Category

Digital Transformation

Digital Transformation ROI: How to Measure the Impact of Your Investments | Blog

By | Blog, Digital Transformation

Organizations around the world have invested millions of dollars on digital transformation initiatives. Yet, many IT leaders struggle to measure how well their companies’ digital investments are performing, and others see just a portion of the ROI picture because they only look at one or two parameters.

Here are Everest Group’s two key recommendations for how IT executives should measure digital transformation ROI.

Think and act like a mutual fund manager or venture capitalist

Mutual fund managers and venture capitalists view their investments through a portfolio lens. They look at the portfolio’s overall performance to understand how it is doing, recognize that underperformance of one stock or seed-stage company doesn’t signal overall failure, and make as needed adjustments to individual stocks or investments that are underperforming.

They also make sure their portfolios are comprised of investments with different risk profiles. This is because higher risk projects create the opportunity for higher returns, and deliver a lot of learning take-aways if they fail. Note that when it comes to measuring digital transformation ROI, IT executives need to look at overperformance as well as underperformance. If every project in the portfolio is deemed a success, the organization is likely not pushing the boundaries enough, isn’t innovating enough, and will likely only reap incremental benefits.

Define a clear set of business metrics before you measure

IT executives should define a clear set of business metrics for the digital transformation effort well in advance of the measurement initiative. The metrics should be rooted in a hypothesis about the various impacts the portfolio of projects will likely have on the business. While it can be difficult to link individual projects to outcomes, . Examples of hypotheses include:

  • Meeting customer expectation – as customer experience a more digital world, their expectations of how to engage with the enterprise will change. An hypothesis that keeping up with the evolving customer expectations could be that it will increase customer retention and potentially new sales
  • Breaking down the silos between IT and the business – secondments between IT and business units can increase and understanding of the links between IT initiatives and business objectives. An hypothesis could be that a greater understanding could enable faster innovation

Many IT executives err by focusing only on cost savings metrics. While the business case for technology projects must include cost savings, organizations that make strategic and operational impact their objective consistently achieve higher returns across all dimensions, including cost. In a recent Everest Group study on next-generation infrastructure, the 88% of the leading enterprises were able to achieve some level of reduction in operating costs from their infrastructure transformation efforts with 65% achieving reductions in excess of 10%. Only 29% of the rest of the study participants were able to achieve savings at that level.

Thus, IT executives should employ metrics that fall into three buckets. This ensures they are looking at the total value of the digital transformation initiative.

  • Strategic impact: revenue growth, increasing lifetime value of the customer, reducing customer acquisition costs, accelerating time to market of new products, etc.
  • Operational impact: productivity improvements, greater scale, operational efficiencies, etc.
  • Cost impact: reduced IT operating costs, reduced business costs, reduced total cost of ownership of IT assets, etc.

Once the measurement effort is underway, IT executives should regularly – quarterly tends to work best – look at every project in the portfolio for signs that it is delivering the anticipated type of impact, or is instead contributing in an unintended manner. This gives them the opportunity to determine if adjustments need to be made to how the project is being executed, if business requirements have changed (e.g. shifting customer demands, new competitive threat, etc.), if they have gleaned sufficient learning from the project (e.g. process optimization, technical limitations, success requirements, etc.), or to terminate the project it if they conclude it will not deliver results.

Please reach out to me directly at [email protected] to discuss how to measure the ROI of your organization’s digital transformation initiatives.

Persistent Team Vs Contract Labor Crucial In Solving Business And IT Misconnects | Blog

By | Blog, Digital Transformation, Talent

A major frustration between business units and their enterprise IT organizations is the issue of employee churn. The same issue affects relationships between enterprise IT and third-party service providers. Let’s look at how a company’s talent model affects whether the results of the IT work are consistent with the needs and desires of the business.

Read more in my blog on Forbes

Digital Transformation Changes Role Of Purchasing Organizations | Blog

By | Blog, Digital Transformation

The role of CPOs and their organizations grew over the last 10 to 15 years by institutionalizing consistent disciplines in acquiring products and services. There is no doubt that they made a strong contribution to the earnings of organizations. But in the context of digital technologies and services, the nature of the buying process is changing. Thus, digital transformation poses an existential threat to CPO organizations.

The importance of corporate CPO organizations was based on the foundation that there was tremendous value in introducing consistent disciplines in acquiring products and services. This resulted in a practice of “three bids and a buy,” which is the practice for most current purchasing vehicles and the classic request for proposal process in the case of third-party services. Most products and services, particularly for indirect spend, now are shepherded under the domain of the CPO organization.

Read more in my blog on Forbes

How You Handle Digital Transformation Challenges Matters | Blog

By | Blog, Digital Transformation

Digital transformation disrupts the way companies create value that improves the customer, employee or partner experience. But it involves a multiyear journey and changing a company’s operating model, which is painful and difficult. Building executive and organizational conviction on the vision for what the transformation is and sustaining it over a three-to-five-year journey requires thinking differently about business transformation and its challenges. Let’s look at the “moments that matter” in how your company must handle challenges on that journey and sustain the conviction that the pain is worth it.

Read more in my blog on Forbes

Digital Transformation: The Perils of the “Get Digital Done” Culture | Blog

By | Blog, Digital Transformation

The “Just-in-time” methodology focuses on achieving an outcome through defined structured processes that also build organizational capabilities. “Somehow-in-time” focuses on somehow achieving an outcome, irrespective of the impact it has on the broader enterprise.

Most enterprises reward leaders who embrace “get it done” approaches. Unfortunately, the ideology is becoming part and parcel of more enterprises’ digital transformation initiatives. And while “get it done” may seem like a glamorous virtue, it is detrimental when it comes to digital.

Get Digital Done Doesn’t Build Organizational Capabilities

Everest Group research suggests that 69 percent of enterprises consider the operating model a huge hindrance to digital transformation. Leaders are in such a hurry to achieve the intended outcomes that they neglect building a solid operating model foundation that can enable the outcomes on a consistent basis across the enterprise. This leaves each digital initiative scampering to somehow find resources, somehow find budgets, and somehow find technologies to get it done. And because no new organization capability – think digital vision, talent, or leadership – is developed – these initiatives do not help build sustainable businesses.

Get Digital Done Rewards the Wrong Behavior and People

Much like enterprises’ fascination with “outcome at all costs” creates poor leaders, digital transformation initiatives are plagued with the wrong incentives for the wrong people. Our research suggests that 73 percent of enterprises are failing to get the intended value from their digital initiatives. The key reason is while the leaders are expected to “somehow” complete them, there is no broader strategic agenda for them to scale it beyond their own fiefdoms. Our research also indicates that while enterprises want to drive digital transformation, 60 percent of them lack a meaningful digital vision. They’re obsessed with showing outcomes, and cut corners to achieve them. They take the easier way out to get quick ROI, instead of getting their hands dirty and addressing their big hairy problems.

Get Digital Done Does not Align People towards Common Goals

Obsession with outcomes makes leaders leverage their workforce as “tools” for a project rather than partners in success. Because the employees are not given a meaningful explanation of the agenda and the impact, they become execution hands rather than people who are aligned towards a common enterprise objective. This ultimately causes the initiative to fail. No wonder our research indicates that 87 percent of enterprises that fail to implement change management plans see their digital initiatives fail.

To succeed in their digital transformation journeys, enterprises must put their “get it done” obsession away in a locked drawer and focus on three critical areas:

  • Build a digital foundation: Although easier said than done, this requires a revamp of internal communication, people incentives, and a shared vision of intended goals. Each business unit should have a digital charter that aligns with the corporate mandate of leading in the tech-disrupted world. And it requires strategic, yet nimbler, choices on technology platforms, market channels, brand positioning, and digital vision.
  • Have realistic timelines: Expectation of quick ROI is understandable. However, a crunched timeline can backfire. Enterprises must work towards a pragmatic timeline, and incentivize their leaders to meet it without bypassing any fundamental processes.
  • Involve different stakeholders: Our research shows that a shocking 82 percent of enterprises believe they lack the culture of collaboration needed to drive digital transformation. That means the initiatives become the responsibility of just one leader or team. And that simply won’t work. Instead of driving everything independently, the leader or team should be an orchestrator of the organization’s capabilities. This is the key reason more enterprises are appointing a Chief Digital Officer, as one of that role’s key responsibilities is serving as the orchestrator. Additionally, the team needs to leverage the organization’s current capabilities, and enhance them for the future. It should build a charter for its digital transformation initiative that includes impact on fundamental organizational capabilities such as talent, business functions, compliance, branding, and people engagement.

In their race to “get it done” and appease their end customers, enterprises have forgotten the art of building organizational capabilities that will sustain them in the future and create meaningful competitive advantage. And they can’t succeed unless they change their approach and ideology.

Does your organization have a “get it done” culture, or has it built the right organizational capabilities to achieve true transformation with digital? Please share with me at [email protected].

How The CIO Role Must Change Due To Digital Transformation | Blog

By | Blog, Digital Transformation

Digital transformation is sweeping through businesses, giving rise to new to new business models, new and different constraints, and presenting a need for more focused organizational attention and resources in a new way. It is also upending the C-suite, bringing in new corporate titles and functions such as the Chief Security Officer emerge, Chief Digital Officer and Chief Data Officer. These new roles seemingly pose an existential threat to existing roles – for example, the CIO.

Read more in my blog on Forbes

Video: Digital Transformation and The New Breed of CIO | Blog

By | Blog, Digital Transformation

Over the last year, it seemed that CIOs faced an existential threat. This threat was coming from new roles – Chief Digital Officer, Chief Security Officer, Chief Data Officer – as well as the business becoming more and more involved in digital transformation, and looking to inject its influence into IT.

It even got to the point early on last year, where there were questions as to whether or not the CIO’s role would continue, or would it dissolve or devolve into these different roles.

During the course of the year, we investigated this, and have come up with a strong point of view that in fact, the CIO has survived this challenge, redrawn its charter, and has emerged as a very powerful and sustaining executive role in the organization.

You know, in this new charter, what we find is there is no other executive in the organization that has the breadth of vision across all the different operating parts of the organization or the depth of resources to be able to deliver on digital transformation and support the new digital operating models that are emerging – leaving the CIO as the natural place for this responsibility to stay in.

And the new breed of CIO, therefore, is redrawing their charter to support this new vision. Now, redrawing this charter is not easy, and it requires substantial changes in organization, IT organization, as well as a substantial commitment to deepen the relationship with both the business and the board so that the CIO in the organization can play this transformative role.

I look forward to hearing from you this year on how your progress toward this new charter and your experiences as you build this very important role in your organization. 

How To Know If Your Company’s Investment In Building A Digital Platform Is On The Right Track | Blog

By | Blog, Digital Transformation

When your company undertakes digital transformation, undoubtedly a primary activity will be building a digital platform. As digital transforms companies, their digital platform becomes a differentiator. Building your platform is a crucial activity, as it will enable your company to change to a new digital operating model, and that model is how your company will create new value and new competitive positioning. But digital operations and technologies are still new and evolving quickly, and the business world lacks 10-20 years of experience and benchmarking data that could help your company determine the effectiveness of your platform’s performance. This is one of the reasons so many initiatives fail. To avoid that risk, let’s look at how to understand whether your digital platform will deliver your intended outcome.

Read more in my blog on Forbes

How To Avoid Frustrating, Mistaken Approach To Digital Transformation | Blog

By | Blog, Digital Transformation

Digital transformation gives companies new opportunities to change their competitive position. Typically, the objective for using powerful digital technologies is to create new value that changes the customer experience, the employee experience or the ecosystem partner experience. However, executives become frustrated when they need to communicate to their boards or peers on how quickly they can deliver on the promises of digital transformation. We live in a world of instant gratification, agile methodologies and sprints. This leads to an impression that a company can quickly achieve a new competitive position in the marketplace or quickly get meaningful benefit from the investments. Inconveniently, this impression is not the truth.

Read more in my blog on Forbes

Next-generation HR: Key Considerations for Successful Adoption | Sherpas in Blue Shirts

By | Blog, Digital Transformation, Talent

HR has certainly come a long way in being perceived as a strategic function with significant impact on business outcome. Yet, despite workforce and technology investments, multiple challenges – including the growing talent deficit, problems with skilling and retaining niche talent, and the increasing flexibility and better experience demands of Millennials and Generation Z – are inhibiting HR departments from attaining their full strategic potential on behalf of the enterprises they serve.

The solution is moving to a next-generation HR model with digital transformation at the core.

Next-gen HR Model

The inefficiencies of the traditional model – siloed HR systems, a large number of touchpoints, and a disjointed employee experience – are clearly exposed by the challenges cited above. The next-generation HR model addresses these issues with a cloud-based platform at the center, augmented by technologies such as advanced analytics and automation. This results in an intuitive and integrated model that has the ability to provide an enhanced employee experience.

To successfully adopt the next-generation HR model, enterprises should take a structured approach that considers several important factors.

Employee Experience Should be the Focal Point

While the importance of operational cost reduction and process standardization can’t be disparaged, enterprises should prioritize the employee experience when they plan for a digital HR transformation. Be it HR service delivery or technology modernization, the end goal should be to provide an integrated, intuitive, and seamless employee experience to better attract, engage, and retain talent.

In our recently published report, “The Key Ingredients for a Digital-First HR Transformation,” we identified two critical components of the best employee experience:

Empowerment: HR should offer employees integrated, accessible, and disintermediated workflows and systems that empower them to serve themselves. Methods include employee self-service tools, omnichannel experiences, chatbots, and analytical tools, all of which enable employees to have more control over the decisions they make.

Engagement: Millennials and subsequent generations exhibit different behavioral patterns, are digital natives, and expect seamless employee experiences. Enterprises should adopt solutions that enable HR to engage and retain this ever-evolving talent. Solutions that are integrated, user-friendly, and provide consistent experiences across sub-processes / third-party portals with optimized response times and accuracy should be the key focus areas.

Ensure Orchestration of Digital Technologies to Maximize Impact

Rather than implementing a handful of technologies haphazardly, enterprises must take an orchestrated approach to digital HR transformation that enables the technologies to feed off each other, find synergies, and maximize the impact.

The findings in our recently published report made it clear that while each individual technology lever (see chart below) is powerful, enterprises can realize the maximum transformative impact when all the levers are applied in cohesion.

Technology in HR

Why is this? Although the impact of technologies such as Robotics Process Automation (RPA) and BPaaS are focused on enhancing the efficiency of various processes, predictive and prescriptive analytics are capable of deriving net new insights.

On the other hand, cognitive/AI technologies such as Natural Language Processing (NLP) and Machine Learning (ML) can be bundled with other digital levers to significantly improve the stakeholders’ experience, in addition to increasing efficiency and providing net new gains.

Engage Service Providers for Help

To help support buyers’ growing demands and needs, service providers are increasingly offering HR and technology consulting services. Capabilities they offer include:

  • How to understand and plan for the impact of digital adoption on the enterprise’s workforce
  • How to adopt and derive value out of digital investments (i.e., third-party cloud solutions such as Workday, SuccessFactors, and ServiceNow, automation, and analytics solutions)
  • How to optimize HR processes

With technology changing so rapidly, organizations need to make sure that they fully embrace digital transformation, and buckle up to face and be ready for the changes. Many organizations are already working in this direction.

To learn more about this topic, our recent report titled “The Key Ingredients for a Digital-First HR Transformation” identifies and deep dives into five key levers (automation, analytics, cloud, advisory, and employee experience) that will help enterprises successfully transform their HR function.

Is your enterprise planning to undergo a digital HR transformation? Have you completed it? We’d love to hear from you about your experiences, questions, and concerns. Please write to us at: [email protected] or [email protected]