- The “right combination” of digital transformation actions can generate up to $1.25 trillion in new value for businesses, while the “wrong combination” can erode that value by up to $1.5 trillion, according to data from a recent Deloitte report.
- The combination of digital strategy and technology-aligned investments without actual change in an organization can cause up to a 9% value erosion — or a cost of $1.5 trillion to Fortune 500 companies — according to the report, which analyzed more than 4,650 financial disclosures from global organizations.
- “Very often in the past, digital transformation was started at what I call the frontier of the business. We talk a lot about greenwashing these days, but there is also something called digital washing, and this is when you start transforming, or pretend to transform, at the frontier of your business and not the core,” said Tim Bottke, partner and telecoms, media and entertainment leader at Deloitte Germany, in an interview.
Between artificial intelligence, machine learning, language processing and other cutting-edge technologies, CFOs are scrambling to keep up with the potential gains from digital transformation.
Only 34% of Fortune 500 companies that were analyzed “showed signs of being strategic about their technology investments in financial disclosures,” the report said — revealing the enormous room for growth.
In terms of how much change finance leaders are really initiating with the implementation of these strategies, unless you transform the business at the core, the value will not be seen, according to Bottke.
“I can talk in buzzwords for two hours and you can get away with this for a long time, but what our research really shows is that shareholders start to look into the real impact of these things,” he said.
CFOs and their C-suite counterparts are looking to investments in new technology as a means to both place their business in a position adept for growth, while also trimming costs wherever possible. The pairing of technology both as a cost-saver and disruptor is a risk.
This intersection of limited funds, strong cost pressures and the need for technology investments is where CFOs start to get nervous, according to Bottke.
“It's a big difference if you spend 20 million somewhere or if you have to spend half a billion in a long term program, and that's the time when shareholders really start asking questions because many of these programs will fail,” he said.
There are three core tenets to ensuring that your digital transformation strategy will bring the best value to an organization: digital strategy, aligning the technology with that strategy and then making sure your entire organization has the ability to adapt to new processes, resources and ways of working in light of digital transformation, the report said.
“Digital transformation is continuous — however, the scale and stakes are ever increasing. For organizations, finding the inherent value of technology innovations, and not letting it slip away, is crucial to a company’s long-term growth,” said Tim Smith, head of technology strategy & business transformation at Deloitte in the report.
It really is all about thinking of digital transformation as an “end-to-end business transformation, and using digital as a tool,” stressed Bottke.