By Deloitte experts: Rich Nanda, US Strategy and Analytics Offerings Leader Raga Gurumurthy, Chief Innovation and Chief Digital Officer Sam Roddick, Global Head of Deloitte Digital Deborah Golden, Deloitte US Cyber and Strategic Risk Leader
Organisations still struggle to advance digital transformation. A common language that transcends technology could be the key to strategic transformation.
From disruptors and disruptive tech to pandemics, political unrest and climate change, future success depends on adaptation. To survive and thrive, leaders should determine how to maintain a competitive advantage and enable an ability to win in a way that doesn’t just withstand change but embraces it for new strategic possibilities.
An adaptive business in the 21st century is typically a digitally-powered business, leading many organisations to pursue digital transformation. But why do so many transformations fail to deliver tangible impact? Why is it so hard to drive cross-functional change, plan beyond one technology at a time, or create a strategy that can adapt as technology evolves and organisations shift their core assumptions? Creating a common, strategically linked language for digital transformation could be the answer to achieving digital advantage and adaptability.
Framing the digital transformation conversation
While 85% of CEOs accelerated digital initiatives during the pandemic, most can’t articulate their overall strategy and progress beyond that they made a tech investment. The imperative for change is increasingly the creation of an adaptable business – one that can thrive in the digital economy. If CEOs can’t say their digital transformation resulted in new business advantages or adaptability, then they haven’t really transformed. This contrast between business and technology strategy highlights a broader phenomenon. Many leaders understand that technology shouldn’t drive business strategy, yet all too often, that understanding is overridden by an impulse to ask questions like: ‘What should our AI strategy be?’ or to respond to events by making a series of tech-first, one-off investments. The urge to think in discrete technologies can be powerful.
While 85% of CEOs accelerated digital initiatives during the pandemic, most can’t articulate their overall strategy and progress beyond that they made a tech investment. The imperative for change is increasingly the creation of an adaptable business – one that can thrive in the digital economy.
Compounding this challenge is the fact that C-suite executives have different focus areas and goals. And, more than likely, a single technology won’t address their needs – a complex combination of solutions may be needed. Often C-suite execs don’t speak to each other when making tech decisions, or if they do, they struggle to effectively communicate. Digital transformation is a team sport and should use a playbook to coordinate strategies across leadership functions with consistency in the face of change.
While many organisations have a digital strategy, they lack a common language to strategise across functions, making it challenging to digitally transform and address related opportunities and risks. Indeed, a common language for digital transformation can enable C-suite executives beyond just the CTO or CIO to have tech-adjacent and tech-agnostic conversations. These can transcend any individual technology and go to the heart of their processes, culture and how people work and interact.
By embracing a common language, organisations can begin to:
Break through human behavioural and structural barriers. Everything in an organisation is interconnected. Leaders across functions can speak thematically about shared needs, avoid redundant investments, address emerging risks and change processes at scale by simply communicating better.
Plan beyond a single technology. Platforms, capabilities and initiatives often involve multiple digital and physical technologies securely working together. As these technologies combine, they become greater than the sum of their parts to bring new capabilities and greater value.
Evolve into the future. Today’s breakthrough technology is tomorrow’s legacy tech. A common language can enable leaders to think flexibly across a matrix of business and technology needs, without having the business strategy reliant on any single technology.
Achieve a greater strategic business value through its capacity to change and ability to win. This approach helps organisations better align and execute against their business strategy to achieve their desired results of advantage and adaptability of the organisation, people and technology.
In fact, Deloitte’s soon-to-be-published research on the exponential enterprise has found that on average, a company with above-median scores on both the ability to win and capacity for change indices enjoys measurable rewards. These firms saw a price-to-earnings ratio that’s 53% larger and share price volatility that’s 21% less than industry rivals, with below-median scores on both dimensions based on data from 2015–2020.
The language of digital transformation should have one foot on the business side and one foot grounded in downstream technology and operations, steering clear of technical terminology to ensure that all parties can understand and contribute to the conversation. Leaders across industries recognise the need to connect the two spheres in an approachable, universal way. As Tighe Wall, Chief Digital Officer at Contact Energy, explains: “If you want to get closer to, and become more vital to the business and its strategy, you need to speak the same language as the business. Every company will become more technologically and digitally focused in the coming years. The ones who will be successful are the people who have already bridged that gap and are already speaking the same language in the business as they are in technology”.
The language of digital transformation should have one foot on the business side and one foot grounded in downstream technology and operations, steering clear of technical terminology to ensure that all parties can understand and contribute to the conversation.
Five imperatives to drive digital transformation
We’ve identified five business outcomes that technology impacts and enables that can help to build that common language. By thinking thematically across these five digital imperatives – experience, insights, platforms, connectivity and integrity – organisations can communicate across functions in a way that puts strategy before technology. This can lead to initiatives that deliver a more modular, flexible technology core that better delivers transformation and strategic value. Business-techno concepts can act as guardrails to help leaders avoid the trap of falling into a technology-led conversation. They can also help frame digital strategies that are linked to technical realities and workforce implications. In essence, they create a bridge for coordinated discussions between business and technology strategists and workforce and operations leaders.
Drilling down into more detail:
1. Experiences: Focus on optimising interactions with users, whether they are customers, the workforce or other stakeholders within the ecosystem
2. Insights: Assess what data, analysis, operating model and workforce are required to enable organisational strategies
3. Platforms: Focus on the location and management of information across an organisation or its network
4. Connectivity: Involves the flow of information between platforms, experiences and insights, encompassing the future of the internet and networking with other organisations and ecosystems
5. Integrity: Focuses on improving resilience, security, ethical tech and trust across all internal and external facing business systems and processes with a cyber-minded culture to address continuously evolving threats
There will be more than one technology to consider for each imperative. Thinking about the imperatives as categories, or ‘capability stacks’, can be useful. Themes allow change categories to become fixed as technology changes. This way, leaders can consider today’s enabling and disruptive technologies (cloud, IoT, blockchain, AI, cybersecurity, mobile, 5G, digital reality, edge computing, quantum and others), while leaving the same strategy in place for future disruptive and horizon-next technologies to meet the same strategic objectives.
Putting the imperatives to work: Align strategy and drive transformation
Organisations can use these imperatives as a vocabulary to build a digital strategy aligned to the organisation’s strategic north star.
Start by considering how that overarching ambition cascades across business, technology and workforce considerations:
1. What’s the enterprise objective for digital transformation? Capacity to change? Ability to win? Both?
2. Across each of the five digital imperatives, ask the following questions: • What’s the strategic business goal that best supports our enterprises’ objective(s)? • How do we need technology to support this business goal in terms of purpose, function, security and risk requirements? • What will the operations and workforce impacts be for those business and technical or security decisions? • Conversely, will workforce strategies and capabilities impact the transformation strategy in a way that considers profound changes across leadership teams, operating models, ecosystems and the workforce aligned to strategy?
3. We can then arrive at a technology strategy, with planned technology investments that ladder up to the overarching organisational ambition and align with organisational and workforce transformation needs.
Let’s look at an example to further explain creating a smart factory strategy. First, assess the enterprise objective for the smart factory, for example, to manufacture small batches or to personalise items at reduced cost versus current mass manufacturing approaches. Second, build the digital business strategy by considering how each of the five imperatives aligns to these manufacturing goals in terms of the insights needed, the platforms and connectivity required and, finally, how to do so with integrity. Then, broadly consider your technology requirements aligned to the digital business strategy down the list of digital imperatives. Instead of starting with cloud as an assumed investment, discuss a range of technologies (that may or may not include cloud), and the implications of those technologies on the workforce and operations. The result could be better strategic alignment across the digital business strategy, technology investment strategy and organisational or workforce transformation agenda.
Instead of starting with cloud as an assumed investment, discuss a range of technologies (that may or may not include cloud), and the implications of those technologies on the workforce and operations.
Change, compete, win: Getting to value with the five imperatives
While our proposed framework may be new, the challenging practice of adopting an integrated, cross-functional approach to digital transformation is not. But achieving such an integrated approach is vital. When we analysed data from 2,860 global business and public-sector leaders responding to Deloitte’s 2021 Digital Transformation Executive Survey, we saw that the technologies listed in our survey that align with these imperatives were rated as the top five most important to enable digital transformation. Additionally, we saw that the more digital imperatives these organisations adopted, the greater their digital maturity and profitability. In addition, more digitally integrated organisations measurably outperformed on their strategic objectives, capacity to change and ability to win.
To effectively gauge the value organisations can gain from increased adoption of the digital imperatives, we broke respondents into two groups. These groups are ‘digital all-rounders’, who have implemented three or more digital imperatives (~13% of respondents), and ‘digitally developing’, who have implemented fewer than three digital imperatives (~87% of respondents). While ~67% have embraced at least one digital imperative, when organisations combined them in an integrated digital strategy, they saw greater value.
Digital all-rounders lead digitally developing organisations in terms of:
Whether they realise it or not, many organisations are already taking this integrated approach. We interviewed four global leaders responsible for their organisations’ digital transformation, each in different business and technical functions, industries and geographies and found that they were already approaching transformation in this way – but without a clear language and framing to guide them.
From these conversations, we learned that this framework can effectively guide organisations with three digital transformation objectives:
Optimise one digital imperative across business, technology and workforce
Integrate multiple imperatives to build a more comprehensive single strategy
Adopt a combined approach that integrates multiple imperatives across these strategies
Prudential, for example, focused on optimising the insights imperative across business, technology and workforce and operational strategies. When designing its algorithm to automate underwriting, they engaged underwriters to gain greater adoption and value from the transformation. Robert Huntsman, Chief Data Scientist for Prudential Financial’s Life Insurance and Retirement business, explained: “The way they work is changing, so, knowing that, underwriters have been involved from day one in helping to write the requirements. They’ve worked to craft how the model works as well as in changing their own processes for how they would interact with the model. Now, for 60% of applications, you can get an expedited decision – reducing the amount of time an underwriter needs to spend on evaluating an application. That’s a huge cost saving for the company which enables us to be more price competitive and provide our customers the services they need faster.”
Alternatively, the framework can help organisations to consider building a more integrated business strategy that includes platform, insights, experience, connectivity and integrity. Manoj Raghunandanan, President of Global Self Care and the Consumer Experience Organisation (CxO) at Johnson & Johnson Consumer Health, articulated a digital transformation business strategy touching on all five of the imperatives. These are: a platform approach to improve end-to-end data connectivity across customer insights and experience in a way that considered data integrity. He explained, “we’re focusing on connecting our organisation from end-to-end to create an improved and more transparent experience for our consumers, customers and our suppliers [of] ingredients. This requires connecting all the data from the very beginning of research and development, through the supply chain, to our retail customers, and through to the consumer.”
British American Tobacco and Contact Energy looked at a combination of several of the digital imperatives aligned across business, technology and operations/workforce strategies. Elaine Chum, Area Head of Digital Transformation at British American Tobacco, North Asia, explained how she is leading her organisation’s online retail platform strategy in Japan to create a direct-to-customer buying experience within the regulatory integrity requirements to drive increased sales revenue. She explains: “In today’s world, I should be able to deliver within 24 hours. We started looking at consumer experience and restrictions” and with those three imperatives in mind, advised, “put the consumer experience in the front, middle and back of your company’s agenda. Look at the strategy element, the internal business processes and how it can enable transformation, the technology and its platforms that we own and operate in, the capabilities that we have, talent, people, resources [and] the organisation structure”. This notably emphasised the unique challenges of operating in a region that values stability over change and finding Japanese-speaking digital talent.
Additionally, New Zealand’s Contact Energy is extending the digital platform their organisation initially created to optimise customer experience and reduce friction for customer service representatives, enhancing workforce operations. Having a comprehensive, matrixed strategy in place can allow for this type of flexible, synergistic decision-making that keeps the overall organisational ambition in mind.
A language for today’s transformation – and tomorrow’s
Our digital imperatives can enable organisations to drive transformations that align to their overarching ambition while remaining open to future strategy changes. They acknowledge the importance of AI, cloud and cybersecurity today but leave room to evolve toward ‘horizon next’ eight technologies, avoiding the trap of leaping at every shiny new technology. Ultimately, they help design-adaptive business processes and technology architectures (modular ‘capability stacks’) that embrace constant change and reconfiguration in the face of ongoing disruption and risk with the goal of compatibility for multiple possible futures. As Raghunandanan of Johnson & Johnson Consumer Health states, “We’re not done. We’re not going to be done. We’re only done at the speed of technology being done and, if you look at it, it’s changing every single day.”
Our digital imperatives can enable organisations to drive transformations that align to their overarching ambition while remaining open to future strategy changes.
