The quest for digital skills

THE QUEST FOR
DIGITAL SKILLS
A multi-industry executive survey
A report by The Economist Intelligence Unit
Sponsored by:
TM

1© The Economist Intelligence Unit Limited 2016
THE QUEST FOR DIGITAL SKILLS
2 About this research
3 Executive summary
5 Part One: Time for an enterprise-wide digital skills strategy
12 Part Two: Industry briefings
12 - Health industry explores new partnership models
14 - Financial services industry braces for escalating security
challenges
16 - Retailers face big data and smart products skills deficit
18 - Manufacturers hungry for big data
20 Conclusion: Digital feast, skills famine
CONTENTS

2
© The Economist Intelligence Unit Limited 2016
ABOUT THIS RESEARCH
The quest for digital skills is an Economist Intelligence Unit report on the supply and
demand of digital skills across four industries: financial services, healthcare, retail and
manufacturing. The research is based on an online survey of 422 European and US
executives, from functions including strategy and business development, marketing,
sales and human resources. Survey data is supported by in-depth interviews with senior
commentators and experts. We would like to thank the following individuals who were
interviewed for this report:
Susana Berlevy, digital HR director, Lloyds Banking Group
Elizabeth Cowper, HR and people-development director, Harvey Nichols
Jessica Federer, head of digital development, Bayer
Robert Mahowald, vice-president, IDC
Rich Pearson, senior vice-president, Upwork
Peter Sondergaard, senior vice-president, Gartner
Rachel Weiss, vice-president of digital innovation and entrepreneurship, L’Oréal US
The Economist Intelligence Unit bears sole responsibility for the content of this report.
The findings and views expressed in the report do not necessarily reflect the views of the
sponsor. The report was commissioned by Cognizant.

EXECUTIVE SUMMARY
From app developers to cyber-security experts, digital skills are among the most highly
prized in today’s labour market. Are companies finding the digital skills they need?
Where are the gaps and how are organisations overcoming them? How do senior
decision-makers predict the ways in which skills gaps will change over the next three
years? This report, combining an executive survey with in-depth expert interviews, asked
executives across four industries about the digital skills dynamics shaping their sectors.
Key findings
Most companies are worried about a looming skills gap. The vast majority (94%) of
executives cite a “moderate” or “severe” digital skills gap. Financial services and
manufacturing had the largest enterprise-wide skills deficits, while healthcare and
retail survey participants were concerned with department-specific shortages. The top
reasons for the skills gap were, in order of consensus, insufficient supply of appropriate
talent (49%), internal opposition to creating new digital jobs (49%) and lack of clarity
over who is responsible for digital talent acquisition (45%). Respondents also worry about
digital workers’ lack of interest in their industry (37%).
Cyber-security and web/mobile development are the most important digital
competencies today. “Big data” will top the list by 2018. Four out of ten (41%)
respondents rank cyber-security and web/mobile development as the most important
digital skills in their business today. Less importance is given to digital strategy (35%) and
“smart products” (32%). However, this pecking order looks set to change, with 43% of
executives believing that big data will be the top skillset in three years’ time. The shift
towards big data was especially marked among manufacturing executives, as they try
to excel in so-called Industry 4.0—the age of complex “cyber-physical” systems such as
the Internet of Things and smart products.
Half of companies face internal push-back against the creation of new digital jobs.
Internal opposition to creating new digital jobs is cited as a hiring obstacle by 49% of
respondents. Older workers are more resistant to digital transition than their younger
colleagues, the survey shows: 80% of companies face internal resistance to digital
transition of processes and work among older members of the workforce. The top
reasons for scepticism are confusion about digital technology and the skills it needs
(cited by 53%), budget (49%), cultural factors (49%) and lack of a proven business case
(48%).
“Digital talent does not want to work for us”. Over one-third of companies (37%) believe
that digital workers have no desire to work in their industries. The problem was especially
acute in retail, where 43% subscribed to this view. Companies can take measures to
address this challenge, however: 45% have sought to improve perceptions of their
company as an employer of digital talent, and one-third of executives have raised

4
salaries for digital talent. The finance industry expects salaries to play the biggest role
in recruitment going forward: 43% of financial services companies expect to increase
salaries for digital talent over the next three years, the highest proportion of the industry
groups.
Companies are finding skills gap “workarounds”. Companies are seeking solutions
beyond conventional hiring. Of all respondents, 55% have embarked on digital training of
existing staff, while 47% of companies outsource digital functions. Healthcare companies
are increasingly partnering with technology firms, and companies across the board are
building cross-functional teams to integrate digital across the business. Companies are
also looking externally, such as crowd-sourcing on social media for innovation ideas:
84% said that they would use LinkedIn to crowd-source ideas and 40% would use Twitter.
Mergers, acquisitions and “acqui-hiring” will become more popular as a skills strategy
going forward: 40% of companies plan such measures by 2018, compared with 21%
at present. Lastly, companies are rethinking physical structures: 40% of companies said
that, as a result of the rise of remote working made possible by digital, they have a larger
number of “spokes” rather than “hubs”, while manufacturers and retailers are building
more satellite offices near digital talent hubs.
Industries feel the skills gap differently: Digital skills gaps vary considerably across
industries, depending on how digital is reshaping their commercial landscape. Retailers
are primarily concerned with smart-product development and web and mobile, as
customers expect to research, view and buy goods on an array of platforms. Financial
services firms, by contrast, are mainly worried about having adequate cyber-security
skills to defend themselves against hackers, while manufacturers struggle with a big
data skills gap as they try to produce efficiently in the Industry 4.0 era. Industry responses,
therefore, must be tailored to the unique circumstances in each commercial sector.

PART ONE:
TIME FOR AN ENTERPRISE-WIDE
DIGITAL SKILLS STRATEGY
Getting digital right: why it matters
Digital technology offers innumerable benefits to companies today. It yields granular
data about consumers, enables faster communications, improves inter-departmental
co-ordination, reduces wastage and supports efficiency.
It can drive creativity, too, allowing a freer flow of information among colleagues. It is no
coincidence that digital-first companies—including Amazon, Google, Facebook and
Alibaba—rank among the world’s most fast-evolving and ambitious businesses. But even
older industries like manufacturing are increasingly powered by digital, evidenced in the
rise of 3D printing, and ever-greater levels of production innovation. A 2015 Economist
Intelligence Unit survey1
of over 200 research and development and product design
professionals in Europe, sponsored by Cognizant, found that “smart products” are
poised to reinvent customer relationships, and in so doing reshape entire industries.
But digital technology presents challenges in equal measure, especially for long-
established companies adapting to a new age. New tools require novel ways of
working and fresh skills. Cyber-security, for instance, is one of the most valuable skillsets
in today’s labour market, and companies do not feel sufficiently well capacitated: 86%
of information technology (IT) professionals in a 2015 poll2
cited a shortage of cyber
skills globally. “Big data” and predictive analytics have become integral to 21st-century
business, from consumer trend-spotting to genome sequencing. With over 2.5bn
gigabytes of data created daily3
, companies face the daunting task of understanding,
interpreting and reacting to this flood of information.
The consequences of failing to adapt are serious: digital disruption can reshape entire
industries and those not ready could be consigned to history. ‘Intrinsically’ digital
companies like Uber and AirBnB have transformed the competitive dynamics of their
industries (taxis and hospitality, respectively).
To exploit the opportunities of digital, companies need the best skills. This report
investigates whether skills supply is currently meeting this explosion of demand. Drawing
from an executive survey and in-depth interviews across four industries, it identifies
common digital skills needs, challenges and workaround strategies. Part Two explores
sector-specific nuances, as revealed by our survey.
1
The Economist Intelligence Unit (2015)
Developing smart products. Sponsored
by Cognizant.
2
ISACA, 2015 Global Cybersecurity
Status Report, January 2015
3
Wall, M. “Big data: are you ready for
blast-off?”, March 2014, BBC News.

6
Cause for concern
Our survey reveals that remarkably few executives have the digital skills required to
compete, thrive and win in a digital era. The overwhelming majority (94%) of respondents
said that they did not have the digital skills they need, with 30% describing their skills gap
as “severe”.
If digital skills are so vital, why are most businesses struggling? The most common reason,
cited by 50% of respondents, is inadequate supply. This has several manifestations.
Companies need not only digital skills, but also people who understand their sector.
Digital is not an entirely portable skillset: digital workers need to understand the nuances
of the industry they are going into. Healthcare companies said that they struggled to
find cross-trained individuals who knew about healthcare as well as they understood
digital technology.
A second reason for the digital skills gap is “internal opposition to creating new digital
jobs”. This was considered an obstacle by 48% of respondents. This inertia is the result
of the sprawling nature of digital itself. Rachel Weiss, vice-president of innovation and
entrepreneurship at L’Oréal US, says: “We’re consumer-facing as an advertiser, we own
retail stores, we are a distributor and a manufacturer. Our business is so broad that digital
interacts with every function, every brand, everything that we do.”
This means that, although IT has traditionally been handled by a single specialist
department, it is not yet clear where digitally skilled employees should “sit”—or whose
budget should pay their wages. Different senior figures vie for control, including chief
executives, heads of marketing, IT and data, and heads of technology. Some 45% of
survey respondents said that it is not even clear which department was responsible for
hiring digital staff. Evidently, this confusion is preventing organisations from sourcing the
skills they need.
Source: The Economist Intelligence Unit.
Which of the following best describes the current situation with regards to
skills gaps in your organisation? select one
(% respondents)
Figure 1: Quantifying the skills gap
We have no digital skills gap
We have a moderate digital skills gap
in some departments but others are
sufficiently equipped
We have a serious digital skills gap in
some departments but others are
sufficiently equipped
We have a serious digital skills
gap across the organisation
6%
63%
25%
5%

There is also a cultural challenge, as some workers resist digital transition. Susana
Berlevy, digital human resources director of Lloyds Banking Group, says she understands
resistance to new ways of working: “I can see this as a tremendous change and why
there might be push-back or reluctance to embrace it, because it’s a different way of
thinking.” If the finance industry can hire more young workers, she says, it may influence
cultural norms to foster more support for digital transitions. Ms Berlevy notes that the entry
of “millennials”—those born in or after 1981—into the workforce could be one of the
“key levers to change the culture and accelerate digitisation”.
Another problem facing talent acquisition is that many industries are struggling to
appeal to digital talent—these workers are more attracted by digitally “native” firms,
from Uber to Spotify to LinkedIn, in a booming sector. “Attracting talent to Harvey
Nichols means offering something exciting and unique,” says Elizabeth Cowper, the
department-store chain’s HR and people-development director. “This is tricky in an
ever-evolving, fast-moving digital world, where developments in other businesses seem
tantalising and exciting.” Ms Cowper says that her company wants to do more to
“proactively market itself to a new breed of digitally savvy applicants…We are actively
working to put ourselves on the radar for passive applicants”, she adds. “There are many
skilled employees who may not actively be looking for a new role, but would move for
the right opportunity that would enhance and grow their career.”
The finance industry, which once attracted the cream of the graduate crop, is also
struggling to compete with more appealing technology sectors. “If you think about our
ability to attract digital talent, for an organisation like Lloyds Bank that is 250 years old, it
is not a small challenge,” says Ms Berlevy. In an environment where technology start-ups
are buoyed by rapid growth rates and a fun working environment, those organisations
are most likely to attract a wider choice of candidates, and Ms Berlevy says that Lloyds
have a “challenge” to cut through the noise and communicate their own digital
development opportunities to young candidates.
Digital skills: not created equal
Not all digital skills are valued equally, our survey reveals. The two most important skillsets
today, according to survey participants, are web and mobile development (cited as a
top digital capability by 42% of respondents) and security/privacy (also cited by 42%). In
the next few years, however, respondents see big data skills emerging as the most highly
prized, with 43% identifying big data as becoming the most important skillset by 2018, up
from 37% currently. Worryingly, big data is also the area in which executives forecast the
biggest skills gap: 46% said that this would be the main unmet demand for skills in 2018
(see figure 3).

8
Which of the following do you consider the primary reasons why demand
for digital skills is not met? select up to three
(% respondents)
Figure 2: Unmet demand
Digital talent expects higher
salaries than we can afford
There is insufficient supply of digital
talent in our local markets
There is internal opposition to
creating new digital jobs
The digital talent we need does not
want to work for companies like us
It is not clear which department is
responsible for hiring digital talent
We do not understand our own
requirements for digital talent
Other, please specify
32%
49%
49%
37%
45%
30%
3%
Which are the most important digital competencies in your organisation
today? and what do you expect to be the most important digital
competencies in your organisation in 3 years’ time?
(% respondents)
Figure 3: Top competencies today, and in 3 years
Security/privacy/risk
Today
Web/mobile development
Digital marketing
(SEO, Social Media etc.)
Software development
Analytics/big data
Digital strategy/business modelling
Smart product development
42%
42%
41%
40%
38%
35%
32%
39%
41%
40%
39%
43%
39%
37%
Next 3 years
Working around the skills gap
Although the skills gap is acute, companies are making headway in tackling the
problem, our survey finds. The most popular strategy, adopted by 57% of respondents,
is guaranteeing opportunities for career development for digital workers. Companies

l Build satellite offices near innovation
hubs (Silicon Valley; Austin, Texas;
Cambridge UK)
l Increase use of freelancers to access
skills on project-by-project basis
l Joint ventures and partnerships with
digital firms, to focus on comparative
advantage
l Upskill the workforce
l Launch competitions and innovation
prizes to utilise outside entrepreneurs
DIGITAL TALENT WORKAROUNDS
Which measures have you already taken in order to address your digital
skills shortage? Which do you plan to take for the first time in the next
three years?
(% respondents)
Figure 4: Tackling the skills gap
Provide additional training to existing staff
Today
Outsourced digital functions and processes
Taken measures to improve perception
of your company as an employer of
digital talent
Taken measures to guarantee opportunities
for career development for digital talent
Focus on head-hunting
Formally audited the availability of
digital skills within your organisation
Opened new offices in locations with
a better supply of digital talent
Next 3 years
Raised salaries for talent
Undertake M&A i.e. “acqui-hire”
Scaled back the ambition of
your digital strategy
55%
47%
45%
41%
34%
34%
32%
41%
49%
44%
57%
37%
36%
38%
30%
31%
22%
40%
21%
23%
are also trying to improve perceptions of their brand as a digital employer (an active
measure by 45% of respondents), providing training to existing staff (55%) and raising
salaries for digital workers (30%). In future, however, companies will increasingly look to
mergers and acquisitions (M&A): 40% of executives said that they would look to M&A
and “acqui-hiring” by 2018 to solve the gap in digital talent, up from just 21% that have
already done; the largest forecast increase in remedial measures.

10
One common trend among survey participants was their openness to exploring
unconventional ways of accessing digital skills, beyond trying to hire more digital
employees. The M&A strategy is one workaround: 39% of firms will pursue M&A to bridge
skills gaps in the next three years, compared with just 21% of companies that have done
so to date.
Partnerships and outsourcing can help, allowing companies to focus on their
comparative advantage and bring in specific skills when needed. The healthcare
industry has been particularly active here. A Swiss pharmaceutical firm, Novartis, is
investing in early-stage digital healthcare companies through the subsidiary of a joint
investment company, Qualcomm4
, and has partnered with the Walgreens pharmacy
group to recruit clinical-trial participants from its 100m-strong customer database.
Jessica Federer, head of digital development at Bayer, says her company has
been concentrating investment in their core health skills, not digital technology.
“We have developed our core competency in molecular processes, while
technology companies have, for example, developed machine learning and
artificial intelligence. Creating competencies requires a lot of time and money,
experience and expertise.” Partnerships and joint ventures can help to address
this and Ms Federer advocates engaging technology companies in areas far from
the comfort zones of the company. “Bayer’s management has been very clear
that we don’t have ambitions to be a technology company, we’re a life sciences
company. We’re going to partner with the best digital companies,” she explained.5
Retailers, meanwhile, are turning to freelancers to develop apps and mobile products.
“Businesses are trying to be more agile,” says Rich Pearson, a senior vice-president at
Upwork, a freelance matchmaker website, where mobile and app development are
among the fastest-growing skills needs in retail. “The demand for freelancers in mobile
app development is palpable in places such as London, San Francisco and Paris, where
it could take three months to hire a full-time developer.” Working with freelancers means
that companies can often access skills without taking on the high overheads that such
people would cost if brought in-house.
Consumer brands are experimenting with innovation competitions to attract creative
ideas from entrepreneurs. “What we’re doing a little differently is starting with outside
entrepreneurs,” says Ms Weiss at L’Oréal. “We know that a lot of the skills we need
internally are going to take time to build, and there’s great talent outside that wants
to collaborate with us.” And manufacturers are opening satellite offices closer to the
locations where digital workers can currently be found.
But not all the digital talent is going to be external—companies must not underestimate
the benefits of training existing staff. This can be profoundly effective in improving in-
house capabilities, and helps staff to future-proof their skillsets in a digital era. This
is especially the case in manufacturing, owing to a long-term trend of companies
4
Bain & Company, Getting the dose
right: a digital prescription for the
pharma industry, March 2016
5
Shah, N.D. and J. Pathak, “Why
healthcare may finally be ready for
big data”, Harvard Business Review,
December 2014,

pulling technology skills back in-house, according to Peter Sondergaard, senior vice-
president at Gartner. “We are jumping from a world with relatively long product cycles
into one where development is iterative, meaning you have to have people who
can continuously evolve a product.” Finding skilled people who can cope with both
structured development work and constantly changing parameters is “very difficult”,
he says. Having those skills within the organisation gives manufacturers a critical lead.
In summary, the survey found a large digital skills gap, especially in web/mobile product
development, security and big data. The reasons for this are primarily lack of supply
of appropriate skills and internal opposition to creating new digital jobs. Companies
are also struggling to appeal to digital workers flocking to start-ups or technology
behemoths, from Google to Facebook, Airbnb to Uber. But the survey also revealed
practical workarounds being deployed, such as joint ventures and partnership models,
M&A, the use of freelance talent, innovation competitions and “crowd-sourcing”. Lastly,
companies are realising that digital skills can be acquired by their existing workforce,
and in-house training remains an effective measure to future-proof organisations.
Do you agree/disagree with the following statements?
(% respondents)
Figure 5: Skills acquisition - Top obstacles
Financial services Healthcare, pharmaceuticals and biotechnology
Manufacturing
It is not clear which department is
responsible for hiring digital talent
We do not understand our own
requirements for digital talent
There is internal opposition to
creating new digital jobs
The digital talent we need does not
want to work for companies like us
Digital talent expects higher
salaries than we can afford
There is insufficient supply of
digital talent in our local markets
Retailing
29% 31% 29% 41% 40% 60% 50% 47%
33% 38% 34% 43%47% 44% 49% 56%
33% 49% 40% 60% 34% 27% 37% 22%

12
PART TWO: INDUSTRY BRIEFINGS
Our survey found common trends across industries, but also revealed industry-specific
nuances. Not all sectors are affected by digital skills gaps in the same way, or to the
same extent. The second part of this report delves into these nuances.
Health industry explores new partnerships models
In the 18th century new statistical techniques and technology revolutionised healthcare,
revealing how diseases such as tuberculosis spread and which treatments worked. The
industry is arguably now embarking on a similar leap forward, as the sheer volume of
data available to doctors and researchers is exploding.
The recent outbreaks of Ebola and Middle East Respiratory Syndrome (MERS) underscore
the importance of big data analytics to monitor health threats. Digital gadgets such as
wearable fitness trackers put individuals in greater control of their health and create a
wealth of data that could treat patients. It should be of concern for us all, then, that of
the four industries included in this survey, the digital skills gap is most severe in healthcare;
99% of respondents expressed concern about their digital skills capabilities, describing
the deficit as “moderate” to “serious”.
Big data and analytics skills are the most sought after competency among healthcare
executives today, with 49% of survey respondents placing it as a top need. Looking to
the future, 46% of healthcare executives surveyed worry about a shortage of “digital
strategy” skills in three years’ time, while 40% foresee a security and privacy skills shortage
by 2018.
What are the obstacles? Six out of ten (60%) respondents cite a “lack of appropriate
talent” as the primary reason their digital skills gap is not met. The challenge is in finding
people who not only have digital expertise, but also strong healthcare knowledge.
One popular measure to meet this need is training existing employees in digital skills
(57%). Involving clinicians in internal or industry-led digital courses is another approach.6
However, many acknowledge the need to widen their net: 50% plan to open an office
nearer to where the digital talent exists, and 64% will consider remote working for specific
roles. Some 48% are attempting to improve how they are perceived by digital talent.
Partnerships and joint ventures can also help. As part of its Grants4Apps programme,
for example, Bayer has selected five digital healthcare companies, which will each
receive €50,000 (£36,000) to advance projects and work with the company in its so-
called Co-Laborator unit in Germany to incubate their ideas. Bayer sees such crowd-
sourced, open digital innovation as a way to establish relationships with digital partners
and generate new ideas.7
6
Terry, K. “IT talent shortage hitting
healthcare hardest”, CIO, August 2014,
and 2014 HIMSS Workforce Survey, June
2015
7
PR Newswire, Bayer HealthCare
launches ‘Grants4Apps’ 2015
Accelerator Programme, August 2015
and Schmitz, A. Digital transformation
at Bayer, SAP, May 2015.

Other forward-looking pharmaceutical firms are doing the same, including Teva, the
world’s largest manufacturer of generic drugs. The company is working with a US-based
firm, Microchips Biotech, to develop implantable, digital drug-delivery technology that
releases medicine on a specific schedule. It also has a joint team with IBM to conduct
machine learning-based research into disease treatments, while a US pharmaceutical
company, Merck, is working alongside digital firms in data, voice and clinician
technology, and Johnson & Johnson is partnering to develop software to help cardiac
rehabilitation.8
This partnership approach is clearly a popular strategy for healthcare
companies to gain access to frontier skills while focusing on their core competency.
8
Sources including Teva, IBM and
McKinsey
Couple up: Digital skills joint ventures and partnerships in
healthcare
Bayer Serona
MediKeep
Sendinaden
Oregon Health and Science University Intel
Teva Microchips Biotech
IBM
What form of internal resistance do you face? Healthcare,
pharmaceuticals and biotechnology
(% respondents)
Figure 6: Resisting change
Inability to acquire digital skills/confusion
over digital technologies
Lack of proven business case
Budgetary
Cultural
Legacy costs of change
Resistance from senior stakeholders to
change staff's existing common practices
Buy-in from senior management
59%
56%
49%
47%
47%
45%
39%

14
2: Financial services industry braces for escalating
security challenges
From stocks and shares to hedge funds, from retail banks to institutional investors,
financial services are already highly digitised. Internet banking, like online travel booking,
is a norm for many consumers. Such trends mean that financial services companies
have long been comfortable with digital technologies.
But digitisation is entering a new era. Algorithmic trading, “robot” financial advisers
and big data are the modern tools of the trade. A subindustry of financial technology
(“FinTech”) has emerged, and the rise of “crypto currencies” like bitcoin has opened
up a new technology frontier. But digitisation also brings new threats. Cyber-criminals
have powerful tools to wreak havoc, requiring banks to strengthen their capabilities
continually.
Against this backdrop, the mood of the industry is one of concern: 90% of respondents
to our survey said that they had either a “moderate” or “severe” digital deficit, and
7% stated that the gap was severe “across the organisation”, while the rest identified
department-specific shortages. Security was ranked as one of the most important digital
competencies by 43% of participants.
Web and mobile development was the other competency viewed by a large majority
of respondents as being of “primary importance”, elected by 44% of those surveyed.
Consumer expectations of their banks are on the rise and a bank’s attractiveness is
in part defined by how user-friendly its technologies are. Helpful apps for checking
bank balances and monitoring spending, with graphics to help customers monitor their
finances, are among the products made by the most consumer-friendly banks. Building
them requires expertise in app and mobile development.
Which are the most important digital skills in your organisation
today? Financial services
(% respondents)
Figure 7: Top-ranked skills
Web/mobile development
Security/privacy/risk
Analytics/big data
Software development
Smart product development
Digital marketing
(SEO, Social Media etc.)
Digital strategy/business modelling
44%
43%
40%
37%
32%
31%
31%

Flood of big data
Respondents predict an increase in the importance of big data: 48% believe that this
will be their most important digital skillset in three years’ time, up from 40% at present.
IDC estimates that in 2015 US$1.8bn was spent by banks on work related to big data. Big
data is essential to monitoring financial activities but equally important for understanding
customers, so much so that it now has regulatory implications. The European Banking
Authority, the European Securities and Markets Authority and the European Insurance
and Occupational Pensions Authority have all warned banks that they are investigating
the privacy-related ramifications of collecting and using big data.
Internal opposition and brand perception
The industry is making considerable outlays in “digital transformation” (see Table 1).
Despite such investments, our survey reveals concerns about skills deficits. The biggest
constraint is internal opposition to creating new digital jobs: 47% of respondents believe
this to be one of their primary hiring constraints.
The transition to digital may result in job losses. Roles amenable to automation,
such as data entry and processing, are under threat. To minimise opposition to new
technologies, financial institutions must encourage employees to take on more creative
and interpersonal tasks, which are the most protected from the march of technology,
such as customer-facing interactions, product development, strategy and marketing.12
Internal opposition is only one of the problems facing the industry’s need for digital skills
acquisition—the second is brand perception. Millennials have grown up using digital
technology and are comfortable with such tools. But attracting younger workers is not
as easy as it once was for the finance industry. Before the 2008-09 global financial crisis,
the sector was able to pick the cream of the crop from the graduate pool. Today, the
industry is no longer as appealing. Banking has become a less desirable profession owing
Table 1: Banking’s big data investments
- IDC Financial Insights said that by the end of 2015 US retail banks would have invested US$16.6bn
directly into “digital transformation” initiatives aimed at better customer engagement, improving
technical processes and complying with regulations.
- Lloyds is working on a £1bn digital transformation plan focusing on big data, marketing and digital
products, and is creating a digital training academy.
- RBS is embarking on a £3.5bn digital plan, including establishing a “global scouting network” for
talent and building an outpost in Silicon Valley.
- Deutsche Bank, as part of a new effort led by its first-ever chief digital officer, JP Rangaswami, is
upgrading its big data capabilities.
- The Commonwealth Bank of Australia is using big data to analyse business customer risk and
provide early warnings of cash-flow problems.
- The Spanish banking giant, BBVA, uses big data for risk analysis, to advise on product creation and
branch location, and to spur the development of new apps with external partners.
12
T Olanrewaju, The rise of the digital
bank, July 2014, McKinsey & Company.

16
to the poor conduct of the industry in the lead-up to the subprime mortgage crisis, and
later scandals such as the Libor rate controversy.
Financial services companies still prefer to hire from the top of the university graduate
pool. Ms Berlevy of Lloyds adds that highly technical roles, such as system architecture
and data science, require very specific expertise that has to be rigorously taught. “For
the hardwired digital skills,” she notes, “we are still very focused on traditional degrees
including [systems] engineering.”
But beggars can’t be choosers. Some banks are discussing new approaches to widen
their hiring net. Lloyds still requires a 2.1 degree for digital roles, but is considering other
candidate attributes, such as business values, motivation and working style. “Some
companies are starting to champion removal of a 2.1 degree-level requirement [to
apply], and we are having the debate ourselves,” says Ms Berlevy.
3. Retailers face big data and smart-products skills
deficit
Today’s customers research, view and buy goods on an array of platforms, from brand
websites to social media. As consumer-facing companies, retailers have to excel in
digital technology. But across the retail industry, the two biggest digital skills gaps cited
by survey respondents are big data and smart-product development.
Tapping social media has been a game-changer, but interpreting that data is far from
straightforward, and customers’ expectations for a seamless online experience mean
that web and mobile development skills are an increasingly important skills: 54% of
retailers predict that this will be a top digital competency in three years’ time.
How, if at all, does your organisation intend to strengthen its digital assets
over the next 3 years? Financial services
(% respondents)
Figure 8: Bridging the skills gap
Increasing the use of
contractors/outsourcing
Building cross functional teams
to support digital
Recruiting key staff in specific hotspots
Building a standalone digital division
Acquiring another business
Running hackathons
We do not intend to strengthen
our digital assets
58%
56%
52%
38%
22%
21%
5%
13
Moth, D. “Does Harvey Nichols’ new
site match up to its luxury reputation?”,
April 2014, and Econsultancy, “Harvey
Nicks recruits Google chief”, August
2014.

Harvey Nichols sees digital as relevant to most consumer-facing parts of the business,
but digital capabilities are present “mainly within the technology, marketing and trading
teams,” says Ms Cowper. However, the skills needed by the company now stretch
across its operations. The retailer has digital teams with a wide array of skills, “ranging
from developers, user experience and user interface, and agile scrum masters [a form
of rapid product development] to search engine optimisation, digital marketing, social
media engagement, and using analytics and insights on daily trades and competitive
analysis.”
Such skills have been vital for developing Harvey Nichols’ mobile site, for enabling
information collection from disparate sources to understand customers and for adding
live stock levels of products to websites. Additionally, its user-interface developers have
created facilities such as instant “web-chats” with fashion advisers, and a “click and
try” service, where customers can reserve items and test them in store. Meanwhile, as it
attempts to improve search-engine rankings and social-media engagement, the digital
marketing teams have been adding and tagging large amounts of fashion content
across online channels.13
Attracting the best: the retailer’s struggle
While Harvey Nichols stands out for its joined-up digital skills strategy, the industry as a
whole is not keeping up with demand: 91% of respondents cited a moderate to severe
digital skills gap.
The first challenge is internal. Of all respondents, 60% were “unclear” which department
was responsible for hiring digital talent. In financial services, by contrast, only 33% cited
such uncertainty. The second most commonly cited challenge is opposition to creating
new digital jobs, cited by 56% as a key obstacle.
Yet the hiring problem is not only internal—digital workers do not seem to want to work
in retail, or at least so retailers believe. A sizeable number (43%) of respondents say that
the digital talent they need “does not want to work for companies like us”. This is a
considerably higher percentage than the other industries facing this problem (33% in
financial services, 34% in manufacturing and 38% in healthcare). No surprise, then, that
a recent report by a government agency, the UK Commission for Employment and Skills,
called on the retail sector to improve its image to digital candidates. Furthermore, the US
National Retail Federation has called on the industry’s chief executives to demonstrate
that their sector is just as rewarding as those found in Silicon Valley.14
Out of those surveyed in the retail industry, 61% said that they had taken measures to
improve the perception of their company as an employer of digital talent, a far higher
percentage than the other three industries (50% in healthcare, 44% in manufacturing
and 34% in financial services). If this charm offensive is successful, the benefits could be
considerable.
14
UK Commission for Employment
and Skills, Digital skills high on retail’s
shopping list, according to new UKCES
report, July 2015.

18
4: Manufacturers hungry for big data
Of all industries covered by our survey, manufacturers had the highest number of
respondents describing their digital skills gap as severe “across the entire organisation”
(11% described their company as systemically deficient, compared with 1% and 2% in
healthcare and retail, respectively, and 7% in finance).
Manufacturing’s largest skills gap is big data: 46% of respondents expect this to be a
top digital need in three years’ time, compared with 31% currently. That increase
outstrips any other industry’s predictions about their future big data skills requirements.
This is largely a response to Industry 4.0—the convergence of physical and digital
manufacturing. Big data is not only the preserve of the traditional manufacturing
industries of automotive, machinery, technology and industrial processing. Consumer
companies are also manufacturers. L’Oréal requires big data skills for its production
work, says Ms Weiss: “We’re seeing specialisation [of skills], in different functions, that
maybe didn’t exist in companies like L’Oréal before. When we talk about big data,
we’re really talking about people with deep understanding around statistics, maths and
how software is evolving.” Similarly, food company Danone uses big data to analyse
its manufacturing efficiency, reduce inventory and cut product waste, and Belgian
beverages firm Anheuser-Busch InBev relies on big data to optimise its supplier base.
The location legacy
The largest share (50%) of respondents say that the talent pool is not large enough to
satisfy their needs. Part of the problem is location. Manufacturers mostly operate through
fixed-site production facilities, which bear little relationship to the locations of digital
workers. Moreover, manufacturers, as with other industries, cannot compete with high-
profile social-media and technology firms. Some 34% of manufacturers said that the
digital workers they need are not interested in working for their company.
Manufacturers are working to increase their appeal. L’Oréal has bases in technical hubs
such as New York, and is working with start-ups and business “accelerators”, such as
the city’s Grand Central Tech.15
It invests in companies where it sees the opportunity
to pilot a good idea. As part of its Women in Digital programme, the company has
a competition for female innovators. Winning projects have led to developments in
robotics, social media analytics and mobile beauty apps.16
“What we’re doing a little
differently is starting with outside entrepreneurs,” Ms Weiss says. “We know that a lot
of the skills we need internally are going to take time to build, and there’s great talent
outside that wants to collaborate with us.”
Within three years, 55% of manufacturers plan to recruit talent from key digital “hot-
spots” and 37% say that they will open offices wherever the best digital talent resides.
Some forward-looking companies are even looking to open offices in the true heartlands
of digital talent. In January 2015 a US car manufacturer, Ford, opened an Innovation
15
King, L. “Why L’Oréal has eyes for the
new innovators”, Forbes, March 2015.
16
King, L. Women are the foundation
of beauty tech breakthroughs, Forbes,
November 2014.

Centre in Silicon Valley to help to support its work in autonomous and connected
vehicles.17
Another option is to “upskill” workers. Part of the rationale for working with the existing
workforce is a longer-term trend in which manufacturers are pulling technology skills
back in-house, rather than outsourcing, according to Mr Sondergaard at Gartner.
“We are jumping from a world with relatively long product cycles into one where
development is iterative, meaning you have to have people who can continuously
evolve a product.” Finding skilled people who can cope with both structured
development work and constantly changing parameters, is “very difficult”, he says.
Do you use, or would you consider using, any of the following tools to
crowd-source a solution to a digital problem? LinkedIn
(% respondents)
Figure 12: Crowd-sourced innovation
Healthcare, pharmaceuticals
and biotechnology
Manufacturing Financial
services
Retailing
91% 91% 85% 67%
17
The Wall Street Journal, “Ford wants
to sharpen big data skills at its Silicon
Valley Innovation Centre”, January
22nd 2015.

20
CONCLUSION: DIGITAL FEAST,
SKILLS FAMINE
Digital skills are among the most sought after in today’s labour market. But the supply-
and-demand dynamics vary by industry. This report has identified commonalities and
industry-specific nuances and revealed differing moods among executives.
Across the board, there are serious digital skills deficits, with over 90% of executives
citing a “moderate” or “severe” skills gap, for reasons including lack of supply, internal
opposition to creating new digital jobs and lack of clarity over who should lead digital
talent acquisition. Looking ahead in the period to 2018, these skills gaps are expected
to change: big data and web/mobile development will be the most crucial digital skills
in three years’ time. Although web and mobile development is also a top skills gap at
present, the other main current gap—security—is forecast to close in the future.
Despite these skills gaps, companies across all four industries are experimenting with
workarounds. In healthcare, companies are partnering with technology firms so that
each can focus on their comparative advantages. Retailers are increasing their use
of technical freelancers to develop apps and mobile platforms. Manufacturers are
opening satellite offices nearer to the locations where digital workers can be found,
and all companies are trying to address brand perception and make themselves an
‘employer of choice’ for digital talent. Companies are also increasing their M&A activity
in the coming three years as a way of acquiring skills. Finally, retooling the existing
workforce is not to be underestimated. Digital training initiatives for current staff can
be profoundly effective in raising in-house capabilities, as well as helping staff to future-
proof their own skillsets in a digital era.

While every effort has been taken to
verify the accuracy of this information,
The Economist Intelligence Unit Ltd.
cannot accept any responsibility or
liability for reliance by any person on this
report or any of the information, opinions
or conclusions set out in this report.

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