Published on the 30/04/2019 | Written by Heather Wright

Closing the gap between DX investment and KPIs…

Begin with the foundations of infrastructure and talent, and then go deep and wide. That’s the path to digital transformation success – and digital maturity – according to a report from Deloitte, which says digital mature companies are seeing significantly higher net profit margins and revenues than industry average.

The Deloitte survey shows DX investments are rising sharply, with an average increase of 25 percent planned for this year – though the company admits estimates of DX spend are ‘imprecise’ because there are no standards to distinguish between DX investments and ‘ordinary’ IT spend.

But the accounting and services giant says despite the aggressive investment, most organisations have yet to bridge the gap between investment and impact.

The report puts the focus on digital maturity, measured in business benefit.

“Early on in a company’s digital journey, it pays to go deep rather than broad.”

“Our survey and experience with clients reveal that digital transformation requires more than investments in technology: It is not just a tech upgrade,” says Ragu Gurumurthy, Deloitte chief innovation officer and chief digital officer.

“Transformation entails reimagining entire business processes and enabling change across the business system. This is best done by investing in foundational capabilities and working to transform specific functions holistically.

In an effort to understand the difference between those successfully achieving business benefits from their DX projects and those pouring money in for little return, Deloitte surveyed 1,200 senior executives knowledgeable about their companies’ efforts.

It identified seven tech related capabilities – which it calls digital pivots – required to propel organisations to digital maturity.

While it says all seven – flexible secure infrastructure, digital mastery, digitally savvy, open talent network; ecosystem engagement; intelligent workflows; unified customer experience; and business model adaptability – are important, the first three are ‘foundational’.

“They make it possible to execute the other pivots more effectively. They also lend themselves to broad application across all business functions,” Deloitte says.

It found that higher maturity companies, which were seeing the greater benefits from their efforts, deployed an average of 40 initiatives targeting the pivot capabilities.

“On average, higher maturity organisations’ digital transformation efforts are twice as broad as those at lower maturity organisations,” Deloitte says.

That’s a lot of work for IT – and the wider business, and Deloitte advises smart prioritisation in the early stages.

So what’s the process to more from digital infancy to maturity?

Begin with the foundations
Invest early in flexible secure infrastructure including adopting cloud infrastructure, embracing agile/DevOps methodologies, developing and using platforms (in Deloitte’s terms a reusable collection of digital assets and capabilities that can work together and make it easier to build a product or deliver a service) rather than ad-hoc applications, and implementing a cybersecurity platform.

Cultivate data mastery using data and analytics to discover insights. “Data mastery is about more than building data lakes or empowering senior leaders to make better decisions,” Deloitte says. “It is also about structured and unstructured data flowing through organisational processes to enable decisions at the edge of an enterprise. Much of the value of data mastery is derived from making micro insights widely available to people and processes at the edges of an enterprise.”

Eighty percent of higher-maturity companies in the Deloitte survey said they were getting significant positive impact from their use of data – well in excess of the 24 percent of lower maturity companies reporting the same.

Bring talent along for the journey. Retool training programmes to focus on digital competencies, staff teams through more flexible, contingent talent models.

Deloitte says once the foundation is in place, focus on a function and go deep, applying the full complement of pivots to a single business function. While transforming back office functions first is less risky, focusing on customer-facing functions may produce quicker market impact.

“This approach helps organisations build confidence in their ability to execute the pivots. And it allows leaders of other functional areas to observe the benefits of transformation achieved by those who have gone first. This can build organisational momentum to support the scale and scope of change that digital transformation requires.”

Deloitte cites the example of finance. A more digitally mature finance function may automate transaction processes (intelligent workflows); streamline data collection and preparation and use advanced analytics to continuously identify opportunities to improve performance (data mastery); use chatbots, cognitive agents, and self-service tools to improve business users’ access to financial data (unified customer experience); and shift headcount from operational to technology-based skill sets (digital savvy). It may also change its approach to funding, from an annual process based on pure financial business case to one that is more agile.

Concentrating early efforts on one or two function and executing more pivots per function, brought greater returns for those surveyed.

“Early on in a company’s digital journey, it pays to go deep rather than broad.”