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Advisors love to tout the failures of traditional transformation (75 percent of all transformations fail). At A&M, we are increasingly seeing and helping clients overcome an even more pressing matterless than 50 percent of all digital, data, and AI spend by the F1000 is delivering ANY value to shareholders, customers, or employees.

We believe business strategy and transformation have evolved, shifting from digital transformation within a technology function to a catalyst for CEOs, CFOs, COOs, and heads of business to drive a step change in how they capture the next wave of value with greater pace and certainty.

In the first part of the series, we will focus on how to deliver value from digital investment, redefining why, what, how, and when to invest, spanning the use cases and exciting solutions tech has to offer, new organizational muscles including new delivery models, and effective technology partnership models with a clear case and payback.

Technology and technologists have evolved and become mainstream over the past decade, infusing the breadth, depth, and pace by which companies transform and deliver greater results. Digital, a catch-all term for many, has redefined how companies emerge from traditional cost-cutting measures in the back office or SG&A (Selling General and Administrative Expenses) and get fit for exponential growth in product and service development, customer engagement across touchpoints, complex supply chains, and growing partner ecosystems.

Tech has evolved, with the continued growth of industry stalwarts, such as Microsoft, Google, and SAP leading the way in the mainstream adoption of as a service business models, the internet of things (IoT), advanced analytics through gen AI, and AR/VR in both the consumers living room and enterprise workspace. The rise of the software defined enterprise has crossed over from OEMs (Original Equipment manufacturers) in Telco and High Tech to more traditional industries such as Automotive and Industrial Products, delivering new levels of configuration, personalization, and value-added services to customers. Multi-cloud and low code platform-based apps, along with microservices-based platforms, are the norm and the path forward to lower the barriers of entry for smaller technology players and competition, while driving greater reuse, scale, and economics for those investing in the technology in the first place.

External forces have accelerated these trends: COVID-19 forced companies to work and operate remotely, setting a new standard for workplace technology and security. ChatGPTs recent rush into the spotlight has put into question age-old processes in creative or product management, customer care or employee services. Sustainability Scope 2 and 3 requirements are driving a level of end-to-end visibility, controls, insights, and intelligent automation never thought possible in todays global supply chain.

Companies are now approaching a new wave of technology hype and investment renewals, without a clear payback from the last wave. CDOs, CIOs, and CTOs need to evolve from being the new kid on the block, an evangelist or a corporate investment, to becoming a tech Profit & Loss (P&L) owner or driver. Financial and operational rigour are table stakes, with medals earned based on meeting and exceeding your annual plans, measured through the lens of traditional P&L Key Performance Indicators (KPIs). IT functions have an incredible opportunity to set the tone for a dynamic step change in performance improvement within their functions and lead the way for reinvestment across the enterprise. (Read more about our perspective on how to practically align your IT investments to business value here).

More importantly, leading CFOs, COOs, CMOs, and heads of sales or product understand the technology functions, the services they provide, their value, and cost compared to peer groups across the industry. Effective digital and data leaders are acutely aware of the concerns of the shareholders and CEO that digital investments are not delivering the outcomes or value based on the original case. They focus on specific, well known and understood use cases, rewiring the business to both drive and benefit from the technology change, and a shift to only owning core capabilities while relying on strategic partners to overcome the gaps.

Leaders must go beyond the illusion of new use cases defined by technology vendors and resist the temptation to spend time creating new ones or focusing on unproven technology platforms (anyone remember the promise of 5G and Edge for Enterprise, or the Metaverse?). Instead, they should focus on existing and well understood use cases and how emerging or mature tech will benefit them further based on todays KPIs, baselines, and targets.Moreover, leaders must effectively deliver complex use cases and their solutions by combining relevant base technologies (e.g., AI, IoT sensors, geo-location, and AR/VR powering very different solutions in personalized retail offers or industrial plant visual inspections). This requires an advanced understanding of each and a practical view on how well their organization can quickly architect, integrate or engineer, and maximize their value together.

Finally, leaders should ask themselves: Which use cases are of highest value? What problem are we trying to solve, how does it align to P&L contribution, and who owns solving it? What is the starting point and intended outcome? Whats the Minimum Viable Product (MVP) required to validate those assumptions? How do we get to scale fast? Should we let others invest first and be fast followers? Build practical business cases that embed the costs of building, changing and operating the technology over time as well as the business change required to adopt and evolve solutions with market feedback.

For example, a global Consumer Goods leader fully loaded the IT and SI cost of deploying and operating its Customer Relationship Management (CRM) platform as well as its data transformation as part of its cost to sell, attributing future improvements in its customer targeting, traffic, basket sizes, and conversion to those investments. This created joint accountability for outcomes and commitments across business and technology functions and accelerated a change in behaviour as part of a broader shift in the business model to agile commercial teams.

Use cases and technology solutions in isolation dont drive the change required to meet the case. The business operations in commercial, the plant, field or supply chain, and support functionsneed to adapt their workflows, organization and skills, ways of working and RACI, and ability to use new forms of information, insight, or tools to drive faster and more efficient actions and/or more effective results. The business needs to operate as modern software engineering and product companies, embracing what digital, data, and AI have to offer to accelerate the journey.

In turn, technology functions should elevate the importance of Portfolio Management and Target Architecture Management. Leaders must go beyond the basics: maintaining legacy, ensuring nothing breaks, and meeting rising security standards. They should define and steer tech investments with a strong financial grip and continuous Total Cost of Ownership (TCO) improvement to balance where to invest to save, where to invest in the new, and where to continue to sweat the asset. Return on investment in tech requires the careful balance of delivering point solutions with capabilities that enable and deploy many use cases with a common technology platform.

For example, a global Industrial Products leader, recently transformed its asset management functions to harness the full benefits of technology, data, automation and AI, resulting in a radical improvement in asset productivity and maintenance cost reduction. To ensure the successful implementation of the business case at scale across geographic sites, the work included the redesign of the manufacturing and supply chain processes. This transformation infused new perspectives drawn from transferrable technology solutions proven in other industries, while setting out clear changes to the RACI, KPIs, and incentives across the business and with partners.

Transforming technology functions in isolation yields limited return on investment. The true value lies in framing and extending those tech investments in support of critical use cases and new business models. Leading technology functions evolve into internal tech service providers and focus on mastering fewer core capabilities, effectively consuming those few services at scale. With that clarity on what is core, leaders deeply entrench themselves in the business, supported by agile digital factories delivered by strategic partners an ecosystem that is incentivised to invest in areas that directly contribute to the P&L.

Successful tech service providers effectively tap into the ecosystem to access and co-develop in-demand capabilities and skills. They then focus on exposing and addressing business needs, while maximizing delivery flexibility. Critical to this journey is the evolution of procurement in support of the business and technology areas to ensure this ecosystem is proactively engaged and given a front row seat to the challenges, opportunities, and upside of helping leaders grow.

At A&M, we partner with industry leaders to shape, create or transform, and operate high-performing and modern businesses. We help clients understand, adopt, and get the most out of technology investments to accelerate business transformation and growth. This is achieved through data-driven analysis and monitoring of P&Ls, defining and launching new products or services, acquiring and retaining great customers with intelligent commercial, supply chain, and service delivery operations.

We draw from our heritage as business owners and operators in Private Equity and Corporates not only to assess and guide but to take action. We work alongside executives to make practical decisions fast, pivot to execution, and always balance the need for near-term efficiency with cash to fuel future investments in growth and innovation with confidence. Our results speak for themselves; across sectors we help clients deliver 20 to 25 percent reductions in Total Cost of Ownership (TCO) in 12-18 months, with an additional upside of 10 percent in reductions complemented with targeted reinvestments to fuel new sources of top-line growth over a 24-month time horizon.

A&Ms Digital and Technology Services team supports companies through the full lifecycle of a business transformation across the enterprise, within business functions in the front office and support functions, and within IT / OT and other technology service areas.

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Maximising Growth and Accelerating Value Creation with Digital ... - Alvarez & Marsal