What’s your digital ROI? Realizing the value of digital investments
October 12, 2016
Executive summary
Digitization is transforming how companies in every industry go to market, interact with customers, and carry out their operations. The digital transformation required, however, is complex, time consuming, and expensive, and it affects every aspect of the enterprise. So it’s essential that companies actively plan and monitor their digital investments in order to get their money’s worth out of the effort.
To that end, every company should put together a process and governance mechanisms by which they can manage and measure their digital return on investment and innovation — the progress they are making toward digitization and the value they are capturing. This process should be carried out across the enterprise, in six key strategic focus areas: customers, employees, operations, safety and soundness, infrastructure, and disruption and innovation. Metrics for measuring digital ROI, both quantitatively and qualitatively, need to be developed and linked clearly to the company’s overall strategy and goals.
A strong process and proper governance, however, are not enough to guarantee success. Digitization has the potential to reinvent work entirely and change the way organizations function fundamentally. Key elements of digital transformation include focusing on the digital experiences of both customers and employees, quickly testing ideas early and rewarding the willingness to take risks, managing the disruptive effects of digitization on your operations and culture, and taking an all-encompassing view of how digitization will impact your business.
The only way companies can successfully manage the process and reach their strategic goals is by measuring their digital ROI every step of the way.
Returning value
The age of digital disruption is upon us, and no company is immune to its effects. Across every industry, customers and employees alike are demanding greater mobility; easier, more transparent access to information of all kinds; and flexible, pleasing user experiences. Internal operations, too, are being transformed as companies look to digitize and automate everything — the factory, the supply chain, even marketing and sales.
And if you think your company should be cautious in its approach to digitization, think again, because even if you’re moving slowly and carefully, your competitors aren’t. They aren’t just paying more attention to social media or capturing more information about their customers’ preferences. Rather, they’re completely reimagining their business models to take advantage of the imminent wholesale shift from strategies based on selling physical products to strategies built around selling the data and services now becoming available through digitization. According to a recent Forrester study, a large percentage of executives think that almost half of their revenue will be influenced by digital by 2020.
Already, companies are dedicating huge resources to the effort to digitize. PwC’s 2015 Global Digital IQ survey found that 31 percent of companies globally, and 44 percent of Canadian companies, are assigning more than 15 percent of their revenues to digital investments. By 2019, companies around the world are expected to have spent a total of US$2.1 trillion on digital transformation, according to IDC.
This level of massive investment brings with it huge risks, especially for companies that neglect to take into account the full impact of digitization in every aspect of their business. IDC also predicts that by 2018, 70 percent of siloed digital transformation initiatives will ultimately fail.
But failure isn’t an option when the very survival of your business is at stake. So how can your company make sure it is getting a positive return on investment from the money and resources it is dedicating to its digital transformation? That’s where the concept of digital ROI comes in.
Are we succeeding?
The rewards of completing a successful digital transformation will be great, but companies embarking on the process are well advised to expect a long, complex, and expensive process. Only by measuring every step of the way — in terms of what is working and what isn’t, how much time it’s taking, and whether it is boosting revenues and cutting costs — will companies have an accurate picture of their progress. The digital ROI framework can provide the holistic view companies need if they are to ensure a fast, efficient, and orderly transformation, while adhering to their strategic goals.
Acknowledgments
The model described in this report was developed by PwC Digital Services with specialists from Strategy&, PwC’s strategy consulting group. It incorporates feedback from our cross-industry digital discussion panel. We’d like to thank the panel for its advice and insights for this report.
Trish Barbato, senior vice president, innovation, at Revera Inc.
Karla Congson, former chief marketing officer at Dundee Corp.
Susan Doniz, corporate board director at DIACC
John Hall, senior vice president of customer experience at Rogers Communications
David Nicholl, corporate chief information and information technology officer for the province of Ontario
Michael Ptasznik, former chief financial officer at TMX, currently CFO of Nasdaq
Robert Siddall, chief financial officer at Metrolinx
