10 minute read 8 Jan 2020
Female cyclist riding race bicycle on sunny open road

Five major trends which will underpin another decade of digital innovation

By

Jim Little

EY Global Microsoft Alliance Lead and EY Americas Technology Strategy Lead

Technology enthusiast. Former CIO. Passionate about helping companies re-imagine their business, value propositions, customer and employee experiences using technology.

10 minute read 8 Jan 2020

Show resources

Discover the technology trends every transforming business must master in order to ride the next wave of digital innovation

As milestones go, 2020 will be a significant one in the tech world. Digital technology started to have a major impact on businesses around 2010, meaning next year will mark a decade of transformation. As companies mapped out their digital plans, many hailed 2020 as a crucial target year. Many companies set out IT 2020 programs, featuring lofty goals, such as equipping employees with connected devices, modernising the datacentre (perhaps even eliminating it), and making headway with emerging tech such as AI, IoT and blockchain.

We explored many of these themes in our upcoming research study, due for publication in early 2020, which looks at how companies are using technology to reimagine their business models. We surveyed senior leaders and executive management team members from 500 corporations and 70 start-ups across a range of global geographies and sectors, in order to pinpoint where they are on their transformation journeys, and where they are heading.

What’s encouraging is that, on the whole, companies are making progress on their digital journeys. According to our research, today, almost half (44%) of corporate companies said they are making good progress with their transformation plans and are starting to embed them across their businesses. An additional 4% of corporates said they were even more advanced, with their transformation fully embedded and optimized across the organization. In two years’ time, two-thirds (66%) of corporates expect to be making good progress, and 17% expect their transformations will be fully embedded – demonstrating that they are on a steep transformation maturity curve.

In two year's time, only two thirds or

66 %

of corporates expect to be making good progress on digital transformation.

This is good news, but there is still a lot of work to do before all companies' transformations are fully embraced. What's more is, because transformation is a continuous cycle, it is never complete, and companies will need to continually evolve their programs to meet customers' changing expectations.

With this in mind, it's important to understand how far we've come, where we are, and where we're heading. In this article, we will examine five major trends that are currently laying the groundwork for the next decade of technological innovation.

Transformation is a continuous cycle, it is never complete, and companies will need to continually evolve their programs to meet customers’ changing expectations.

Five major trends for the next decade of innovation

Where are we heading and what technology will enable us to get there?

1. Cloud is the digital foundation

Rewind to 2010 and cloud was the big technology experiment for companies. The IT world had already swung from the centralized computing of mainframes to a more distributed computing model, and then we found ourselves rapidly swinging back towards the more centralized model of cloud. Will it work? Is it secure? How do we do it? These were the major questions of the day, as companies grappled with virtualization, server migration, infrastructure-as-a-service, and security and privacy concerns about moving away from on-premise computing. But today, it’s fair to say that cloud is the new normal and companies’ use of it is accelerating.

According to our research, 60% of corporates said cloud accounted for the largest share of their technology investment over the last two years, and 53% said cloud will likely to account for the largest share of investment over the next 2 years. Cloud is no longer a cutting-edge experiment, and is, in fact, a business essential, fuelling better economics, more innovation and greater speed.

According to our research,

53 %

of corporates said cloud will likely to account for the largest share of investment over the next 2 years.

The cloud story is reflected in our start-up¹ data. Over the last 2 years, the technology which accounted for the largest share of investment at start-ups was Intelligent Process Automation (IPA) (54%). Cloud came in only in second place (47%). This goes to show that while cloud is important to start-ups, it’s seen as a basic requirement to fuel more innovative tech, such as IPA. We expect this sentiment to spread across all companies in the coming years.

Looking ahead to the next decade, all technology innovations will rely on cloud in some way, securing its place in history as the world’s digital foundation.

2. Businesses are pivoting around data

If cloud is the digital foundation, then data are the building blocks of the new world technology. Cloud technologies have underpinned value creation through major innovations over the last decade, particularly the internet of things (IoT), where companies are using a combination of sensors and cloud technology to collect insights from almost anything you can think of – from oil rigs in the middle of the ocean to refrigerators in your home.

This has created a data deluge, and means that the major challenge today, and for the next ten years, is making sense of it all. Only 4% of corporates claim to have a “highly sophisticated” approach to leveraging data, according to our research.

Looking ahead, we would expect this statistic to rise over the next decade, as the ability to mine and monetize real business insights from data, becomes an increasingly important success factor in modern business. Companies are already using data to run simulation models to analyse the past behaviour of humans or machines in order to predict future habits.

According to our findings, only

4 %

of corporates claim to have a "highly sophisticated" approach to leveraging data.

For example, in 2017 beverage giant Coca-Cola used deep data insights to launch its new product Sprite Cherry². Since 2009, Coca-Cola Freestyle fountains have allowed restaurant customers to mix and match their favourite drinks and flavours. Data collected from these machines over the years showed the company that cherry-flavoured Sprite was very popular, prompting the firm to release it as a standalone brand. When it launched the product, Coca-Cola claimed Sprite was one of the fastest-growing beverages in the US, and that it expects new innovations such as Sprite Cherry to help it continue on this path. This is just a snapshot of the value that data analysis is bringing companies, which we expect to continue.

Unlocking the value in data will arguably become the biggest business priority of the next decade.

3. Experience is everything

Companies now have razor-sharp insight into their customers, owing to the increasing amount of data they are sharing. Savvy companies are using these data to create better customer experiences. In fact, our data shows that the number-one improvement priority for the IT function at corporates is improving customer experience and engagement (40%).

This shows that the “experience mind-set” is a major trend, which we expect to accelerate in the coming years. Of course, with more data comes more responsibility, and companies will need to think hard about the ethics and governance they build around this.

An experience mind-set can manifest itself in either of two main ways – customer experience and employee experience. The critical element to both of these is human-centred design – personalizing information to individuals or personas, and how they want to experience something, and working backwards from there.

In the past, customers and employees simply had to use whichever technology was available to them, for better or worse. But today – and in the future – companies can use tech to differentiate, by delivering exceptional experiences, bolstering positive brand perception and market differentiation.

For example, McDonald’s recently acquired personalization and decision logic technology specialist Dynamic Yield, with the aim of using data to create an even more closely personalised experience for customers. Interactive menu boards at drive-throughs will be able to display food based on time of day, weather, current restaurant traffic and trending menu items. Additional items will also be suggested based on the customer’s food choices, adding greater convenience to the customer³.

Honing a true experience mind-set will be a major strategic priority for companies in the coming decade.

There is a real focus on having much more of an experience mindset. It’s really about thinking through the customer experience and then applying your digital technologies against that. But the critical element of it is what I will call the ‘human center of design.’ In the old days, where you would just take the package and implement it to the best of your ability... now, it's more centered around the experience that you're trying to drive and the brand that you're trying to be known for as a company.

4. Ecosystems and partners help bridge the skills gap

Fifty-nine percent of corporates we surveyed believe there is an industry-wide shortage of the type of skills that would help accelerate their transformation efforts.

This is a major concern for companies, because employees must know how to get the benefits of digital technology before they can help customers do the same. Businesses are looking at a range of ways to solve this issue, as we explore in our flagship report, such as developing new incentives, acquiring companies and introducing mandatory new training programs.

Amont the corporates we surveyed,

59 %

believe there is an industry-wide shortage of the type of skills that would help accelerate their digital transformation efforts.

Another way that many companies are looking to overcome this challenge is through partnering. By tapping into the skills resources of partners, companies can achieve mutual benefit.

Partnering has always been a strategic priority for companies, but this has accelerated dramatically in the age of transformation. In fact, our research shows that 68% of corporates say that partnering is the only way to succeed in today’s market. Of course, partnering is about much more than plugging the skills gap, and companies are teaming up in order to speed up their time to market, to leveraging the strengths of others, and to differentiate in front of customers.

5. Security and privacy are soaring in importance

There has never been a time when IT security of technology has not been important to businesses but, in the transformative age, it has become even more so.

The amount of data is growing rapidly, and so is the sophistication of threat actors, creating a perfect storm for security issues. Meanwhile, regulation is tightening, raising the stakes for companies even further. Unfortunately, there is no simple resolution to most digital security issues. The fast pace of progress means new threats evolve as quickly as do new technologies. This means companies are never at the end of their security journeys.

It is, therefore, no surprise that security is among companies’ top priorities – our research shows that 38% of corporates say improving security and securing the enterprise is a top improvement priority, on par with driving innovation (39%) and improving customer experience (40%). This focus on security is essential for companies if they want to continue to protect their enterprise.

But it’s not just about investing in the security technology itself, it’s about building a security-conscious culture on the basis of appropriate internal processes.

One way in which companies are doing this is by developing robust internal governance procedures to deal specifically with emerging technologies. While only 8% of corporates said their governance functions for emerging technologies are “well established and active”, a third (33%) said selected emerging technologies are “reviewed under a governance model.”

As we approach the next decade, we fully expect companies to bolster their governance functions for emerging and future technologies.

What can we expect in the decade ahead?

The last decade has seen tremendous technological innovation, which has fundamentally redefined businesses and changed the way we live and work.

The fast pace of change means that, in the next 10 years, this will only accelerate. Companies that take heed of the major trends today will lay the foundations of the digital enterprises of the future. 

We will explore these themes in more detail as we explore our upcoming research study, due for publication in early 2020, uncover what the six core habits of digital transformation leaders are, and how they drive improved financial performance.

  • Show article references # Hide article references

    1 Companies which have been trading for less than five years, and have revenues between $50m and $1bn

    Coca-Cola Company press release: “Fountain Favorite: Sprint Cherry is First National Brand Inspired by Coca-Cola Freestyle. Coca-Cola Company, 13th February 2017.

    McDonald’s press release: “McDonald’s to Acquire Dynamic Yield, Will Use Decision Technology to Increase Personalization and Improve Customer Experience. McDonald’s, March 25 2019.

Summary

The arrival of 2020 is a major landmark for digital transformation. In this article, we examine the core digital trends which will underpin the next decade of innovation.

About this article

By

Jim Little

EY Global Microsoft Alliance Lead and EY Americas Technology Strategy Lead

Technology enthusiast. Former CIO. Passionate about helping companies re-imagine their business, value propositions, customer and employee experiences using technology.