For TMT companies, accelerating innovation is a real and growing challenge

The risks of not innovating

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If an economic recession happens, how do you anticipate your technology innovation strategy/investments will change? (TMT Industry Respondents vs. All Respondents)

Innovation is the lifeblood of technology, media and telecommunications (TMT) companies and the catalyst behind products and services that are driving dramatic, far-reaching and lasting changes for consumers. According to the Global Technology Survey, which includes a sample of TMT executives from mostly large publicly traded companies, TMT companies are spreading innovation activity around three areas:

• Optimization of current systems, products, processes and more
• Building resilience against disruption
• Growth (e.g., new markets, revenue)

Below is a summary of other key findings from the survey:

• A tool for growth. TMT companies are prioritizing innovation for growth more than the other industries represented in the survey. The results show that one-third of TMT organizations are focusing activity in this area, compared with 29% overall.
• Optimization is even more important for TMT companies. IT executives in this industry group report that about 40% of their company’s current innovation activity is devoted to such efforts. This suggests TMT companies are looking to make the most of existing technology investments and improve efficiencies at a time when many are streamlining operations to save costs, reduce redundancy and overstaffing, and meet changing expectations from customers.
• Innovation goals and strategy. The survey shows that 82% of TMT businesses are forging ahead to meet clearly defined innovation goals — although only 58% of IT executives in the industry describe their organization’s innovation strategy as “clear.” That finding may reflect the current economic climate, which requires agility so that companies can continue innovating to stay competitive while being prepared to pivot if conditions suddenly change.

Top challenges to innovation

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Which of the following best describes your organization’s top three challenges when it comes to innovation?

IT executives in the TMT industry group see many obstacles to innovation for their organizations — and the survey shows security risks are the greatest worry.

Like all businesses, TMT companies must continuously evolve security defenses so that they can protect their operations, people, data and intellectual property from existing and emerging cyber threats. For those firms responsible for developing and maintaining critical technology infrastructure, the security stakes are even higher.

Why it matters: TMT businesses are primary targets for attackers. In addition to increasing their overall cyber resilience, they must ensure that the products and services they provide to customers have security built in and can be updated to the extent possible as new vulnerabilities and threats surface. They must also be vigilant about cyber risks within their supply chain — and insider risks, as well.

Innovation itself creates security risk for TMT companies. According to the survey, all IT executives in the TMT industry group expressed concern about security risks, like data breaches, stemming from the implementation of innovative new technologies. Half of these leaders reported that they are “very concerned” about this issue.

Overregulation is a constant concern

Complex and costly regulatory and compliance requirements represent the second-greatest challenge impeding innovation for TMT organizations. The survey results show understanding and meeting the demands of stringent data security and privacy mandates are no doubt top-of-mind concerns for IT executives.

What’s next: There is also the question of regulatory requirements that will apply to emerging technology, like artificial intelligence (AI), which TMT firms are at the forefront of developing and deploying. Legislation related to regulating AI, the Artificial Intelligence Act, has already been introduced in the EU. IT leaders are worried about the potential risks of forging ahead with new technology initiatives in AI and other areas that could be derailed or require significant rework as new regulations come into effect.

Regulatory efforts focused on online content moderation are another source of concern. In the EU, for instance, new rules have been enacted to address longstanding concerns about online trading of illegal goods and services, the sharing of harmful content, the use of manipulative algorithmic systems to spread misinformation, and the control of essential ecosystems in the digital economy by a few large platforms.

Also positioned among the top three risks is the lack of governance and infrastructure. For many IT executives, concerns about this risk are closely tied to security and compliance worries — and amplified by other dynamics, such as the growing need for the business to stay on top of environmental, social and governance (ESG) material issues, which include data privacy and security.

The cloud factor

Architectural constraints, including technical debt, sit high on the leaderboard of innovation challenges for the TMT industry group. IT executives are showing concern that their organization may lack a modern, scalable architecture platform to support rapid innovation and experimentation.

Most IT leaders in the TMT sector see technical debt as a hindrance to their company’s ability to innovate, with nearly a quarter (24%) reporting that its impact is “significant.” Resolving technical debt will require dedication of resources, including skilled IT personnel who are in scarce supply.

By the numbers: The number one solution to reducing or alleviating technical debt for TMT businesses, according to 74% of industry IT executives, is moving to the cloud. The cloud is critical to supporting TMT companies’ operations and innovation initiatives: 79% of IT leaders in this industry group said their business uses cloud solutions. That is slightly higher than all other industry groups in our survey combined (75%).

Why it matters: TMT companies are gravitating toward the cloud because it is vital for supporting AI innovations, which will rely heavily on the cloud to access, manage and process large datasets quickly. Additionally, these companies are using, or at least experimenting more with, technologies like edge computing, augmented reality and virtual reality (AR/VR), and robotics than companies in other industry groups. The fact that many firms in the TMT group are on the leading edge of innovating with these technologies is likely a top reason for this finding, and less a reflection of other industries lagging in these areas.

Skills gap critical to innovation

TMT companies are struggling to attract and retain top talent. According to Protiviti’s Executive Perspectives on Top Risks survey, industry leaders expect this issue to be among the top-5 risks for their company over the next decade.

TMT companies are having the most difficulty aligning in-demand skill sets to support their innovation initiatives in these top three areas:

• Solution architecture (39%)
• Design thinking (37%)
• Enterprise agility (31%).

These and other skills-related gaps, including technical knowledge and strategic thinking, are critical issues that create a challenge for TMT firms trying to bring their innovative solutions to life. 

Our thought bubble: A proactive stance toward risks and controls can lead to innovation success

Companies in the TMT industry sector, like other businesses included in the IT executive survey, anticipate that their innovation strategy and investments will change if an economic recession officially takes hold. However, a good percentage of TMT firms (38%) still expect to advance innovation efforts in a downturn, compared to 32% of other companies.

It is important to note that TMT businesses, especially smaller technology firms that help to fuel innovation, may have to deal with funding challenges in the near term, given recent disruption in the banking sector and ongoing volatility in the financial markets. This may lead to more TMT firms cutting back their budgets for innovation and shelving projects out of necessity.

Regardless of uncertainty, any TMT business that intends to innovate, and operate, for the long term will benefit from taking a structured and strategic approach to innovation, and aligning the supporting tools, platforms and people that their structure and strategy need to be successful.

Additionally, TMT businesses should consider undertaking a formal risk assessment to ensure they are targeting security and privacy in their innovation processes. Control structures should be adapted accordingly to support any innovation project, but especially those involving new or emerging technologies — from AI to quantum computing — where the risks are not fully understood.