How to Build a Digital Transformation Strategy that Delivers ROI

We live in the age of tech disruption, and no organization is immune to its impacts. Across industries, customers and employees have been demanding mobility, simpler and more transparent access to information, and better user experiences. To increase their operational efficiency and reduce time-to-market, companies must also automate their business processes and supply chains and adopt a digital transformation strategy consulting approach. According to an EY survey, businesses that allocated 3.5% of revenues towards adopting digital technologies in 2020 and 4.7% in 2021 raised the amount to 5.8% of revenues in 2022.

And yet, most companies still struggle with how to implement a digital transformation strategy and measure and materialize the outcomes of such investments. They often do not know how much CAPEX and OPEX they have spent on new tech and the value it yields in terms of reduced costs and incremental revenues. The methods to measure ROI for digital transformation (DX) programs are not yet applied systematically. Any business that plans to improve its digital capabilities must have transparency with:

• A methodical approach to digital capital allocation with appropriate controls in place.
• Focus on high-value areas where other organizations have already validated the positive impact of DX initiatives.
• Comprehensive principles to guide the strategy with simultaneous consideration of business goals, the company's existing tech portfolio, and potential effects on operations.

Organizations need to understand that as disruptive technologies continue to change business environments and take customer expectations to the next level, only the most digitally mature organizations will be able to fuel growth and report better profit margins, making a robust digital transformation strategy a business imperative.

How to increase revenue, close tech gaps, and optimize your digital transformation strategy?

The EY Digital Investment Index study, involving over a thousand participants, identified 9% of them as leaders. These organizations have achieved higher returns on their digital outlay and higher revenue growth compared to other respondents in the survey.

Most of them stated that mergers and acquisitions (M&A), as well as alliances and partnerships with tech-native companies, were critical enablers of successful digital investments. These businesses are also:

• Keep well-defined policies and accountability for digitalization.
• Prioritize the use of technologies in processes that have significant monetary returns.
• Allocate funds progressively to new digital platforms, solutions, and business models.
• Leverage cloud services, IoT, artificial intelligence (AI), machine learning (ML), and cybersecurity in their operations.

To eliminate the barriers to scaling their digital transformation strategy, businesses should have a portfolio-based approach that balances their short-term cash requirements and long-term digital initiatives. And they must have a talent pool that will help them to meet their outlined requirements with the right technologies and tools.

Boost growth with a comprehensive digital transformation strategy

To maximize the value of enterprise digital transformation strategy investments, partnering with an expert who can help build a robust technology and data infrastructure while paying attention to the current and future needs of employees, customers, and stakeholders goes a long way in ensuring success. It is also critical to proactively leverage agile sprints to test changes' effects, derive value, and incorporate due governance and deep analytics at every step to gauge outcomes and justify funding.

Simplifying your digital transformation strategies with an optimal mix of buy, build, and partnership-based investments is a sure way to ensure its success. At the same time, it is essential to avoid siloed approaches, and M&A value must be maximized by understanding the differences between startups and traditional companies considered for M&A.

To eliminate challenges that impede project scaling, it is vital to develop operating models customized for your digital programs. The models adapt to the organization's changing needs—they allow for the incubation of new digital solutions and capabilities.

Another area for a successful digital transformation strategy concerns effective administration and metrics to measure success. For this, an experienced partner can help enterprises analyse their use cases frequently and ensure that the focus stays on tactical tasks while reducing business expenses and driving cash flow. Organizations that can access advanced analytical systems are assured of an accurate picture of their return on digitalization.

Digital transformation: The only process that will help businesses steer through uncertainty

While the COVID-19 pandemic is a rather over-discussed topic, it has taught some valuable lessons that cannot be disregarded. It has shown the uncertainties and shocks that communities, governments, and businesses can suddenly have to deal with. And while we cannot control the speed of change enforced by external events, all entities must navigate these changes efficiently, take measures against threats, and make the most of new opportunities.

That's where a solid digital transformation strategy, backed by thoughtful approaches, well-executed operating standards, due governance, and planned funding, helps.

Author: Anji Reddy Maram, Founder & CEO, CriticalRiver