Where CEOs should invest their tech dollars

Digital platform leaders show CEOs how big bets will yield huge payoffs

Every CEO today is laser-focused on optimizing her organization to boost revenues, innovation, and cost savings. The irony, however, is that so few chief executives (just 40%) have confidence in the most important strategy that can deliver on those objectives—enterprise digital platforms.

A new survey from ESI ThoughtLab may help change that perception. Perhaps more importantly, it also offers a blueprint of sorts for CEOs looking to plot investment strategy in digital platforms to produce the highest returns.

The payoffs are significant. In five major industries surveyed—healthcare, financial services, manufacturing, telecom, and the public sector—34% of all organizations that invested early and substantially in digital platforms are seeing high to very high returns on investment. Among other benefits, these “digital leader” organizations report greater market share, faster time to market, and more successful innovation efforts.

The remainder of surveyed organizations ranked as either digital beginners (33%) or intermediates (43%). If the CEOs of these “follower” companies hope to compete with the digital trailblazers in coming years, they will have to make larger and more strategic investments in digital technology, especially in enterprise digital platforms.

Despite ongoing economic uncertainty that the COVID-19 pandemic has created, now is the time for CEOs to make those digital investments, says Dejan Slokar, global lead alliance partner at Deloitte. “CEOs must invest in new business models,” he says. “If this conversation is not front and center at the executive level, you may be putting your entire business in jeopardy.”

The power of platforms

What’s to account for the performance chasm between leaders’ and followers’ ROI? The survey suggests that the X-factor may indeed be digital platforms, which integrate digitized and automated workflows across multiple business functions, from HR and IT to finance and ERP. When it comes to investing in digital platforms, leaders are outspending the middle of the pack by a 2-to-1 margin, and beginners by 4-to-1.

Those investments are producing outsized returns beyond revenue. Forty-six percent of leader organizations report positive gains in productivity, and 55% report increased customer satisfaction and retention. Just 39% and 37%, respectively, of non-leaders say the same.

Consensus is emerging around investment targets

All surveyed executives report that their organizations are pouring the bulk of their technology investments into a number of specific areas—cybersecurity, cloud, robotic process automation (RPA), data management, and data storage technology. When comparing the level of spending between leaders and followers in these core technologies, the gap ranges from 13% to 26%.

Bigger spend = bigger ROI …

CEOs of digital leader organizations are seeing greater ROI on these targeted investments than followers. In cybersecurity, for example, of the 97% of digital leaders are making significant digital-platform investments, nearly as many (89%) say they are seeing substantial ROI.
Roughly three-fourths of digital-investment followers, meanwhile, are making the same level of commitment with cybersecurity, yet only 71% say they’re getting the same level of return.

… especially with advanced tech

Leaders’ ROI on advanced technologies is also significantly higher than that of followers. For example, 73% of leaders report substantial payback on IoT investments, versus 43% for followers. For AI, 79% of leaders report moderate to high returns, compared to 52% of followers.
Does this mean followers should splash out on much-hyped technologies like AI, IoT, Blockchain, and AR/VR? Not necessarily, says Slokar.

“You should approach these decisions based on guiding principles, not hype,” he advises. “What will improve the productivity of your teams? What will help you create a more agile organization? What will create value for your customers?”

How leaders lead with investments in platform integration

Another investment target for CEOs when it comes to playing catch-up on digital platforms is to look at the biggest gaps in spend between digital leaders and followers. According to the survey, there are five areas with the biggest gaps. This group of technologies, interestingly, aren’t competitive game-changers such as AI, but collectively make platforms more accessible and interactive.

  • Applications management:
    Leaders: 73%
    Followers: 27%
  • Open platforms/APIs:
    Leaders: 73%
    Followers: 29%
  • Business applications:
    Leaders: 77%
    Followers: 35%
  • Mobile tech/apps:
    Leaders: 74%
    Followers: 38%
  • Device management:
    Leaders: 78%
    Followers: 42%

“You need to invest in a purposeful way,” says Deloitte’s Slokar. “It’s not about experimenting for the sake of experimentation. It’s about identifying true business opportunities that can deliver real value.”