Published on the 08/12/2022 | Written by Heather Wright

And is DX actually providing ROI?…

Companies remain bullish with their digital transformation plans, but they’re struggling with delivering bottom line results, and grappling with how to make the right choice in the candy store of disruptive technologies. 

Mind the Tech Gap, a new report from Boston Consulting Group division BCG X – which polled nearly 2,700 executives across 13 countries, including Australia – found 60 percent of planned to increase investment in digital transformation next year, but 93 percent say they’re struggling to navigate the rapidly growing landscape of new technologies.  

That issue of selecting the most appropriate disruptive technology was the top challenge for digital transformation according to respondents.  

Companies must ensure they are focusing digital investment on the goals, results and real-world outcomes that matter most.

Achieving scale fast and recruiting talent were also key challenges cited followed by prioritising investment and development and managing the cost and uncertainty of return on investment, while advanced AI, blockchain and IoT were the top three transformative business technologies. 

Globally, Gartner has forecast IT spend to increase 5.1 percent next year, with New Zealand and Australia tracking ahead of global averages at 6.0 percent, as organisations push ahead with their digital initiatives, despite ­­­– or perhaps aided by – the strong economic headwinds and mixed macroeconomic signs. 

A surge in tech investment and innovation during the pandemic has apparently given organisations new confidence in the potential of technology to revitalise their business – and provide the flexibility and scale needed.  

But picking winners is clearly proving a challenge and the report says 70 percent of digital transformations fail to achieve objectives, often with profoundly damaging consequences. 

“What’s clear from our survey is that most companies are struggling to deliver bottom-line results for their digital transformations and are facing consistent pain points with their tech partners and vendors,” says Sylvain Duranton, global leader for BCG X.  

That’s at odds, however, with a recent KPMG report, which shows 74 percent of Australia’s IT leaders say their digital transformation efforts have delivered more than six percent more profitability or performance for their organisation. 

Globally the report found 99 percent of executives have generated returns from digital investments. Almost all businesses have successfully used digital transformation to improve their profitability or performance over the past two years, KPMG says, although it does not most have only grown by between one and five percent in this period.  

That report notes that globally, respondents acknowledge the potential of emerging technologies and are laying the foundations for their implementation. 

Nearly half (46 percent) are making plans for future investment and implementation of emerging technologies, although for the majority (65 percent), little to no movement has been made yet.  

John Munnelly, KPMG Australia chief digital officer, says Australia organisations, grappling with talent challenges and lower budgets than their global counterparts – with 59 percent (versus 46 percent globally) saying that less than 10 percent of their organisation’s annual budget is dedicated to technology – must ensure they are focusing digital investment on the goals, results and real-world outcomes that matter most.  

Like the BCG X report, KPMG’s report suggests AI is riding high. Forty-five percent of Australian organisations report progressing and continually evolving their AI and automation strategy, with 55 percent predicting AI and machine learning will attract the highest investment three years from now.  

Data and analytics are providng a challenge however, for both New Zealand and Australian companies according to KPMG.  

Just 49 percent of Australian tech leaders surveyed for the Global Tech Report said they were making progress against their strategy, compared to 53 percent globally.  

The news isn’t any better for Kiwi organisations. The KPMG CEO Outlook report found use of data and insights to inform corporate strategy has slumped since 2020, with just 69 percent using data and insights in 2022, compared with 76 percent in 2020.  

Using and trusting data from external sources was a key topic. The survey revealed that the majority of organisations surveyed (89%) acquire and store data from external sources, but 78% said that the outsourcing of digital solution development must be collaborative in order to trust the data and analytics. 

Just under two thirds (65%) agreed that their organisation has trust in the data and analytics available to them. Access and transparency were highlighted as key elements, as leaders who have easy access to their organisation’s data are twice as likely to trust it. 

Stephen Hastings, head of KPMG New Zealand’s data and analytics says “It’s interesting to see how digital transformation and the integration of data may have slipped back down the agenda after time in the spotlight during the pandemic. “Organisations that are investing in integrating strategy and leadership with data-driven insights are reaping the rewards. Those who don’t may be missing out on opportunities to improve their customer experience, increase productivity and report on vital metrics that build trust with their stakeholders.”