business. To avoid pitfalls in digital business execution, leaders need to balance digital investments across multiple projects and understand how each investment contributes to business outcomes.

Trap 1 : Prioritizing cost reduction and efficiency improvement over increasing revenue

In the 2023 Gartner CIO and technology executive survey, 63% of Chinese respondents ranked promoting operational excellence as the primary goal of digital investment in the past two years, followed by improving customer experience (41%) and increasing cost efficiency (31% ), achieve revenue growth (24%) and launch new products and services (24%), see Figure 1.

Figure 1: Digital investment targets over the past two years

This shows that corporate organizations first consider how to reduce costs and increase efficiency, and then how to increase revenue. However, this approach does not help deliver business value. While IT budgets have stagnated in part because of the economic slowdown, IT-led digital investments have historically favored cost reduction and efficiency gains, making enterprises more likely to target IT as a cost optimization target. With limited budgets, CIOs may further rely on cost and efficiency optimization to demonstrate their value. However, there are minimum number of people and technical requirements for business operations, and there is a lower limit for cost reduction. Business growth, on the other hand, has no upper limit. CIOs should focus more on growing the business and improving customer experience to expand their influence on the business.

Trap 2 : Eager to implement multiple digital initiatives but lack a strong financial case

The 2022 Gartner Enterprise Growth Strategy Survey shows that China's business leaders hope to drive future growth through multiple digital initiatives. These initiatives span multiple revenue areas, such as launching new products, improving customer experience, and developing digital ecosystems, as well as cost reduction and efficiency measures, such as increasing efficiency and improving decision-making (see Figure 2).

Figure 2: Digital projects that will drive future growth

Given the economic pressures over the next two to three years, corporate institutions are unlikely to invest in everything on their wish list. In addition, surveys show that most Chinese companies prefer projects with better ROI expectations, so CIOs should focus more on projects with better financial demonstration results.

Trap 3 : Digital capabilities don’t translate into business results

Chinese corporate organizations have been building digital technology and operational capabilities for many years. Gartner's Digital Execution Scorecard shows that corporate organizations already have high capabilities in this area. For example, IT employees with digital skills account for 60% of the total. 35% of the total number of IT employees, cloud-based applications account for 30% of the total number of applications, and cross-functional business IT integration teams account for 33% of the total number of application development teams (see Figure 3). However, these capabilities did not translate into business results. The Digital Execution Scorecard shows that the revenue contribution achieved by respondents in Greater China (including mainland China, Hong Kong and Taiwan) through digital products and services, platform businesses and "as-a-service" models is only in the single digits.

Figure 3: Lack of correlation between digital capabilities and business outcomes

The level of digital capabilities is high, but the contribution to business results is low, which does not help Chinese CIOs demonstrate their business impact. Part of the reason is that CIOs are often not directly responsible for business revenue and are not evaluated on such metrics.

To this end, CIOs should identify the gap between the digital capabilities required to achieve future business goals and current levels, and invest in specific technologies and capabilities to bridge the gap. At the same time, technical capabilities should be linked to business indicators and mapped to the KPIs of employees at all levels of the IT team.