New research from digital transformation and product development services firm Modus Create reaffirms that many companies are underspending on digital transformation, have not established clear plans and goals, and don’t have the processes or resources in place to successfully implement cross-functional digital initiatives.
“In an analog world, IT was a commodity to be outsourced for the cheapest cost available,” said Pat Sheridan, CEO of Modus Create, in a news release. “In the digital economy, it is the core IP with which you differentiate and deliver value.” However, not every organization realizes this.
Key findings from the firm’s 2022 State of Digital Transformation:
Digital initiatives are critical to American organizations
- 69 percent of American organizations consider digital initiatives to be critical, and 62 percent plan to pursue a digital initiative in 2022.
- Executives/managers at large and medium-sized companies (by revenue) are more apt to claim that digital initiatives are critical than small companies (82 percent of large and 74 percent of medium vs. 57 percent of small companies).
- Investments in digital initiatives vary greatly by company size. 38 percent of large companies plan to spend over $1 million on digital initiatives in 2022, compared to 22 percent medium and 2 percent small companies.
Improving cybersecurity and IT modernization are leading digital initiatives
- 32 percent of American organizations plan to strengthen their cybersecurity in the next two years, making it the most popular digital initiative of 2022.
- 41 percent of large enterprises will invest in IT modernization projects such as resolving technical debt and cloud migration in the next two years.
Innovation is becoming more decentralized
- Only 11 percent of companies plan to create an Innovation Hub or Lab in the next two years, making it the least popular digital initiative of 2022.
Many business executives are overconfident about their ability to implement digital initiatives
- Two in three executives/managers (66 percent) are confident their company can successfully complete their digital initiatives, despite the fact that fewer (56 percent) say their organization is currently equipped with the resources, team and budget to succeed in this area, and just 51 percent have a clear plan and goals for digital transformation in the next 1-2 years.
- 39 percent of executives in large enterprises weren’t aware of their digital spending for 2022, compared to 18 percent medium and 11 percent small companies.
- Nearly half of executives/managers (47 percent) indicate their company is spending less than $1M on digital initiatives in 2022.
Agile is popular among large enterprises
- 57 percent of large organizations have adopted an Agile framework for implementing digital initiatives, which is much higher than the average Agile adoption rate in the survey (43 percent).
Trends by Industry
- Media/Entertainment (66 percent), Finance/Accounting (59 percent), Research/Engineering (54 percent), Manufacturing (50 percent), and Healthcare (45 percent) have a high percentage of executives who believe that digital initiatives are either extremely or very critical to their organization’s health. Wholesale/Retail (35 percent), Real Estate (25 percent), and Construction (23 percent) rank at the bottom.
- The finance industry has the highest percentage of companies planning to spend over $1 million in 2022 on digital initiatives (31 percent), followed by Research/Engineering (26 percent).
- Increased cybersecurity awareness is fueled both by a spate of high-profile cyberattacks in 2021 and new legislation for data protection by governments around the world. The report states that cybersecurity initiatives will be a gateway to wider digital transformation projects and a more mature software development ecosystem.
“The last five years of digital transformation focused on enabling new channels. Now, these channels have created massive data pipes and intelligence,” said Sheridan. “That’s where AI, ML, and next-gen software will come in to make sense of data and enable teams to deliver value back into the hands of users.”
This survey includes responses from 1,006 business executives and managers at private, for-profit companies in the United States.