With the assistance of Arthur D. Little and the Cutter Consortium, we surveyed business executives about their business-technology plans, readiness and priorities.a The results surprised us—a lot. We learned that nearly 80% of the companies still believe in some form of the central control of technology, and that only 5% of the companies are decentralized, where the lines of business are free to pursue technology initiatives on their own. Just over half of companies do not track emerging technologies or maintain technology watch lists. Innovation? Only 17% of companies have a well-funded, well-defined innovation strategy, and 34% have no innovation strategy at all.
What about artificial intelligence (AI)—the technology driving major changes in business models and processes? We discovered that only 20% of companies define AI initiatives as high priority. Approximately 77% said they had only looked at generative AI (GenAI) briefly or not at all, and only 26% of companies believe they are “ready” for AI. We assumed that there was more interest in AI than meets the eye, but the survey revealed that 27% of board directors have little or no interest is AI, and 73% of boards have little or no interest in technology strategy.
The data revealed that 30% of the respondents are in technology, 37% in senior management and 14% in consulting. The majority of respondents are in the technology consulting (12%), financial services (12%), management consulting (10%), and higher education (8%) industries. Said a little differently, the survey was representative across industries and executives.
Analysis and Interpretation
Like so many of us in the business-technology world, we are accustomed to failure. As we all know, technology projects fail at astonishingly high rates.4,5 The massive Enterprise Resource Planning (ERP) business—$75B by 2030—routinely experiences failure—with the well-known Gartner Group’s failure rate estimate at 75%.2 Customer relationship management (CRM) programs fail at nearly the same rate.3 Perhaps the harshest finding is that “90% fail to deliver any measurable ROI.”1 But despite high rates of failure, companies must leverage emerging technology as the power of these technologies continues to rise. While it was not one of the survey questions, we believed that the frequency of technology project failures would drive more progressive approaches to business-technology optimization. We expected to see survey results that were “modern,” and at least tacitly acknowledged that it’s time to do better.
But the data suggests that many companies still view technology as a business tool rather than an enabler of competitive advantage. Particularly surprising were results observed in technology adoption and awareness, cybersecurity, innovation and board readiness, where we observed technology awareness and commitments were much more tepid than anticipated, especially in the age of AI. Most companies are even struggling to articulate AI plans, as responses do not describe AI as a strategic differentiator or an investment priority. Similarly, companies don’t see innovation as a priority, despite how many companies claim to be innovation leaders.
None of this suggests that companies have learned enough lessons from past experiences. Despite problems with the optimization of technology, survey results suggest that the learning curve is fairly flat. Companies frequently say that “technology” is an important part of their strategy and tactics. Approximately 75% of them also say that technology is “essential to their competitiveness over the next 5–7 years.” But when asked about “readiness” to leverage emerging technologies over the same period, over 75% answered “moderate” or “low.”
Organizational analysis. Respondents also revealed some organizational structure and IT oversight mismatches. More than 65% of respondents indicated that their companies still manage technology functions centrally, and only 14% shared technology management with the lines of business. These results indicate that nearly 80% of the companies relied on traditional “command and control” centralization to manage the IT function.
There is some good news. In almost 70% of the companies, the CIOs and CTOs report directly to the CEO. It appears that the days of IT reporting to CFOs (only 10%) and COOs (12%) are over. This news is mixed, however, since reporting to the CEO reinforces centralized management, which has huge implications for innovation.
Technology adoption. The data also suggest that the majority (51%) of companies—including the ones that regard technology as strategic—do not have defined processes in place for adopting new emerging technology. This is an extraordinary—and dangerous—“wait-and-see” mind-set. The data also suggests only 29% describe themselves as innovators or early technology adopters. This tracks with the lack of defined innovation processes and the inability to be technologically agile.
The data suggest that the vast majority (70%) of companies see technology solutions as requirements-driven not technology-driven (12%). Inexplicably, 14% answered “neither” or “not sure.” While a requirements-first approach to technology investment sounds prudent, it’s important to remember that many technology solutions are “discovered” by prototyping and the encouragement of so-called “science projects” where technologies—especially such as AI—are “product tested” before they are assigned for duty. The insistence on old approaches to modern technology spending is risk multiplying. The data reflect antiquated attitudes and practices that limit companies’ odds to deploy and leverage emerging technologies.
Boards of directors. Survey results suggest that only 27% of the companies regard their boards as proactive. Over 73% of companies report that their boards are only reactive or have little or no interest in technology strategy. That said, there is one area where boards are proactive and reactive: cybersecurity, where more than 90% of boards are engaged in cybersecurity threats and investments. These findings highlight the problematic gaps between executive decision making and board influence.
Cybersecurity. When asked about cybersecurity, the answers range from self-described “innovators” to “unprepared.” Remarkably, 29% of respondents selected either “insufficiently” or “don’t know” when asked about their cybersecurity funding. Is cybersecurity funding an effort to dodge what “might go wrong” or assuring “what must go right”?
Strategy. Why do companies invest in technology? What competitive advantage are they seeking? The responses here were equally surprising, and suggest some digital era challenges. As business moves toward “all-digital” status—that is, 24/7 technology-enabled business processes—only 19% of companies see their business and technology strategies as intertwined. Thirty-five percent believe they are “very different” and 46% see business and technology strategies as somewhat related.
Motivations. Motivations vary too. While “digital transformation” still has conceptual appeal, cost reduction topped the list of motivators. Others cited “fear of competition” and “C-suite pressure.” Revenue generation—while always important—is the first priority.
Innovation. One of the most surprising findings is that over 55% of companies do not actively track emerging technologies or maintain technology watch lists. Only 36% claim that they do, which is surprisingly low in the age of digital transformation. Massive innovation readiness gaps follow. Only 17% of companies have a well-funded, well-defined innovation strategy. Forty-nine percent have a “partial” innovation strategy, and 34% have no innovation strategy at all. This finding defines the essence of risk, since new, digital era business models and processes are almost always technology driven.
The Strange Case of AI
A 2024 McKinsey survey describes GenAI as a major driver of strategic competitiveness, yet the executives we surveyed do not see AI as a strategic differentiator.6 This was especially surprising given all of the publicity and prototyping related to AI, machine learning and GenAI. But despite all this publicity, only 20% of companies defined AI initiatives as high priority, and more than 47% defined them as insufficient or “unknown.” Consistent with this finding, only 25% adequately fund their AI initiatives and 37% believe they do “sometimes.” Thirty-seven percent report their AI initiatives are not adequately funded or they just do not know. How was this even possible circa 2024?
When asked about where their AI initiatives appeared on the technology adoption curve, 32% of companies described themselves as “innovators” and “early adopters,” which contradicts some other findings. Approximately 53% describe themselves as “late majority,” “laggards,” or completely “unprepared” for AI. When asked specifically about GenAI—ChatGPT, Gemini, and so forth—23% said they have explored the potential and risks of generative AI, but 77% said that had only looked at GenAI briefly or not at all. Given all of the interest—and opportunity—in AI, these findings—in 2023–2024—are stunning.
Recommendations
The lack of technology ROI, inadequate technology tracking, poor innovation funding, disengaged boards of directors, a casual view of AI, stubborn requirements-driven technology projects and the separation of business and technology strategies all define the need to modernize the business-technology relationship and the entire technology investment strategy.
In response to the survey data, here are some steps companies might consider:
Companies should revisit their technology reporting structures. While “control” can reduce risk and enable accountability, opportunities for technology-enabled solutions should be widened across lines of business where decentralized technology teams act on their own to develop technology strategies for their own markets.
Enterprises and lines of business should invest in technology tracking, testing and adoption. They should avoid becoming “late adopters” of emerging and disruptive technology, which is the blueprint for competitive unpreparedness.
Requirements-first/technology second is a conservative adoption strategy that defined technology applications development in the 20th century. While the approach still holds for some well-bounded requirements—such as ERP and CRM requirements—most requirements are dynamic and cannot be easily “matched” with technology solutions. Technology exploration should often replace requirements-first technology investments.
Emerging and disruptive technology should be tracked and assessed on a continuing basis. Internal teams should be assigned to this task. Technologies should be assessed for their problem-solving potential, cost, risks and impact—and reviewed at least quarterly.
Innovation methods, tools, techniques, talent and funding should be defined and acquired. There is no such thing as a “partial” innovation strategy.
Board directors should be recruited for their knowledge and experience as well as their strategic demeanor and ambition. Technology-savvy board directors should be recruited and retained. The board should also have a technology committee separate from audit and compliance oversight.
AI, machine learning and GenAI should immediately rise to the top of the emerging/ disruptive technology list. Credible talent should be developed or hired.
Distinctions between business and technology strategy are nearly obsolete, since all companies to some degree are now technology companies. Technology and business are intertwined today more than ever before, with growth needs only reasonably expected.
The overall business-technology relationship should be assessed by a team comprised of chief strategy officers and chief technology officers where it is impossible for an observer to know who is who.
Conclusion
The data we collected yielded some surprising results about how technology is organized, tracked, secured, innovated, adopted, governed and integrated into business strategy. The results revealed that despite all of the excitement about AI, machine learning, and GenAI, adoption even here is slow. Our survey suggests that no matter what the industry, who the leadership is, or the size of the company, the business-technology relationship still has a long way to go.
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