TIM SMITH: OK. Good morning, good
afternoon, everyone. Tim Smith here. Absolute pleasure to
be on LinkedIn Live and have the chance to
actually talk to all of us about digital transformation. Effectively, what it means to us
on the back of a ton of research that we've done,
and really, just to have a conversation
as to what it means to us and how to demystify it all. Before we jump in, though,
maybe a little bit more on background as to the
panelists that are here with us. So I mentioned that I'
m
with Deloitte Consulting. I've been with the firm
for a fair amount of time. I've been servicing our clients
across a host of sectors. You name it. Always a passionate
technologist. Always looking at the
promise of what technology can do for the enterprise,
whether it's growth, whether it's
efficiency, you name it. And I still live that today. I also head up for
the states, what we call our tech strategy
and business transformation practice. All part of our broader
set of capabilities within s
trategy and analytics
for Deloitte Consulting. So that's me. Let me go around the panel. So you know who else
will be speaking today. So Garima? GARIMA DHASMANA:
Well, thanks, Tim. Good morning, good
afternoon, and good evening, wherever you're joining us from. My name is Garima Dhasmana. I'm a principal in our strategy
and analytics practice. And I have the pleasure of
working with our banking and capital market clients,
helping them shape and execute their modernization
and innovation agendas.
Look forward to this discussion. And thank you for everyone
who has joined us. Greg, over to you. GREGORY DOST: Thank you, Garima. Greg Dost. I'm a principal also in our
strategy and analytics practice within Deloitte Consulting. And I work with technology
leaders of global organizations across sectors on development of
enterprise technology strategy, as well as the management and
execution of the transformations of tech organizations
and the tech estate that go along with that. Diana? DIANA KE
ARNS-MANOLATOS:
Thanks, Greg. Hi, everyone. I am Diana Kearns-Manolatos. I'm a research leader
in Deloitte's Center for Integrated Research. And within our team, I lead
our technology transformation research. Under that umbrella has
been a two-year research journey on the topic
of technology value. And I'm really excited to be
here today to discuss that. TIM SMITH: OK. So this is the panel. Happy to field
questions as they come. Let's jump in and really
kick this thing off. So as Diana mentioned
, she
used the phrase journey. For some of us, it's a quest. It's a quest to
really understand what digital transformation
means to you. Ultimately, how it expresses
itself within the enterprise. And, again, how to navigate it. Look, we all know digital
transformation is here to stay. It really isn't any
distance between enterprise transformation and
digital transformation. We view it as one and the same. And we view it as a
continuous effort. And I would assume most
of us agree with that. Even
in the face of economic
headwinds-- and we actually pulsed a host of CFOs not too
long ago, a fourth quarter survey, we asked them, hey,
even in the face of everything you're trying to decide, knowing
the macroeconomic environment out there, what do you think
about digital transformation and its role for you? And 75% or so said
that it's going to play an even
increasing role for them in spiking their corporate
strategy and their ambitions therein. So we all have to tackle it. We all have to make
it our own. We all have to contextualize it. So we're making the
right decisions. I'd love to promise
on this panel today that we're
going to tell you the answer for digital
transformation for you. Now, we know this is
what it should feel like. These are the tech
bets you need to make. And if you just do
these things correctly, throw a few dollars here,
and you'll see wild returns. Spoiler alert, we
don't know that. No one knows that, because
it is so multivariate. Success or failure with
digit
al transformation goes well beyond the
technology you adopt. There's so much
to do with how you mobilize the enterprise
and all, again, all of these other factors. And we'll talk about this. The research that we've
been tackling for some time charts a path
forward effectively. Ways that you can eliminate
some of the noise. Ways that you can focus on truly
that, which you can control. And what's coming in our
research now is, ultimately, the value that comes and
how to make it real for you, wheth
er it's an industry
or sector or regional bent. So without further
ado, let's really jump in and get to
the essence of it all. As we mentioned, this is a
panel discussion along with Q&A that we can help work through. But before we get to everything
regarding value and sizing and what that means
for your balance sheet, again, it's worth
demystifying or defining it. So Greg, starting with you
on digital transformation, how do we define it? GREGORY DOST: Yeah. So there's a growing
adage in the indu
stry that if you ask 10 people the
meaning of the term digital, you're going to get
20 different answers. And the same could
arguably be said about the term transformation. So you put those two
together and what you get is a phrase that's used to
mean many different things to many different
people to the point that the phrase can feel
overused and meaningless. So rather than add
to the confusion, add to the esoteric
definitions, what we tried to do was to answer this in
a very pragmatic way. So
we asked CEOs of two dozen
different organizations, what is the phrase digital
transformation mean to you? From that, a pattern
emerged pretty quickly, which is that while digital
transformations take many forms, our CEO respondents all describe
digital transformation commonly as an ability to adopt
and to apply technology with the dual aim of
continuously evolving and reinventing their
enterprises, ultimately, with the end goal of growing
and competing in the market. In our research,
we heard n
ot only this common definition for what
digital transformation means, but also a common
set of challenges that the CEO cohort
was facing in running digital transformations. Among those leaders
across the enterprise, often, struggled to
speak thematically about shared digital needs. This also meant that they had a
misaligned view of the required investments and the
risks that go along with digital transformation. Leaders would struggle to plan
beyond a single technology versus looking holisticall
y
at the tech estate that was required to
enable transformation. And also, there was a tendency
for digital and technology investments to not be
integrated and to be amplified in a way
that maximizes value at the enterprise level. Now, in principle, it's helpful
to uncover a common thought pattern around how CEOs
view digital transformation. But really, this pattern
is more impactful, when we look at the research
that preceded the study that we're really going
to focus on today. Very quickly, in
that research, we look back at 10 years
worth of 10-K filings for just north of 4,500
different publicly traded companies. And we used NLP analysis
within those 10-Ks days to identify patterns for
how organizations talk about their strategic priorities,
their digital ambitions, the specific technologies
that are investing in their capacity for change. And what we found was
that organizations that delivered a
cohesive narrative to the market about their
digital transformation ambitions and inves
tments over
time saw upwards of 15 percentage point
differential in market cap relative to their
peers, who did not. And so that question of how do
we define digital transformation is not an academic one. But rather it's a question
that's of real consequence to organizations. I'll add very briefly to in
a nod to the KPI framework that we're going to
be discussing shortly, when we embarked on our
last round of research, the impact of digital
ambitions on market cap was not a common KPI that
many
organizations were using. And so you'll hear
that a big part of the focus in
our research here is to think about
new types of metrics organizations can be using to
tell a more holistic and a more compelling story
around the bold bets that their companies are making
in the digital transformation space. TIM SMITH: OK. Well, you know what the next
question is going to be, because we always hit this
right after the definition. But I think it's
important for all Greg and you mentioned it
saying, it t
akes many forms. So what are the forms? What is a spectrum? How do you point
which to take on? GREGORY DOST: Yeah. So what we saw in our research
is that, like, you mentioned, there's a spectrum. And it breaks into
five different groups. I'll refer to these as
level zero to level four digital transformation. So let me start with
level zero and level one. Zero and one, we refer to in
our research as digitization. Level zero, I'd call
incremental digitization. Simply put a company is
maintaining t
he same business model they have today. They're delivering on
the same capabilities. They're operating in the
same markets as before. And what they're
doing is they're deploying new
technologies to drive incremental operational
improvements, perhaps, with incremental
cost improvements. So think of a customer
service organization that's deploying a new
case management system to serve customers better. Level one, we would call
advanced digitization. Once again, companies operating
with the same bu
siness model, delivering the
same capabilities, operating in the same
market as before. However, the
digitization in this case is less incremental
and more radical. So think that case management
system for my previous example, now, includes automation
of customer service, activities, perhaps, integration
with supply chain distribution systems to automate orders
and product delivery. So you're going across
the full value stream. So both of these
types of digitization deliver meaningful value to t
he
company and to its customers. But we're still within the same
space in terms of business model capabilities, market. And the sponsorship for
these types of efforts likely sits within one
or a few business units. Likely not spending the
entirety of the enterprise. That's zero and one. If I move to levels
two, three, and four, those are the ones
that we're going to refer to as digitally-enabled
business transformation. I could go on for a while. So I'll be very
succinct in this. In level two, y
ou're using
digital to enter new markets. So think of how-- let's think of things like how
digital banking and fintech have removed traditional barriers
for financial services firms to enter new markets. In level three, you're using
digital to create new products. Think of how IoT
and edge computing have unlocked fundamentally new
ways for technology companies and for industrial
product firms to engage with their customers who buy
their products and services. And then in level four,
you're using
digital to radically transform
your business. This is a new business model. Capabilities, products
disrupting the industry. It's a new ecosystem. And it's a radical shift. And one that typically a CEO
may be staking their legacy on. So as a disclaimer,
this model isn't meant to put any one
organization in a box. So it's not that your level zero
or one, or two or three or four. In fact, organizations can be
showing up at multiple points on the spectrum
at the same time. I'll use AI investments
a
s an example. One of our colleagues offers
a construct they love, which is AI in process
and AI in product that helps illuminate this. AI in process, a company may be
making artificial intelligence investments that drive level
zero incremental digitization by removing administrative tasks
like note taking from customer service interactions. The company may also be making
AI investments for level one advanced digitization
by employing generative AI to increase
self-service adoption for more strai
ghtforward
customer service needs. Both of these are
examples of digitization. Both examples of AI
embedded in the process. At the same time,
the organization may be embedding AI in
what it sells to customers. Suppose that a company
historically has sold products that consumers use in
their day-to-day lives, and suppose those products can
be connected to the internet, gather data on how
consumers use products, and then offer AI-enabled
recommendation. Same area of investment
fundamentally. But v
ery different
outcomes that are tied to very different
levels of ambition. TIM SMITH: And so
for all of us here, big piece of the research
that just came out was to use a phrase
contextualization. Really, understanding
how you slice and dice digital transformation
based off who you are, vis a vis region, vis a
vis sector, you name it. So Greg piling on
to that, there's nuances that we've seen in
terms of what type of where, I guess, various slices fall
on the spectrum like the types. What do you
think about, whether
they dominate in certain sectors or regions versus others? Are we seeing
differences in bets? GREGORY DOST: Yeah. And there's so much to
be said on this topic. I'll touch on this briefly. And I think Garima
and Diana, you have great examples that
go deeper on some of this. But where this gets
really interesting is when we use this
construct of level zero to level four
transformation, we went out and surveyed 1,600 leaders
across different industries. And it was pretty balan
ced. So we included about
300 organizations each from companies in our five
main private sector industry groups as well as 150
government and public services organizations. And we asked them, how do you
define digital transformation for your organization? What is your level of
ambition along that spectrum? And across the board, the
ambitions were pretty bold. So for each industry
group between 69% and 77% of respondents indicated
that they use the level four definition. So that is an
overwhelmin
g majority say the digital transformation
is about radically transforming their enterprises. And there was a
little bit of spread there from the 69% to 77%, but
vast majority for each of them. The remainder of
the respondents, interestingly, they were
split evenly more or less between level zero or
level one and level three. Not a lot of love in terms of
companies indexing on level two, digital to enter new markets. But what was perhaps
even more eye opening than the boldness
of their ambitions
is how their spend
reflects their priorities. So we asked the same
1,600 respondents. And we looked at the
industry groups for us. Where is your annual spend going
across the different levels of digital
transformation ambition? And we found quickly that
the budgets don't match the ambitions across sectors. So remember, 69% to 77% said,
we are using the level four definition across
the board about half of those organizations-- I'm sorry-- across the board,
all of those industry groups were on ave
rage putting
about half of their spend toward level four
transformation. Now interestingly,
government public services came in higher in terms
of percentage of spend going to level four. That was at 57%. Life sciences and health care
was right behind that, about 55% of their spend going
to those ambitions. And the lowest
fascinatingly enough was in technology media
and telecom at 44%. You asked about industry. You also asked about
the geographic view. And so if we pivot
to that for a second, we
looked at cuts of data across
countries, US, Canada, Germany, France, and Australia. And we saw, again, same
average dynamic at 52%. But intriguingly, US
and UK respondents were putting lower amounts. They're putting about 44% of
their digital transformation spend into level four. I'll add quickly to that
the industry groups all showed some level of meaningful
digital transformation spend across all levels
zero through four. So that aligns with that
notion that many companies can and do find the
mselves
at multiple points on the digital
transformation spectrum. I've never heard it at
that depth to be frank. So what still strikes me
is just to play it back, the vast majority of
folks were saying, hey, when we take on digital
transformation, it's radical. It's almost like we're
green fielding out a new business, because
it's so different than what we're doing today. New offerings, new operating
model, you name it. So our respondents were saying
that's what they're doing. Yet, the spend do
esn't match it. What's the theory of
the case as to why? Still a semantics issue,
a definition issue, or we have a lot of
companies out there that can radically transform
with not much investment. So there's a bit of
supposition in this. And I'll defer on
this question a bit to Diana, who's our data
scientist behind a lot of the detailed research here. I think for a lot
of organizations, it's a journey that they're on. It's a transformational
story, and ambitions that are evolving from
one year
to the next. And so I think what we've
got right now is a let's call it a point in time view,
where a lot of organizations have learned to be very bold
in what their ambitions are. And the spend behavior,
perhaps, is evolving at a different pace than that. I think there's also a
question across the board, and then in an industry
level, where that spend goes and what the cost structures are
to enter into some of those more transformative spaces. And I think Garima,
correct me if I'm wrong, I thin
k you're going to
get a little bit into where we saw some of those spend
patterns within industries by different technology
groups and so on. GARIMA DHASMANA: Yeah. That's accurate. And I think one
other point to add to that is really just what
we hit upon earlier, which is around the
definition of digital, and then you bring in
digital transformation, and what that means to business
leaders, organizations. A lot of different
thoughts you and I have heard across the
various different conferences
that we've presented
this topic at. So I think it's a combination
of all those factors in terms of like the mismatch
we see on what is perceived as an investment
in digital transformation and what value people
are seeing out of it. DIANA KEARNS-MANOLATOS: Yeah. Absolutely. And just to layer in on
that of why the money is not going there, I think that also
gets us to our issue of value that we're here to discuss. There are very high
ambitions, high expectations. But what we found
from our study
is three out of four leaders don't
know how to measure the value. And so there are real
consequences to the investments because of that. You end up either underinvesting
or not moving forward with the bold investments you
need to back up those ambitions. So I think that will get us
into this topic of discussion about why measurement is
so important to make sure that you're making those
connections to the ambitions, the enterprise value
and expectations, and that you have a
common and consistent
way to frame and measure
that topic of value so that you can right
size your investments. TIM SMITH: Fascinating. OK. Before I take us down a
rabbit hole and everything value and metrics,
I do want to make sure we round out the
so-what as it pertains to digital transformations. And Greg, you alluded to it. Garima, I know you spent
a long time on this, which is the tech aspect of this. Now, again-- just
get on my soapbox. When we look at
digital transformation, and the technology
you select has t
o ladder back to
your ambitions, and, ultimately, what the
enterprise can take on from a change perspective. But we did think
it was important. And we did this
research to really shine a light as to what
types of technologies are receiving the most
amount of investments and how that might differ
across various segments. So Garima, can you shine a
light on everything tech? GARIMA DHASMANA: Yeah. Absolutely. So what we've seen for the past
couple of decades with the work that a lot of us have driv
en
across various industries is really the momentum around
big data increasingly grow, and then evolve to other
data-related tech capabilities. And this is evident
through our research as well, where we found data
and analytics really dominating the tech investments
across the 21 tech capabilities we analyzed. Very closely followed
by investments, and no points for guessing,
artificial intelligence and machine learning, as
well as cloud platforms, and just cloud native
development given the adop
tion we've seen around cloud
in the last decade. Now, as we look closely
at the industry, specifically, there are very
few, very logical trends that have emerged. Given the focus on
research and development and data being at such
a core essence of it, life sciences and
health is really leading the way with investments
in data and analytics. That is what they invest in
from their technology dollar spend perspective. Consumer sector,
on the other hand, is a very interesting
case, because they focu
s based on the research
we've done on really investing in APIs and middleware,
which is emphasizing the importance of seamless
efficient integrations that is so integral to
their technology ecosystem, given the number of partners
they have to coordinate across with suppliers,
distributors, customers, et cetera. And then when you look
at financial services, really, going all in outpacing
technology investments in several of our 21
tech capabilities. We analyzed, including mobile,
cloud, broadband
, wireless. What is interesting in
looking at industries holistically is as compared
to other industries, telecom, media, and
technology lags behind in their technology investments,
in data, AIML mobile, 5G, IoT. And we believe that
is because, generally, the early adopters
of technology, and they're right
now in a phase where they're sustaining those
technology investments rather than really amplifying
or ramping up on it. TIM SMITH: OK. Thank you. And let's flip it on its head. So we've talked
about the types. And we've talked about some of
the nuances that we see for tech and whether our data is backing
up a lot of the trends we see. And, maybe, at the
end of this, we should talk about Gen AI and
other things we're figuring out. The other thing to acknowledge
is that digital transformation is no mean feat. It's quite difficult to actually
navigate in the enterprise. And we could spend all
day talking about some of the tips and tricks. But we did as part of
the survey, Garima, actual
ly, asked about
a lot of the barriers folks faced in getting it done. And what rose to
the surface when we looked at it from that angle? GARIMA DHASMANA: Yeah. Both from our research
study, as well as something that we've seen
increasingly with our clients, thinking extensively
about just their reliance on legacy platforms and/or
ways to modernize those legacy platforms. You'll see from our research,
our consumer leaders are way more concerned about
this particular aspect. Almost 10 percentage p
oints
above the overall industry average. A very close of second
challenge to embarking on any digital
transformation journey is really around
security and trust in your technology ecosystem. And the level of confidence
you have in it as you think about a multi-year
digital transformation journey. And this is of significance to
our financial services leaders, given the highly
regulated nature of the business model that
the banks need to comply with. We've also seen with our
government and public
sector leaders. They've discussed
extensively in our research the lack of transformation
strategy and executive buy-in, which is very
likely driven by the scale and scope of what they need
to get their hands around, and just the nature of
operations in this sector. We've also covered
several other barriers. A lot of which we see at
organizations we support, including things like
funding prioritization. There's workforce-related
challenges. There's also challenges
with insufficient data, really,
informing your holistic
comprehensive digital strategy. But what is interesting
in all of this is that as compared
to other industries, life sciences and health
care in comparison is the least impacted
by these challenges. Given the focus on longer term
strategy and continued planning for shifts in evolution
in their business model and their
products and services, which really is, if
you think about it, one of the bigger learnings
coming out of the last four or five years, COVID being
one of th
ose external triggers that very materially changed
their business model, product, services, et cetera. TIM SMITH: Perfect. And we're following along too. So we an audience question
about GPS and nonprofits and how much of their survey. So about 80 GPS nonprofits
were surveyed as part of that. So they do show up. We were intentional on
that as well because we the nature of the
digital transformation for them is quite distinct. So that does show
up in the research. Garima, just pull
one more threa
d, because you mentioned about
challenges with the data. And I know Diana is going
to walk us through more from the value lens. But the metrics
themselves and the KPIs, I know that's going to be
top of mind for a lot of us as we tackle this. Any special barriers to
those KPIs that came out? GARIMA DHASMANA: Yeah. And Diana is going to get into
a whole lot of details here. But you're right. I think there's of another
lens to this whole barrier and challenge
conversation, which is why our companie
s
failing to uncover the value from digital
transformation, when it actually exists. So that's what the focus of
our next evolution of research, where we serve the
1,600 business leaders globally across
various industries that Greg also alluded to. That was the focus
of that research. Interestingly enough,
in our research, a vast majority of the
respondents, almost 73%, believe that it is the
inability to define exact impacts or exact metrics. That is the biggest barrier
to uncovering digital va
lue. And then when you think
about this getting amplified by inability to be
able to collect data, as well as organizational
silos that very often exist, that just exacerbates
the whole problem here. None of this is
surprising for us, given that we work
with organizations who struggle with quantifying
value, creating the value narratives, being able to tie
it up to the enterprise value levers, like, revenue growth,
reduced risk, et cetera. So all this made sense from
what we found in our researc
h. What is interesting
and what we also found being discussed
extensively in our research, with almost 80% of
the respondents, was the fear of double counting. And more prevalently
for popular KPIs like, customer engagement,
impact on revenue, that get very high visibility
from senior C-level execs. So here is the bottom line, and
my last thoughts on the topic around barriers and challenges. Despite all these barriers,
which we understand in some way or form exist in most
organizations, what we
have found as separating
our value leaders from others is really their ability to
push past these challenges and treat them as solvable. TIM SMITH: OK. I'd like to pivot now
and really do a-- well, we only have so much
time-- a deeper cut as to what we started
to find in terms of prescribing and ascribing
value to everything. But let's just recap as to
the conversation so far. So we feel comfortable
that there's a definition out
there for you that can make sense as to exactly
what digital transf
ormation is. We feel comfortable that there's
a way, a spectrum that you could look at and understand,
well, this is what I am doing. This is what the
communicating I'm doing. Does that really align with
the reality of everything that's in play? Am I really changing products? Am I really entering
new markets? Or I'm just doing radical
productivity enhancements. And that matters,
because, again, you're going to mobilize differently. You're going to
invest differently. And we've talked about some
of the nuances that are there. Now, I know we have a
broad audience today. So rest assured, the
material that's out there allows you to pick and choose
based off sector and region. But knowing all of that, and
then some other tips and tricks are along the way, it is
important to now play back. And say, look, this is how
other folks are thinking about the value that comes. And who better, but you,
Diana, to kick that off for us based off how much of the
number crunching you've done. So maybe step
ping back,
you want to tell us how value is formed here. DIANA KEARNS-MANOLATOS:
Absolutely. So from our research on mapping
digital transformation value, we know that 70% of
organizations to a large or a very large extent agree
that digital transformation is the single most important
thing that they can be doing to drive enterprise value. So those are some pretty
high expectations. But at the same
time, our data shows that while it's
important to them, as we were discussing
before, many of orga
nizations just aren't really investing to
the levels that they should be. They're struggling to define
their value measures, as Garima mentioned, and
they really aren't able to make those
connections to how those investments, specifically,
are driving that enterprise value that they
think it should be. And to just give you a
number that I think really brings that point home, on
average from our survey, we saw that global
organizations expect that their digital
investments are driving 29% of thei
r enterprise value. For the largest
organizations out there, those that are over 100
billion in revenue, almost half of their enterprise value, they
expect to be coming from their-- they expect has been coming
from their digital investments. There was a question
in the chat earlier about nonprofits, which as
Tim mentioned is about 5% or 80 firms in our sample. So with respect to
nonprofits, as well as privately held companies, which
are going to be different, we actually saw that those
expectati
ons, as well as the enthusiasm for digital
transformation is even higher. More than 20% agreed
to a very large extent that digital transformation is
the single most important thing that they could be doing. So even higher 20% percentage
points of organizations are expecting it to
be a tremendous driver of their enterprise value. And digital value expectations
are relatively consistent. No matter what
industry you're in. Life sciences and health care
consumer, GPS industries, they tended to fall
in that
range of expecting 21% to 30% of their enterprise value to be
coming from their investments. So there's a big
disconnect there, when we say on the one hand
that 70% of organizations think that it's the single
most important thing they can be doing to drive
enterprise value. But then on average, they're
only able to measure about 30% of their enterprise
value coming from that. So whereas, that can
be a large percentage, it's also not in line
with those expectations. And so those investmen
t levels
are one important driver to be looking at. The other, of course, is
what industry you're in. So we do see some differences
for TMT respondents. TMT respondents are
technology, media, and telecommunications
companies are able to do a better job
of tracking the value. And they say that almost half,
52%, a little more than half of their value is coming
from their investments in digital transformations. Financial services
respondents as well are considering a larger share
of their enterpris
e value from coming from
digital investments. And so that's the good news. We do see other industries,
like, energy, resources, industrials respondents that
generally are attributing a lower percent of
their enterprise value than average to their
digital investments. So for the industry and
sector perspectives, we see that they're
not necessarily keeping pace in certain
industries with the value that they could
be getting there. And what does it come down to? We spoke about it earlier is
thinkin
g more holistically about the value you
could be getting. So when designing the study on
mapping digital transformation value, our goal was to really
understand how organizations are measuring digital value today. And so in the survey, we
identified a really diverse set of KPIs representative of
all different types of value categories, where
organizations might be looking to optimize value
having to do with productivity or workforce
measures, where they might be looking to
preserve and protect v
alue having to do with
their cyber investments that they might be
making to manage risk, and, also, where
they might be looking to create new value
in that level two, three, or four transformation,
which Greg spoke about. And so the goal
here of the study was really to give us a holistic
view of how global organizations are benchmarking that
digital value today, given many are
struggling to figure out what the right measures are. And so I think what's really
exciting about this study is based on
the data from the 1,600
global business and technology leaders, we really
do have a view of what the KPIs
are that they're using to understand digital
value, where there might be gaps and where there might
be opportunities to make a better connection
to their enterprise ambitions. And one of the things that
I'll highlight from the study is that, really, a striking vast
majority, 81% of respondents, regardless of industry,
said that productivity was the top measure
that they're using. And so whe
n on the one
hand, your ambition is dramatic transformation
to enter new markets and radicalize your
business operating model, and your primary value
measure is productivity of optimizing your existing
way of doing things, there's a major
disconnect there. And so that's one area
that we looked at. And we saw that, in particular,
for large organizations. That was really the only place
where productivity wasn't their number one
focus and there were other indicators that had
a high focus for firms
of 100 billion plus. But other than that,
industry, region, productivity was the number one. We did see in our industry
analysis some differences. So, for example, financial
services organization had a very high focus on
budget versus actual cost and ROI and operating margin. Consumer organizations
were much more focused on customer engagement. And in terms of some of
the top workforce metrics, we saw things like employee
productivity also very high. Some of the low measures,
just to call out, w
ere things like number
of agile or pod teams. So given how central and
important agile operating models are, only a very few,
31% of organizations, were actually looking at
agile pod and engineering culture as an important
driver of change. So of the 46 possible KPIs that
we asked about, surprisingly, only about half of them are
being utilized by organizations today. And so there are a lot
of gaps, a lot of levers to be pulling and thinking
about to move toward that more holistic value mindset.
TIM SMITH: Look, I think it's
important to underscore too that the most
striking thing that we had an aggregate agnostic
to an industry or sector was the fact that if
everybody was believing that these digital
transformations are super bold, then there's no way
that the top KPI should still be return on invested capital
and productivity enhancements. For sure, those are
important measures. But the fact that it didn't
permeate to the talent experience, the
developer experience are going to be all
digital all
the time, enterprise agility-- the list goes on
and on-- purpose was quite surprising for us. I think it's a hypothesis. I'm speculating from it. But I think it's back
to what, I believe, was Garima talking
about it earlier, which is the reality has not
yet caught up with the ambition. And so why do we continue to
index on this for this call is more of there's
competitive advantage here. There's space for you to
play to think thoughtfully about, ultimately, what these
digital transf
ormations can do for you, because
you can actually hone your investments in a
different perspective, meaning, if all of your competitors
in a sector or a region are going in one direction,
assuming that it's going to be legacy type metrics,
and you're using it to turn on other
aspects, you're going to get a lot more
leverage for your dollars. There's a few questions
that are being queued up. And we'll get
through all of them. I want to make sure we
stay a bit thematic on it. There was a question
regarding-- and Diana, you can hit it, was
auto as part of their survey. The answer is yes. That laddered up in the
broader sector findings. Separate from this call,
you can look at the research that we do talk about
each given sector, and the metrics, and the KPIs
and where they're investing. But, Diana, any
reflections from what we've seen regarding
manufacturing organizations and how they incorporate
digital transformation? DIANA KEARNS-MANOLATOS: Yeah. So on that, in particular, I
would poi
nt out two things. Some of the metrics that we
have in the KPI framework from a process and financial
standpoint, supply chain optimization is a big one for
manufacturing, as well as auto. And then ROI-- that
was also a big one for consumer
respondents, which would include auto and manufacturing. TIM SMITH: OK. I think it's also
important to say-- Greg talked about it earlier. It's not like we have a
slide up or anything, though. It's always hard for me
to talk without slides. But we mentioned t
he spectrum
of digital transformation, which we have more of these
foundational, what we call, digitization type moves. And then you cross a chasm. And then you're into new
products, new markets, radical reinvention, digital
transformation, semantics, to be frank, at the end of the
day, but different motions. And, again, one isn't better
than the other, et cetera. And a lot of times, to be bold
in your digital transformation, you're going to have to
get the foundation right. A great example is G
en AI
and the promise and potential as to what that can do. You could argue
everything with Gen AI is a level x to the right
type of digital transformation as to what can happen. But on the flip side,
I could look at it and say, you know what, most of
the use cases for that are ready right now, that you can do right
now, because the data is clean, are things like productivity,
developer efficiency, you name it. So Gen AI goes against
different buckets for it. But, Diana, when you reflect
on the
metrics and the KPIs that we have out there,
are you seeing anything different for those who are
tackling meat and potatoes digitization versus a more
radical transformation? DIANA KEARNS-MANOLATOS: Yeah. A great question. And I think that
also gets to one of the questions in
the chat about what are the different levers. And so I think what we're
seeing from the data is f at those early
stages, the level zero, one digitization
that the KPIs that those organizations
that said they're investing in
digitization tend to be
using at greater numbers are those productivity measures. So they're focused on-- we
have five categories of value that we talk about in this
framework-- financial value, customer value, process-related
value KPIs, workforce, and purpose. And these early stage
digitization folks tend to focus more
on process KPIs, like productivity, as
well as workforce KPIs, like workforce engagement. So their focus is inward. And some other
important KPIs for them are things like syste
m
integration and user adoption rates as measures that
they're looking at to think about how their
infrastructure can be optimized and how they can really
digitize their processes. What we see from the advanced
digital transformation group is that their KPIs tend
to also be more mature. They're more externally
focused in their KPIs looking at things like the ROI of
their digital initiatives, digital revenue growth,
customer digital engagement, and digital process efficiency. So they're looking a
t more
financial focused measures, the external market,
their customers, and how they're reducing friction in the
processes for their customers. So two really completely
different value mindsets. As they shift from
those basic ambitions, they tend to align more
with basic measures. And as they move to
those advanced ambitions, they tend to be using more
externally facing and advanced types of measures. TIM SMITH: Got it. In the goal to leverage
phrases such as advanced and legacy and
traditional
versus edge, all that good stuff,
there was a question that came up specifically
about the value narrative itself, like, how
you tell that story and how that story might
change based off whether you're more traditional,
which I assume is like, brick and mortar
versus, I guess, alternative organizations. But assembling the value
narrative for a more traditional organization. And Greg, I know you done a
lot of thinking about this. Anything come to mind? GREGORY DOST: Yeah. Maybe quickly, I think
of
a really good value story is sometimes best done
when it's a partnership within the business, and
when you're transcending organizational lines. It's an example we're seeing
a lot of increased interest in the market on AI apps. So AI for IT operations. And that you go back
three, four years ago, a lot of organizations
were thinking of that as an efficiency
play within the IT shop. There's another way
to frame that when you engage with folks
throughout the business, which is AI in IT operation
s
as a revenue enabler. So if I'm deploying automation
AI within my core applications, my infrastructure network,
so on, and so forth, the ability to keep the
performance and the availability of my system is really high. Yes, that does drive some
operational efficiency. But in an organization, let's
say, it's $10 billion of revenue or greater per year, if
I'm adding one more nine in a availability of a
core application, that's revenue generating. That's worth millions and
millions of dollars in
revenue to my organization. What I need to do is I need to
collaborate with the product owners for those applications
I need to collaborate with infrastructure. I need to collaborate
with my customers to understand what the customer
experience is like for them and where they're having
challenges and engaging technologically with my company. But having that partnership and
taking that value stream lens is a great way to pivot
how an organization that may be thinking efficiency
and lower cost stru
cture can pivot to more of a
revenue in a customer orientation in
some of their KPIs. TIM SMITH: Thank you, Greg. So I want to bring it back home. It is difficult these days to
talk digital transformation without trying to shine
a bit more light on some of the dominant tech
that's out there. So Garima talked a
fair amount about this. And you can see
it in the research as to where the
investments are going. But we were survey-based. So that is a lagging
indicator as to where things are at right n
ow. We know Gen AI is top of mind. I also talked about
how Gen AI shows up in digital transformations
across the spectrum. But Deloitte's also spent a
lot of time, really, trying to talk about what
Gen AI means in terms of the state of the art
and all those good aspects. But, Diana, based off
the research we've done and what we've seen in
terms of value associated with Gen AI, what are some of
the green shoots that are coming up, knowing, again,
it's relatively new in the data space? DIANA KEARN
S-MANOLATOS: Yeah. Absolutely. So I think there are three
important points here. So first off, Deloitte, we just
published our generative AI or state of generative AI 2024. And in that study,
we found that there were very high expectations
for generative AI and the value it's going to drive. 79% of the respondents
in that survey of almost 3,000
global leaders said that they expect Gen AI to
transform their organization in the next three years. So that's the first thing. The second thing
is, how
are they looking at what that
transformation means? In practice, they're mostly
focused on practical benefits. Things like improving
efficiency and productivity, reducing costs, and improving
existing products and services. So that's the first thing
about where we are today. The third point is that thinking
more broadly about innovation. So it's not just Gen AI. There's a lot of
innovation to track over the next couple of years. And so how do you keep
pace with that technology-- it change on thi
s
topic of value. And from our survey,
I think we can really see that the answer to that is
thinking about your timeline. So we see in our data that
organizations, predominantly, are measuring value on a
quarterly or an annual cycle. Very few are looking at three-
to five-year value horizons. But for some of these
new technologies, whether it's generative
AI or quantum or others that are coming in, those
that are getting the most value in terms of enterprise
value from the study, we see that the
y have
that longer time horizon mindset of three years plus. So that's a lever
to be pulling today is having a
consistent short-term and medium to long-term
view of how investments are meant to be driving value. TIM SMITH: So let's try
to put a feather on this. And bring it home. So we've talked to
everyone as to really what is a deep cut of the
research that's out there? Why? Because to be frank,
there is no one answer as to what digital
transformation means to you or how to get it right. And s
o we hope we've left behind
all but a start of where you got to investigate and shore up
your digital transformation ambitions. But around the panel,
I'd be curious to hear, any parting shots
from you as to what to get right for
digital transformation, and reflection on
everything you've absorbed, all the
numbers you've looked at, and just what you've
learned in the field. So I'll go around the
Brady Bunch window. So, maybe, Greg,
we'll start with you. GREGORY DOST: I always say
step one is refl
ection. So I would say, invest
the time to step back and think about what that
holistic framework could look like, who are your
partners that you need to work with in order to be
able to build that narrative, and take the time to evolve
and to grow out that narrative. It's not going to be easy. But it's certainly worth it. TIM SMITH: Garima,
what's your take? GARIMA DHASMANA: I
think three main things. One, really recognizing
the importance of being able to uncover
the hidden value. And then rep
ort on it. We all understand
the amount of time, effort it takes to go through
these multi-year journeys on digital transformations
for any organization. And I think we owe
it to ourselves as digital
transformation leaders and to our organizations to be
able to position us in a way where we can discuss tangible
values for these efforts coming out of such significant
investments. Secondly, any
transformation holistically impacts the entire organization. So it's not just
about technology. It's abo
ut a lot
of other aspects of your entire
business and operation. So then why not lead
with a value framework that is also comprehensive? And you have a starting point
with a whole lot of research that we've put out there. And then lastly, I
would say act now. It can start with
something reasonable. It doesn't need to be
holistic and comprehensive at the very start. But then something
that's reasonable, small gets you to the next
step, and, eventually, drives towards that
longer-term vision. So t
hat would be
my parting shots. TIM SMITH: Last but
not least, Diana. DIANA KEARNS-MANOLATOS: I would
say differentiate from peers by identifying
competitive value streams. And I think that's the beauty
of having a consistent framework for thinking about value. It allows you to
benchmark every investment in every technology
in a consistent way, and to look at what your
competitors are doing to see with intentionality
where you maybe need to refocus and recalibrate
your investments based on what y
our competitive strategy is. TIM SMITH: If I take the time
and reflect on all of it, the research is ongoing. It will be for some time. But if we look back as to how it
started, it was defining it all. It was figuring out the
types you could take on. It was asking CEOs to
exactly where they lean in to make it, at least, get
across the finish line, and then really looking
at scale analysis to understand what that
does to market cap. And then scale surveys to
understand exactly how people are doin
g it in the field. So the biggest
reflection I have-- and it actually ties to a
question that we saw a bit earlier in the exchange here-- was if you think about
what has to happen to get it done correctly,
first and foremost, it is strategy 101. It's, ultimately, about
what are your ambitions? Why is the promise of
technology something you need to outpace
the competition to be that much more adaptable,
that much more flexible? So how does it,
ultimately, ladder to your corporate strategy,
your e
nterprise ambitions? Then the next question is,
where is the value to come? If I pull these
levers, if I actually impact these capabilities,
and this certain dimension, what is the upside or the
cost takeouts, et cetera? Then it's the technology. Ultimately, tell
me the technology that's best suited to do it. And then underscoring all of it. Done in parallel with it is
your organization's capacity to actually take it on. Someone had a question
about horizon and timeline and things like that. Sur
e. You can do some
digitizations that might happen in a couple of
years or things like that. It probably doesn't rise to
the surface of what we're talking about here, because
you're really not impacting the enterprise beyond a given
business unit, et cetera, maybe. But what's more important
is that not factoring in, ultimately, whether your
organization will stick with you on this for the long haul. Super important. If you can use this research,
the value drivers, the way to make sense out of it
,
the way to convince folks that there's real
upside here, the way to convince folks
that I'm doing it in such a way that is distinct
from my competition, and the way to convince folks,
whether you're a CFO, the board, whoever,
that the way I'm orienting this digital transformation
increase the odds of success, that is our hope for
using this research, because, again, there is no
one size fits all for it. And if you get any takeaway
besides understanding where to look and how
to make this happen
, just understand you're not alone
in trying to tackle something that's this gnarly. But getting all three
right, and getting the lineage between
your corporate strategy, your technology bets, and
whether the organization will stick with it, that's
the keys to success. And so from Deloitte Consulting
from the Center for Integrated Research, from all
of us, we thank everybody for participation
here in this LinkedIn Live. We'll certainly send
out, and you probably can see all of the links that
are
available for the research. We are just chipping
away for it. And just as a shout
out for the series, also, we do hope you can
attend one that's going to be happening on February 15. As I mentioned, we're part
of our strategy and analytics practice. And we're quite excited
about a new capability we're adding to strategy
and analytics that are going to take thinking as
it pertains to scale analytics to a transcendent level. All that will happen on 02/15. And we hope you can attend. Thank you, ev
erybody,
for your time.
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