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Digital change capabilities can make or break a digital transformation

How can organisations calibrate digital change capabilities to drive value?

An intentional focus on digital change can be essential to a digital transformation’s success. How can leaders calibrate these capabilities to help drive market value?

Many organisations are operating in a similarly disruptive digital environment: economic headwinds,i rapid tech consumerism (i.e., generative AI),ii evolving tech policies,iii an expanded workforce ecosystem,iv and a push for sustainable, ethical tech.v In this market, digital transformation can be high-stakes often with pressure to gain value from related investments. 

Many organisations view “digital change” as part of the value equation, but often think it’s just about change management. Building a true digital change Capabilities is about so much more. Digital change includes the strategy for rearchitecting work, engaging the ecosystem to unleash the power of the workforce and redesigning the organisation for hybrid work with the right mindset, skills, agile practices and measures.vi

These efforts are tied to many digital initiatives - and can be a make-or-break factor in successful digital transformations. When these capabilities are aligned with digital strategies and technology investments, organisations report as much as a 14% market cap differential as compared to when they’re not. vii That equates to approximately US$2.75 trillion for Fortune 500 firms alone. However, embracing change for change’s sake is not the answer: organisations focused on change alone report three times less market cap than with only a digital strategy. (figure 1)

As leaders calibrate their digital change capabilities, Deloitte Global analysis of 4,600 companies’ 10K filings and financial statements over the last five years underscores which digital change themes are trending up and down across a “digital change” agenda that is only continuing to grow in prominence, breadth and importance.viii As the data shows, getting digital change right matters, validated by the notable possible lift in market cap if done right and potential damage if done wrong. 

The digital change agenda is getting bigger
 

Over the period from 2016-2022, digital change Capabilities keywords appeared over 600 times in the business filings Deloitte Global analysed. Our analysis found that 55% of the digital change keywords trended upward, 31% remained static as persistent priorities and only 13% decreased. (figure 2) 

This demonstrates that digital change capabilities continue to have a prominent place on business leaders’ core agenda - an agenda that is only getting bigger among the set of companies and statements reviewed during this analysis.

Digitisation dominates over transformation
 

As shown in figure 3, the top trends related to digital changeix have remained consistent over the last six years, with each Topics analysed growing in importance. (figure 3)

The greatest frequency of digital change terms has been related to digitising the customer relationship (which showed a +253% increase), operations in relation to disruptive technologies, (a +168% increase) and operations that businesses can digitise (a +135% increase). Yet, what’s missing here is a focus on transforming those same customer experiences and operations. This is where leaders have an opportunity to better use digital change as a lever of their technology strategies and investments. 

Given the recent attention on Generative AI solutions that can operationalise content creation across audio, text and video formats, this research asserts that digital change capabilities are essential. The right mindset and approach to the operating model, organisational design, skills and workforce will likely continue to be driving forces of value now and into the future. 

Beyond the trends detailed in figure 3, each of the top 25 themes analysed for 2017-2019 remained top trends from 2020-2022 and displayed a continued upward trajectory. Leaders, therefore, should take action to ensure that they’re intentionally aligning digital change initiatives with their overarching digital strategies and technology investments accordingly.

High-tech, sustainable and data-driven
 

While the increasing of frequency of digital change terms predominantly aligned with a consistent set of keywords, we found several sets of keywords that were previously less prominent starting to trend upward in the rate they’re mentioned.x (figure 4)

 

The most prevalent of these is bringing together organisational transformation and technology transformation in IT. Other prominent focus areas include tech-enabled and high-tech approaches, ESG, data and agility related to efforts to digitise, microservices and customer Services and IP in relation to disruptive technologies. These topics are increasing at a rate of as much as 2300% as new topics emerge that require leaders’ attention. (figure 5).

Leaders’ ability to ingest and address these new topics on top of an already robust digital agenda may dictate whether they’re able to implement change programmes effectively. Particularly as pace of change shows no signs of slowing down.

We can see a slight downward trend related to topics like:


  • Wearables in relation to emerging technologies (-86%)
  • Software-enabled in relation to technology powered (-83%)
  • Sprints in relation to customer Services (-76%)
  • Internet-enabled in relation to customer Services (-70%)

Given more topics are being added to the digital change agenda than removed, leaders likely won’t experience much relief and should therefore find ways to work across functions to connect the dots across these matters.

Digital change levers for leaders
 

Regardless of an organisation’s size, digital transformation and a strong digital change Capabilities to drive the organisation’s strategy and tech investments are considered essential. 

  •  
  • Bring Strategy and IT closer together with a hub and spoke model - and use digital change Capabilities as a force to turn the wheel: given that digital change drives value but can also deter it, getting that alignment right is a foundational starting point. 
  • Break organisational inertia: larger companies in our analysis (with a market cap of over US$10B) especially benefited from the tech aligned to strategy scenario - catalysed by a strong digital change Capabilities. Perhaps this is because larger organisations with greater legacy technology dependencies may have greater investments and more value wrapped up in core IT modernisation, with the potential to significantly elevate the organisation. As a larger pain point, there could be the potential for greater reward. On the flip side, the digital change required for these organisations could also be far greater given their size and complexity, making it more difficult for them to capitalise on the digital change scenario as compared to smaller organisations.
  • Calibrate to compete at scale: organisations under US$5 billion in market cap were also found to be more susceptible to the risks and effects of value erosion associated with digital change.xi They may more easily succeed at digital change because operating model, ways of working, Agile and other digitally aligned changes can be easier for them to make; Yet leaders should understand that where a smaller size might be an advantage, it could also put them more at risk when they’re missing the right tech strategy to compete at scale. 
  • Experiment to learn: the way to begin the digital change journey is to start making changes, see what works for the organisation and its customers and then iteratively adapt. Experimentation allows for iterative change and that slowly and incrementally builds over time. A recent Deloitte report shows that big bold change can be the result of many small incremental changes over time.xii

 

Making or breaking digital value
 

As leaders look for numbers to give them confidence in their digital transformation decisions, all things are rarely equal. Therefore, organisations should look beyond the number to understand what is possible, what is probable and ground their decisions based on their own potential. There are many roads to value and an organisation’s ability to navigate that digital change effectively is the difference between the right path and the wrong one.

i Ira Kalish, “Looking ahead: Global economic outlook for 2023,” Deloitte Insights, January 2023.

ii Rachel Gordon, “MIT CSAIL researchers discuss frontiers of generative AI,” MIT News, 12 April 2023.

iii Tate Ryan-Mosley, “An early guide to policymaking on generative AI,” MIT Technology Review, 27 March 2023. 

iv Kraig Eaton, John Forsythe, Michael Griffiths, et. al, “2023 Global Human Capital Trends,” February 2023. 

John Mennel, Tim Smith, Kristin Anselmino, “The tech leader’s sustainability agenda,” January 2023.

vi Steve Hatfield, Arthur Mazor, Nicole Scoble-Williams, Simona Spelman, “Beyond productivity: The journey to the quantified organisation,” Deloitte Global, 2023.

vii Based on an analysis of ten years of business and financial data from over 4,600 global organisations. Tim Smith, Tim Bottke, Greg Dost, Diana Kearns-Manolatos, “Unleashing digital transformation value: Paths and Pitfalls,” Deloitte Insights, February 2023. 

viii This analysis revisited the keywords used from 2016-2021 to define ‘change Capabilities’ in our data dictionary developed for the research, Unleashing digital transformation value: paths and pitfalls. We then analysed change in frequency of usage year-over-year and for the most recent three years versus the three years prior to understand trending concepts and shifts in priorities.

ix Based on frequency of mentions in the business filings. 

Based on their % of change from 2017-2019 vs. 2020-2022.

xi We analysed the same 46,000 organisations in the Unleashing digital transformation value study by grouping them into two categories, those above and those below US$10 billion in market cap to understand to what degree the presence of digital change capabilities affected market value based on an organisation’s size. The overall findings were consistent regardless of organisational size, though the intensity of findings differed slightly with the digital strategy market cap lift even more intense for the smaller firms than larger firms.

xii Francisco Salazar, Brenna Sniderman, Timothy Murphy, Natasha Buckley, Aditya Narayan, “Behind the scenes of bold change: Three aeras where relationships matter more than you may think,” Deloitte Insights, October 2023.

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