Six key elements needed for an effective digital transformation

We took a closer look and found that it has morphed into a powerful price lever that is undergoing further development. Interestingly, sectors with traditionally low technology spending tend to feel more constrained than others and emerging economies exhibit greater urgency than developed economies. The Chief Information Officer (CIO) and Chief Technology Officer (CTO) are still relevant, but the business drives the agenda, with the increased involvement of the Chief Executive Officer (CEO). Return on investment is no longer about cost savings or efficiency, and more fresh money is going into “grow” and “convert” rather than “run-the-business”. Let’s understand how.

According to a Boston Consulting Group survey, 35% of chief experience officers (CXOs) globally consider “digital technology” to be disruptive to their business model (while the rest see it as critical to their current model). Within this, counter-intuitively, sectors with high technology spending (banking and insurance) are more accepting of it than low-spending sectors (manufacturing), 40% of which now see digital as a disruption, similar to banking. I see. Similarly, digital transformation is often seen as a “Western” phenomenon, led by North America and Europe. However, more executives in Asia-Pacific (40%) and South America (45%) are familiar with digital disruption than their friends in North America (27%) and Europe (33%). Nearly 90% of emerging markets, including India, now consider digital transformation to be imperative.

Digital transformation is no longer purely the mandate of the CIO/CTO. Globally, over 75% of changes are on the CEO/Board agenda during the lifecycle. India affects us by 90%. Role of Chief Data Officer (CDO) The rise of reporting to business (COO/CEO) reflects a growing leadership commitment. A strong positive correlation between the prevalence of CDOs and the digital maturity of the company confirms the role’s contribution. Geographically, three-quarters of companies in emerging markets prefer to have CDOs. And regionally, more manufacturing companies have recently played this role than their banking and financial services (BFS) and technology, media and telecommunications (TMT) friends. But caution yourself here: Despite business sponsorship and a CDO, the failure rate is 2x if the CEO isn’t directly involved.

The changes are making revenue acceleration the focal point and then investing in the technology capabilities needed. For example, about 55% now prioritize end-to-end transformation over unrelated initiatives around cloud migration, cybersecurity, automation or analytics. Digital transformation is no longer an exercise to cut costs or increase efficiency as customer-centric-driven efforts eventually couple with improved business performance, even as traditional industries such as manufacturing and healthcare tend to have greater customer focus. . Overall, about 43% of firms generate more than 10% of their income before interest and taxes from their digital transformations, if done right, while only 27% of the remaining do so.

While most executives anticipate increased investment in digital (Gartner estimates global IT spending to be around $4.5 trillion in 2022), an analysis of IT spending shows that for about 70% of the ‘run’, approximately 20% is allocated to ‘grow’, and the remaining 10% to ‘transform’ the business. However, the insurance TMT, BFS and consumer industries continue to have the highest ‘growth’ and ‘transformation’ spend-shares, with a combined cross-vertical range of 22–34% ($1–1.5 trillion in 2022), confirming digital transformation. is priority. Interestingly, smaller players are adopting and disrupting emerging technologies 2-3 times faster than larger ones, to keep the change loop alive.

We believe that older digital backbenchers such as manufacturing and healthcare are rapidly catching up and increasing the density and intensity of digital transformations. However, a successful digital transformation truly means digital + transformation – a nuance that not many people understand.

A recipe for success includes a long-term strategy with “Digital by Default”, with no “finish line” in digital since its core, dynamic goal-refinement, a change focus that requires minimal change management. , pulls for a deep CEO commitment, a culture of high-quality talent and innovation.

Adopting digital in a transformative way is no longer an option for companies. Slow or complacent individuals will struggle to survive. But 70% of those who try may fail if they do not meet the above six digital metamorphosis ingredients. Otherwise, they will have a “really fast caterpillar”.

Rajeev Gupta is MD & Senior Partner at BCG and leads DigitalBCG in India, Amit Bharti is Principal at BCG. The article received inputs from Vipin Gupta (MD & Partner) and Anmol Rai (Senior Associate) at BCG. Views expressed are personal.