Point of View

Doing more with less | Align emerging tech investments with business goals beyond narrow financial savings

December 17, 2020

The pandemic has upended spending plans for emerging technologies that are leveraged in a wide range of digital solutions, including AI, machine learning, automation, and cloud. Overall spending during the second quarter of 2020 is down by about 50% for some segments, and this trend has not abated in the third and fourth quarters. We based these estimates on a study HFS Research conducted in conjunction with KPMG International from March to May 2020. Exhibit 1, based on that study, shows the average investment in emerging technologies. We published the full results in the Enterprise Reboot.

Exhibit 1: Investments in financial services dropped dramatically in 2020

Source: HFS Research, 2020; Enterprise Reboot study conducted for KPMG on emerging technologies in 2020

Concomitant with this decrease in spending is a shift in overall business challenges around activities associated with greater management involvement in emerging technologies during these six months, as shown in Exhibit 2. Specifically, the challenge in developing the business case for deploying emerging technologies has shifted dramatically in importance. Challenges with C-suite and board-level commitment to emerging technologies increased in importance. We infer from this that C-level priorities, which extend far beyond routine cost-cutting, will become more critical to business case development.

Exhibit 2: Realizing value from emerging technologies has a new set of challenges

Source: HFS Research study conducted for KPMG on emerging technologies in 2020

HFS believes that to accomplish this shift in mindset in evaluating emerging technologies, enterprises must build the business case around the operational imperatives of the Digital OneOffice as delineated in the following list. These replace the narrower financial savings measures that businesses have traditionally used to evaluate projects on an ROI basis: Align emerging technologies to business goals to drive growth, enhance employee experience, and increase equity value. Digital enablement is one of the most important enterprise goals that support achieving customer experience, financial performance, and growth objectives.

  • Utilize talent for outsized productivity. Digital talent predominates, and automation tools augment employees’ digital capabilities. The workplace becomes a “plug-and-play,” work-from-anywhere scenario. The focus is on creating a touchless, frictionless experience for employees and customers through tools and applications within a virtual setting. Skills training focuses on digital literacy and capability.
  • Enhance the customer experience and drive greater customer loyalty using digital technology. Technology architecture is built upon AI-powered, cloud-enabled autonomous solutions that focus on experience. The focus is on an approach to use integrated technology, not a patchwork of technologies. A strong IT-business partnership will enable this technology architecture.
  • Drive operating model innovation to ensure that service delivery flexes both operationally and financially to market demands. Digitization is the foundation for all processes. Formal centers of excellence run digital transformation projects. The leaders running these projects should provide more transformation journeys that focus on both customer and employee experiences.
  • Emphasize change management to accelerate time to achieve benefits. A focus on simulating processes and reimagining existing ones drives continuous process monitoring versus running after cheaper and faster modes. Design thinking is a foundation for all change management decisions.
  • Treat data as an asset. Instantaneous and ubiquitous access to data with the application of advanced AI and automation tools across the entire enterprise transforms the value proposition of most products and services. Data’s financial benefits are treated as a balance sheet asset, not solely as an income sheet line item.

The people skills in Exhibit 3 make the imperatives of the HFS OneOffice real and lay the foundation for reframing the business case analysis to meet the pandemic’s challenges.

Exhibit 3: Skills needed for OneOffice organization

The Bottom Line: A creative and comprehensive rethinking of the business case is essential.

The pandemic has upended companies’ operations, leading to careful evaluation of investments and expected returns. However, if companies maintain a narrow, finance-focused view of digital initiatives, they potentially miss identifying many of their long-term competitive advantages and may sub-optimize emerging technology investments.

Companies can minimize financial risk by taking a holistic approach to understanding returns, mitigating the challenges to business case development in this new environment. For example, data transformation and access, often facilitated through emerging technologies, have long-term downstream benefits, driving greater market insight to improve customer satisfaction and loyalty. This results directly, in many cases, in incremental revenue generation.

 

It is these linkages that companies must make in the new business case development calculus.  Because enterprises cannot quantify some digital initiatives’ near-term financial impacts does not necessarily make these projects unattractive.

Evaluating emerging technology benefits in creative and holistic ways is necessary to mitigate the challenge of business case development. Just as digital technologies can drive transformation, so too must leaders transform how they think about the expanse of opportunities that digital technologies bring from change, organizational, and strategy perspectives.

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