Nearshore Americas

Ray Wang: Why Digital Transformation is Reshaping the Boardroom

The idea that the world is undergoing a great change at the hands of Covid-19 may sound glib. The idea of ‘great change’ has been trotted out numerous times across numerous publications over the past 12 months, yet it remains true. Automation is firing on all cylinders while companies prepare themselves for a new competitive digital battlefront.

Nowhere in the business world is this great change being felt more than at the top of the corporate tree, in the highest echelons of a company: the boardroom.

In the boardroom, the traditional roles are key C-level executives are being reshaped by digitalization initiatives to compete against digital giants that have “better data, broader networks and money to lose”, says long-term enterprise tech and business strategist Ray Wang.

Ray’s research and expertise focuses on disruptive business and technology trends. Through his Silicon Valley firm Constellation Research, he provides actionable insights to business leaders, IT visionaries and stakeholders across the digital economy and has previously held executive positions across institutions including Forrester Research, Deloitte, EY and Oracle.

Ray was the very first keynote speaker at Nearshore Americas’ annual conference Nexus, held in New York City in 2010. He holds vast knowledge on the IT services landscape in the Nearshore region and freqeuntly appears in outlets including Bloomberg, Fox Business News and Wall Street Journal.

Here, Ray offers his views on how the digital transformation is reshaping boardroom structures and why the acceleration towards digitalization is pushing Nearshore demand.

NSAM: How has the role of Chief Digital Officer changed as a consequence of the pandemic and the digital transformation so many companies are undertaking?

Ray Wang believes that all C-level positions will

Ray: The Chief Digital Officer is undoubtedly growing in importance but this importance depends on the industry they’re working in. 

A CDO in an area where a CIO already exists and the CDO and CIO are not reporting to each other produces friction. The CIO is left with maintaining infrastructure, driving down costs and ensuring security while the CDO is out driving innovation.

This creates an interesting conflict because the CDO has a lot of leeway to go out and deliver new digital products and to begin new initiatives while the CIO is stuck doing “the boring stuff”.

For companies that never had a CTO or CIO, and therefore the CDO is driving both the legacy technical debt and innovation sides, there is a more unified approach. But it’s also industry specific. The public sector, education, media, entertainment are all sectors where a CDO tends to exist but they also typically had CIOs as well so the conflict exists there.

Another interesting development as a response to digital transformation is the fact that to fund innovation new models are emerging. A lot of automation is coming into play. The Nearshore is playing a role here within the strengthening of resilient supply chains and that’s why companies are looking to develop in places like Mexico City or Sao Paulo. There is a lot of work already happening there. Similarly, in Bermuda a lot of blockchain work is taking place driven by Premier David Burt.

We’re also seeing new development centers pop up. Miami is now a tech hub, Austin is growing. These are all pulling new types of resources towards them.

NSAM: Given the reorganization of multiple C-level positions around their relation to digital channels, how will the relationship between these C-level roles and third-party service providers evolve?

Ray: The main thing is that we’ll have more digital officers across the board. Having only one CDO in a company is likely to be a short-term situation. Long-term considerations will include more financial offers with a digital bent, they’ll be thinking about payments and how to to improve digital monetization. Meanwhile, supply chain officers will look to emerging considerations like blockchain, smart contracts and incenvitivization planning. The long-term outlook means that everyone will be a digital officer or have the digital channels and monetization models in the back of their minds.

NSAM: How will the relationship between the buy-side and the vendor change as the vendor’s role becomes even more important in the fully-digital future of business?

Ray: There is a lot more transparency going on in the digital future. The sell side now has realized that most buyers understand their products better than they do before they even walk through the door. They’ve been able to demo it, try before they buy, they’ve spoken to other clients at forums. The level of transparency is huge.

This means that selling services must now come from a position of trust and legitimacy. If sellers don’t have that, they’re already losing. 

A service provider could be 20% more expensive but buyers do not care if they’re in a hurry: if they miss the wave, they miss the wave

Because of this, the buyer side is now buying on relationships. Pricing alone isn’t enough. Delivery and outcomes outweigh the cost completely. A service provider could be 20% more expensive but buyers do not care if they’re in a hurry: if they miss the wave, they miss the wave.  Time is of the essence at the moment and companies are willing to pay because of that.

The other change we’re seeing is that companies are paying for quality. They’re even sole sourcing for quality because they no longer have the time to engage in long procurement bids. Buyers want co-innovation and co-creation from their sellers. They want partnerships that will get their product out the door.

NSAM: How will the metrics by which buy-side digital officers use to rate and retain vendor services evolve as a result of the digital transformation?

Ray: The metrics of efficiency that are designed for consistency should still be there. It shouldn’t be gotten rid off, and this includes the efficacy, the return on investment and other areas do not go away.

But with innovation, it’s a different game. Metrics cannot be, at the moment, applied to innovation. Metrics on innovation are an art rather than science, though I don’t doubt they’ll be a science at some point. 

Companies are sole sourcing for quality because they no longer have the time to engage in long procurement bids

There are operations that require strict operational metrics. There is incremental innovation that also fits under that umbrella. But when a company is doing transformational innovation, those metrics are completely changed. Instead, the metrics are; if the project was put out on time; beyond time, did that project go out at a reasonable cost; and more importantly, if the company was able to generate massive amounts of revenue from it. That equation is very different.

If you’re working with a commodity with a well-known process, the question should not be whether you put more people on it but why it hasn’t been automated yet. If a process is known and is mapped, it can be automated. Those exponential savings that are made through automation can be reinvested into further innovation. This is what CDOs are thinking to themselves. 

NSAM: What are the major challenges for digital transformation at present?

Ray: We’re out of talent. There simply is not enough talent to meet the demand. There is not enough development talent, testing talent, there aren’t enough project managers. We have the same talent shortage we have before 2020, before the pandemic. That hasn’t gone away nor has it been addressed, and the demand is continuing to rise. All companies are realising that they really need people for these vital positions.

But there is another massive challenge that companies have to face: that digital transformation alone is not enough to remain competitive. New digital business models are built to be digital giants and can leverage the data techniques they are born with. They have better data, broader networks and are well funded, able to lose money.

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This is the challenge every company must face. We are in the midst of a massive change. A company that does not invest into tech while its competitors are doing will simply not last.

NSAM: What are the major forces reshaping the Nearshore service offering considering these changes?

Ray: We’re going to see an increasing demand for Nearshore because of the talent and the talent advantages that it offers. Whether we like it or not, regions are becoming trade zones. There is a North America trade zone, a European trade zone, APAC, the Middle East and India, and others. 

There is another massive challenge that companies have to face: that digital transformation alone is not enough to remain competitive

When building software, the cultural advantages these regions have come into play. In India and the Philippines, companies have worked with North America for a very long time. In Dubai, there are great resources from India and Pakistan. Here, Latin America’s Nearshore services plays that role.

The collaboration and remote work that has evolved over the last 12 to 18 months has made people feel more comfortable in outsourcing. It’s less taboo. 

Added to this is the speed by which the digital transformation process is moving. You’ll notice that the people procuring resources within the outsourced space are moving around quickly, so the best talent are often leaving companies to start new teams. They know who exactly they want to procure and the brands they want to work with. There will be more boutique shops popping up in the space being built by people who have left large organizations and have the intention to deliver. 

 

Much of the thought process behind Ray’s comments comes from his upcoming book Everybody Wants to Rule the World.

Peter Appleby

Peter is the Managing Editor of Nearshore Americas. Hailing from Liverpool, UK, he is now based in Mexico City. He has several years’ experience covering the business and energy markets in Mexico and the greater Latin American region. If you’d like to share any tips or story ideas, please reach out to him here.

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