Intense competition, economic volatility and the surging pace of innovation – now accelerating even faster thanks to generative AI – all make technology transformation a must-do for enterprises. But with many competing demands for limited investment capital, those charged with transformation must ensure that they can deliver tangible value by optimising costs and driving growth. And all that needs to happen without ‘betting the shop’.
In today’s challenging economic environment, standing still is not an option. Research by PwC revealed that 86% of UK CEOs expected the economy to shrink in 2023. Nearly a quarter of them believe that, if they maintain their current course, their businesses will not be viable within a decade. 10% say it’ll be within three years. In the face of a range of economic pressures, many are cutting costs and seeking to realise efficiencies enterprise-wide.
But CEOs are also committed to investing in technology with the aim of not simply transforming their businesses but reinventing them for growth. In fact, Gartner predicts that tech spending in Europe will increase by 9% to reach more than $1 trillion in 2024. With businesses under pressure to grow in an uncertain economic environment, justifying and making those investments count has taken on a whole new level of urgency. As ServiceNow’s Chief Transformation Officer. Simon Cox, explains: “Today’s economic landscape makes securing any sort of investment for the right technology a challenge, no matter what level you’re sitting at.”
It’s well known that most (McKinsey estimate 70%) technology transformation projects fail to deliver the results expected. So, as they seek to balance cost optimisation with growth and reinvention, senior executives have to pull off a tricky balancing act. They need to make sure that the investments required for transformation deliver clear and tangible benefits. And they need to create a persuasive business case for transformation before they get the green light.
Of course, for most people making a bid for transformation funds it won’t be for the first time. So there’s a degree of personal or career risk involved in seeking investment that goes beyond the money and the technology itself. Nobody wants to be held responsible for a big bet that does not pay off.
But history shows that while all-or-nothing strategies in any area of life occasionally come through with a winning result, disappointment is much more likely. After all, A 100-to-1 shot means there’s a 99% of failure. Understandably, most people avoid making them for anything that matters. They heed the advice, and their own instincts, to ‘gamble responsibly’.
Yet that’s not always been the case when it comes to technology transformation. We’ve often seen three-to-five year projects essentially staking millions that a huge project is going to achieve the desired outcomes. When those results fall short, there are likely to be more than just financial consequences. Which is why accumulation of risks (financial, technological and personal reputation) have now persuaded many executives that a different approach to the big ticket, long-term transformation program is required.
In its place is a ‘deconstructed’ transformation that breaks down processes that need to change, slicing a program into manageable units of time and money. Rather than designing a program of ,say, three years requiring £10 million, this approach parcels out the change in a way that balances cost and growth to provide demonstrable value early and often. It parcels out scarce investment funds carefully, proving the value of changing a few processes relatively fast to inspire confidence and secure the backing to move onto the next set. And as lessons are learned along the way, delivery cadence speeds up as each discrete project within a program of transformation builds on the last.
One project in which ServiceNow was involved offers a case in point. A specific set of critical claims processes for a financial services business had been handled by teams offshore. When the pandemic hit and offshore centres were closing down, those processes had to be quickly brought back onshore. But what became apparent was that the processes cut across multiple systems which made them extremely manual, cumbersome and inefficient. People were spending 90% of their time on admin tasks and just 10% on the expert decision-making for which they had been trained.
The solution? Rather than try and transform the whole system that supported these important processes, a more targeted approach focused initially on just two of the most critical, and created automated workflows to address them. Integrating the workflows with pre-established risk tolerances for claims created a new way for operatives to review and approve a claim via a ‘traffic-light’ dashboard that cut the average transaction time from 3.5 hours to 23 seconds.
Since then, more processes have been addressed – each one delivered at a faster pace and each one reusing and building out the previously developed integrations and capabilities. Transaction times are now sub 3 seconds. The key lesson? A transformational result achieved without the need to rip and replace an entire system.
So how can leaders charged with driving transformation set about articulating and measuring the value they will deliver? According to McKinsey & Co research, three core actions are common to transformations that achieve business value:
- They always refer to an objective fact base to identify opportunities for improvement. Those fact-based assessments then inform realistic and ambitious targets that can inspire confidence and reflect a transformation’s full potential.
- They communicate clearly and compellingly why a transformation is needed. Leaders take responsibility for explaining why employees should do things differently and precisely how they’ll benefit.
- The most crucial initiatives are resourced with the best talent. This helps to show where value is generated, and who in the organisation is best able to deliver it.
Successful transformations also focus on a specific source of business value upfront, in addition to cost optimisation. The aim is to grow the top and bottom lines, not simply taking cost out but creating a real impact on performance. That might mean increasing revenue, improving the customer experience, increasing supply chain resilience or any one or combination of many different goals. The point? Identify the specific target outcome and put in place the right metrics to gauge progress towards achieving it.
As Jacqui Lipinski, CIO and Director of Digital and Technical Services at the Royal College of Art, explains: “One of the biggest challenges for businesses today when investing in technology, is being able to demonstrate how that technology can cut operational costs down day-to-day, drive growth on top of that, and improve the services you’re providing customers. There’s a delicate balance between these three things. It’s challenging, but it’s a crucial part of the journey. In today’s competitive environment, organisations who just focus on keeping the lights on won’t see success.”
As more companies commit to transformation, there’s evidence that the ones that unlock benefits fastest are those that make their digital core a primary source of competitive advantage. By bringing together cloud, data and AI through interoperable systems across the enterprise, they outperform others, growing revenue by as much as 22% more than their competitors and reducing costs at the same time by a similar margin.
Those businesses are finding ways to balance costs and achieve growth. They are managing the risks of transformation by deconstructing their approach and avoiding ‘all or nothing’ bets by carefully targeting early wins and building on their success. It’s a philosophy that anyone charged with balancing transformation for cost and growth should consider.
Bottom line? Technology transformation is not, or should not be, a goal in itself. Businesses need reasons, supporting data, and objectives in place if they want to see the promised benefits. With a strong, overarching vision, supported by clear goals, organisations can align their digital strategies and inspire everyone involved behind a common purpose.