Never has capital investment been more top of mind for technology, media and entertainment and telecommunications (TMT) companies, according to the EY Global Capital Operations and Innovation Study (COInS), based on the responses of 500 global TMT executives. Based on the analysis of the maturity level of the respondents in relation to each stage of the capital life cycle, the study divides into two categories: “leaders”, those inclined to the coherent use of advanced tools, techniques and processes at the level of the entire company, and “laggards”, those with a low level of adoption.
87% of respondents identified as “leaders” believe recovery from the COVID-19 pandemic rests on maintaining levels of capital investment. This is a matter for concern given that 82% of all survey respondents are unclear who is accountable for delivering results relating to capital investment projects, throwing into question governance practices.
Peter Latos, Consulting, Strategy and Transactions Leader, EY Romania: “As technology increasingly at the beating heart of many industries it is not unsurprising that the majority of TMT executives see capital investment as critical to the post pandemic recovery. Although worryingly, an almost equal number are unclear who is accountable for delivering results from such investment. With decisions on when, where and how to deploy capital further complicated by the relentless pace of technological disruption, innovation and reinvention, as well as regulatory change, it is imperative businesses have a well-defined approach built around three pillars: advanced data and analytics, talent and governance.”
The survey also finds that TMT companies are struggling to meet capital investment objectives. Sixty-three percent of all respondents fail to achieve forecast returns, while 66% agree that costs of their capital programs escalate as timeframes lapse. When it comes to measuring success, 70% of “laggard” respondents (58% of “leaders”) struggle to demonstrate the value their capital investments bring to the business – in large part due to data maturity limitations.
Agility is a top priority
Eighty-three percent of all respondents say the COVID-19 pandemic has highlighted the imperative to establish more agile mechanisms for allocating capital. Yet, a third (33%) believe they are still unable to flex to changing market conditions – including major events like the COVID-19 pandemic.
Telecoms companies have the biggest opportunity to improve agility, with 42% of telcos admitting that their approach to capital investment planning is too static and rigid (compared to 38% for media and entertainment companies and just 25% of tech companies). However, at the same time, telcos are the least likely to regularly review and adjust investments (16% compared to 26% of tech and 31% of media and entertainment companies). Furthermore, 38% of telcos struggle to find sufficient data to add credibility to the decision-making process – notably higher than media and entertainment (30%) and tech (28%) respondents.
Talent agenda must keep pace with tech transformation
The survey impresses the importance of cultivating the right skill sets to optimize capital investment, beyond tools and processes alone. Eighty-nine percent of “leaders” (67% of “laggards”) believe they will derive a competitive advantage by maintaining a highly skilled workforce that can manage capital projects.
But as the landscape shifts at pace, a skills gap is emerging as companies rollout new technologies without providing sufficient training to utilize them. According to the survey the top barrier to the adoption of artificial intelligence (AI) analytics is the lack of AI skill sets, while two-thirds (66%) of all respondents say it is difficult to find the necessary skill sets within their organization today.
Spotlight on the ESG agenda
As TMT companies look to bolster governance and transparency processes, the survey outlines the importance of including environmental, social and governance (ESG) KPIs to facilitate holistic investments that deliver a more balanced set of objectives. The findings indicate that this should now be a key area of focus for TMT executives, with 62% of all respondents stating that not enough capital investment projects are assessed based on their contribution to environmental or sustainability goals.