How to Invest in your Digital Future
Organizations need to measure digital value the right way to take the long view on their key technology investments
The body has many complex, connected systems. Your nervous system connects nerves. Your skeletal system joins bones. All of these systems interrelate in a complex web as well. The brain controls your mood, which changes your posture, which causes pain in your back. Sound complicated? Well, that’s because it is.
Organizations are a bit like organisms. When you invest in a technology, there’s a complex web of value levers. Connections aren’t always apparent. And, it’s hard to know how short-term ROI will leave lasting impacts over time. Moreover, many business are dealing with technical debt, the need to modernize their core, and an immense pressure to innovate.
This is why, when investing in technology, organizations need to be thinking much more holistically, consistently, and long-term about what value is and how to maximize it. The challenge: 75% of the 1600 global business and technology leaders Deloitte surveyed in a recent research study don’t know what the right digital value measurements are. So, how can they measure the long-term and lasting impacts of their technologies?
To address this issue, Deloitte’s Center for Integrated Research spent two years analyzing the topic of digital value and found a few important signals as to what’s on the horizon for Technology Transformation:
Value horizons may be too short-sighted: Organizations have perfected the short game. Many businesses have quarterly and annual earnings and financial reporting obligations and budget cycles, so this shouldn’t come as a surprise to anyone. When assessing digital value, the majority (67%) of organizations are focused on short term savings and gains, assessing digital value quarterly and annually. Only 14% of respondents assess value gained from digital transformation every two years, and just 17% of respondents use or assess value every 3 years or more. Organizations don’t have a good long game when it comes to thinking about future, lasting value from technology investments. But true innovation requires business, technology, and financial leaders to put on their futurist hats and project out future potential. Especially for emerging technologies like Generative AI or spatial computing, the benefits are more likely to be accrued in the years to come.
A long-term ERP investment pays in long-term-stock-price returns: Often the backbone of a modern enterprise, ERP systems connect the business, technology, innovation, and value. While market sentiment is lukewarm – 69% of analyzed companies discussed ERP in negative/neutral terms – when organizations persist past year two roadblocks, their stock price performs above the 3-year-performance-average. ERP investments can and do pay out in the long term, but that requires organizations to plan for the future today, and then hold to that future business case, even when times are tough.
Organizations looking to win on digital today should recalibrate the metrics that matter – or there may not be a tomorrow: Deloitte’s Measuring Value from Digital Transformation Research includes a new multidimensional framework that spans Financial, Customer, Process, Workforce, and Purpose measures. This more holistic set of 46 KPIs reveals a critical gap in digital value measurement across industry and regions. According to our findings, most organizations use only about half of those KPIs available to them, and therefore, don’t have a full picture about where their investments contribute value today, let alone the future. This incomplete view could put critical new investments for the future at risk and place leaders on uneven footing when assessing ROI. Our research also shows that value leaders who best close the KPI gap report, on average, a 20% greater share of enterprise value from their digital initiatives. The best way to prepare for the future is to capture as much of the present value as possible, and then to build from there.
Remember: given organizations are much like organisms, investing in technology today will have long-term effects on an organization’s health and wellness. Impacts in one part of the organization will have both intended and unintended consequences that build over time. Many organizations prioritize short-term gains, but a fad diet doesn’t establish the right discipline for long-term help.
The future is not promised. If organizations don’t undergo a major mindset shift expanding their value horizon, sustaining long-term investments in their core infrastructure and tech capabilities, and assessing value more holistically and consistently across business and technology leaders alike – they may be betting away the future.
Diana Kearns-Manolatos | Research Lead, Deloitte Center for Integrated Research