Legacy systems, skills gap thwart innovation

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 06 Dec 2023
The pursuit of innovation presents a distinct set of challenges for enterprises.
The pursuit of innovation presents a distinct set of challenges for enterprises.

Emerging technologies, such as artificial intelligence (AI), and the introduction of disruptors across industries continue to present multiple challenges for South African enterprises pursuing innovation.

The obstacles include dealing with legacy systems, the IT skills gap and siloed systems.

This is according to the BCX Digital Innovation Index Report 2023, a research collaboration between IT services company BCX and consulting firm EY-Parthenon, which provides an analysis of thedynamic landscape of digital transformation at local businesses.

The index evaluated 42 organisations in SA across five business elements, providing an understanding of their digital and innovation initiatives. It is based on interviews with C-suite or senior employees with a deep understanding of their company's innovation strategies.

According to the study, many large, established enterprises continue to grapple with obstacles in pursuing innovation. The enterprises’ expansive scale and historical baggage often hinder their agility, preventing them from emulating the nimbleness of start-ups, or the scalability of tech giants, notes the index.

“For large, well-established organisations, the pursuit of innovation presents a distinct set of challenges compared to start-ups. Technology and tools have levelled the competitive playing field, making it easier for challenger firms to threaten incumbents, while simultaneously making it harder for incumbent firms to effectively differentiate themselves and maintain a unique presence in an increasingly competitive market,” notes the report.

While being nimble and agile allows start-up companies to quickly identify and act on opportunities, large incumbents operate from a sturdy, yet slower foundation when navigating these dynamic times, it adds.

“The substantial asset and customer bases of enterprises, coupled with established practices, often lead to a more cautious approach to risk and a measured exploration of growth through innovation,” reveals the index.

Quality innovation skills sought

In the report, South African organisations are classified into four categories based on their innovation approach and stage of development: excellent, maturing, emergent and nascent.

The study identifies external drivers enabling innovation as changing consumer behaviours, emerging technologies and shareholder demands.

The predominant constraining factors organisations encounter from the external milieu include regulatory limitations, the unavailability of high-quality talent to lead innovation, and geopolitical and socio-economic constraints.

“Digital innovation, as highlighted in the report, occurs at the convergence of business, data and technology,” says Heather Orton, head of strategy and innovation Africa at EY-Parthenon.

“The emergence of transformative technologies − such as machine learning, augmented reality and cloud computing − is reshaping the market, creating both challenges and opportunities for businesses.”

The scarcity of high-quality skills and talent across various industries is a significant inhibitor of innovation, especially digital skills, states the index. Organisations capable of tapping into the resource pool of a global network are somewhat shielded from this, as they can bring in skills when required.

“This is is a significant impediment across sectors, a systemic challenge for the country and, if left unresolved, will impact growth.

“The energy and natural resource sector anticipates a need for varied workers, possessing diverse skills and unique work priorities, to evolve into a more digital, data-centric and streamlined industry.

“Embedding innovative strategies into workforce planning and establishing a blueprint that guarantees the requisite talent aligns with future business needs is paramount for a sustainable future in the workplace.”