Many local businesses in Australia are finding it challenging to keep pace with the rapid global shift toward digital transformation, according to new findings from Accenture’s local branch. The consulting firm discovered that 40% of Australian companies rank in the lowest quartile for digital maturity when compared to global competitors from North America, Europe, and Asia.
Matt Coates, the technology lead at Accenture Australia and New Zealand, explained to TechRepublic:
“Local firms need to direct a greater share of their IT budgets toward strategic innovation instead of just focusing on maintaining legacy systems.” He emphasized the importance of finding a balance in managing technical debt, recommending that companies allocate about 15% of their IT budgets for debt remediation.
Digital maturity was assessed based on a organization’s adoption of what Accenture terms a “digital core,” which encompasses the cloud infrastructure, digital platforms, data architecture, and security systems that empower organizations to innovate and expand.
In Accenture’s “Reinventing with a Digital Core” report, it was found that 40% of 50 surveyed Australian organizations fell within the “global bottom” quartile for digital maturity—indicating an overrepresentation of businesses that do not meet this standard. Conversely, Australia’s top-performing companies ranked better globally, with 24% of local organizations in the top 25% globally. An additional 36% were placed in the global middle tiers of digital maturity.
“We’ve recognized that there is a considerable variance in digital capabilities among organizations in Australia,” Coates remarked. While he noted that the top quartile of Australian companies appears to be keeping up with their global peers, there is a significant drop off in capabilities for those in the lower quartiles.
Companies that lag in digital transformation risk missing out on substantial business advantages. According to Accenture’s findings, organizations with a robust digital core experience:
- 20% higher revenue growth rates
- 30% greater profitability on a global scale
Accenture argues that a strong digital core can facilitate innovation and growth. When combined with investments in strategic innovation and a careful approach to managing technical debt, organizations can see revenue growth rates increase by 60% and profits soar by 40%.
Challenges Hindering Progress
Several factors are contributing to Australian companies trailing behind their global counterparts in digital adoption.
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Short-term Mindset: Some leaders mistakenly view digital transformation as a cost rather than a catalyst for growth. “This short-term perspective contributes to inadequate technology spending,” Coates pointed out.
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Balancing Technical Debt with Innovation Costs: Organizations often struggle to manage technical debt while fostering innovation. “Many companies find it difficult to allocate funds effectively between addressing debt and investing in growth,” Coates explained.
- Cultural Resistance to Change: Even with strong advocates for digital adoption in leadership roles, internal resistance can impede progress. Coates expressed frustration that even dedicated digital leaders face challenges in garnering widespread organizational support.
Accenture’s research reveals that many executives in Australia and New Zealand have adopted digital platforms; however, 61% report ineffective use, and 41% struggle with integration issues. Coates attributes some of these digital adoption challenges to human factors rather than technology itself.
“Without effective change management and skill development initiatives included in the tech strategy, organizations will face hurdles in digital adoption,” he emphasized.
Key Technology Challenges
Local businesses particularly struggle with:
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Cloud Adoption: Accenture identifies partial cloud migrations as a barrier to progress, citing that issues often arise due to the complexities of hybrid environments and legacy systems.
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Data Quality and Governance: Australian firms face obstacles in maintaining data quality, which is crucial for effective decision-making and the implementation of new technologies, such as generative AI.
- Cybersecurity: Organizations must enhance their security frameworks and compliance measures to fend off evolving threats and ensure regulatory compliance as risks escalate.
Recommendations for Enhancing Digital Core Maturity
Coates offers three strategies for organizations aspiring to strengthen their digital core:
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Educate Stakeholders on the Importance of a Digital Core: IT leaders should emphasize the value of a strong digital core throughout the organization. Coates notes that technology must be recognized as integral to all business functions.
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Prioritize Budget Allocation for Strategic Innovation: Companies should invest a larger portion of their IT budgets into strategic innovation, rather than just upkeep. Accenture’s research indicates that leading organizations consistently increase innovation spending each year by at least 6%. However, Coates underscores the need for a balanced emphasis on both innovation and managing technical debt.
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Cultivate a Culture of Digital Innovation: Organizations must foster a culture that emphasizes continuous improvement, which includes:
- Investing in digital skill development
- Promoting innovation
- Embracing change
“By tackling these areas,” Coates concluded, “organizations in Australia and New Zealand can bridge the digital divide and enhance their competitiveness on the global stage.”
