Digital transformations are abundant.
While some make the bank, others break the bank. What's the difference between the ones that drive value and the ones that don't?
Deloitte's Unleashing Digital Transformation Value: Paths and Pitfalls Research found the difference is $2.75 trillion. Businesses with a strong digital strategy, aligned tech investments, and a strong digital change capability can drive as much as $1.25 trillion market cap across Fortune 500 firms. But beware: Business transformations and tech investments that lack a digital change capability bring a $1.5 trillion risk. What are business leaders getting right and wrong?
"Digital transformation value depends on intentional connection between digital strategies and actions by business leaders." Tim Smith, Deloitte Consulting's US leader for technology strategy & business transformation
What digital actions drive the most market value?
Digital Strategy adds value: Businesses that are making digital bets in line with enterprise strategy see market value gains, according to Deloitte's Unleashing Digital Transformation value analysis of over 4,500 publicly listed companies. However, only 44% of businesses meet this baseline benchmark based on the company's analysis.
Think of it this way:
"When a true digital strategy is in place, leaders recognize it's integral for the business and an investment imperative." Tim Bottke, partner at Monitor Deloitte Germany, associate professor of practice at SDA Bocconi Business School, and author of the bestseller "Digital Transformation Payday."
Tech investment and strategy alignment is even more valuable: To enhance market value, it's essential for businesses to have technology investments that align with their overall business strategy. Business statements that demonstrated tech investments (cloud, AI, cybersecurity, IoT, fill in your favorite) closely aligned with strategic ambitions (to enter new markets, introduce innovative capabilities, to grow, to disrupt, etc.) can drive even greater market value. Compared with digital strategy value gains, this action drove double the market value, according to our analysis.
"Given only 34% of businesses in our analysis benchmarked high for strategically aligned technology investments, market value realization opportunities remain for businesses." Greg Dost, principal, Deloitte Consulting LLP
The trifecta is the ideal: When businesses combine their digital strategy with technology investments that are aligned and powered by a strong digital change capability, it becomes the most significant driver of market value. What does good look like?
Deloitte
Remember that $1.25 trillion market potential for Fortune 500 firms from earlier? That's what's at stake here, and almost no one is there yet, making this a prime place for leaders to reconcile their approach and recalibrate across the business.
What digital actions can destroy market value?
"While challenges may be ample across digital initiatives, our research revealed two risks to market value — both relate to digital change capability in unexpected ways." Diana Kearns-Manolatos, global digital transformation research leader in the Deloitte Center for Integrated Research
Digital change capability without intent destroys value: Business filings focused on transformation and workforce change broadly — when not tied to a larger strategy or tech investment — destroyed value. Business leaders can combat this risk by being specific about how digital change capabilities are in service of their strategy and broader technology investments.
However, there's an even greater risk of value destruction to market value that our analysis revealed with 10 times greater losses than digital change capability without intent.
Digital strategy and strategy-aligned tech investments together — without a digital change capability — destroy the most value: Our analysis made it clear that digital change capability is a wild card. It makes the difference between the ideal $1.25 trillion trifecta and the $1.5 trillion value destruction risk.
In other words, the absence of digital change puts at risk a $2.75 trillion market value delta among Fortune 500 firms. Let that ruminate for a minute. If you invest in your strategy and make all the right technology moves to drive it forward, if your organization hasn't appropriately signaled how you plan to move the business forward to transform in support of that investment, you've missed the point.
Dare to make bold moves
Business leaders are in the driver's seat. Don't miss the strategic intent. Don't chase technology fads. Don't change for change's sake. Dare, instead, to make bold, decisive moves that demonstrate your unique digital intent and unleash digital value.
Interested in learning how your organization can gain more value from digital transformation? Reach out to Deloitte to inquire about a custom briefing for you and your organization.
Unleashing Digital Transformation Value: Paths and Pitfalls
This article was created by Deloitte with Insider Studios.
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