Article
11 minute read 23 September 2021

A new language for digital transformation

11 minute read 23 September 2021
Rich Nanda

Rich Nanda

United States

Ragu Gurumurthy

Ragu Gurumurthy

United States

Sam Roddick

Sam Roddick

United Kingdom

Deborah Golden

Deborah Golden

United States

Brenna Sniderman

Brenna Sniderman

United States

Diana Kearns-Manolatos

Diana Kearns-Manolatos

United States

Organizations still struggle to advance digital transformation. A common language that transcends technology could be the key to strategic transformation.

From disruptors and disruptive tech to pandemics, political unrest, and climate change, winning the future depends on adaptation. To survive and thrive, leaders should determine how to maintain a competitive advantage and enable an ability to win in a way that doesn’t just withstand change but embraces it to generate new strategic possibilities.

An adaptive business in the 21st century is typically a digitally powered business, leading many organizations to pursue digital transformation. But why do so many transformations fail to deliver concrete impact? Why is it so hard to drive cross-functional change, plan beyond one technology at a time, or create a strategy that can adapt as technology evolves and organizations shift their core assumptions? Creating a common, strategically linked language for digital transformation could be the answer to achieving digital advantage and adaptability.

Framing the digital transformation conversation

While 85% of CEOs accelerated digital initiatives during the pandemic,1 most can’t articulate their overall strategy and progress beyond that they made a tech investment. The imperative for change is increasingly the creation of an adaptable business—one that can thrive in the digital economy. If CEOs can’t say their digital transformation resulted in new business advantages or adaptability, then they haven’t really transformed. This dichotomy between business and technology strategy underscores a broader phenomenon: Many leaders understand that technology shouldn’t drive business strategy. Yet all too often, that understanding is superseded by an impulse to ask, “What should our AI strategy be?” or to respond to events by making a series of tech-first, one-off investments. The urge to think in discrete technologies can be powerful.

Compounding this challenge is the fact that C-suite executives have different focus areas and goals. And, more than likely, a single technology won’t address their needs; rather, a complex combination of solutions may be needed. Further, they often don’t speak to each other when making tech decisions, or if they do, they struggle to effectively communicate. Digital transformation is a team sport and should use a playbook to coordinate strategies across leadership functions with consistency in the face of change.

While many organizations have a digital strategy, they lack a common language to strategize across functions, making it challenging to digitally transform and address related opportunities and risks. Indeed, a common language for digital transformation can enable C-suite executives beyond just the CTO or CIO2 to have tech-adjacent and tech-agnostic conversations that transcend any individual technology and go to the heart of their processes and culture, and how people work and interact.

By embracing a common language, organizations can begin to:

  • Break through human behavioral and structural barriers. Everything in an organization is interconnected. Leaders across functions can speak thematically about shared needs, avoid redundant investments, address emerging risks, and change processes at scale by simply communicating better.
  • Plan beyond a single technology. Platforms, capabilities, and initiatives often involve multiple digital and physical technologies securely working together.As these technologies combine, they become greater than the sum of their parts to bring new capabilities and greater value.
  • Evolve into the future. Today’s breakthrough technology is tomorrow’s legacy tech. A common language can enable leaders to think flexibly across a matrix of business and technology needs, without having the business strategy reliant on any single technology.
  • Achieve a greater strategic business value through its capacity to change and ability to win. This approach helps organizations better align and execute against their business strategy to achieve their desired results of advantage and adaptability of the organization, humans, and technology.

In fact, Deloitte's soon-to-publish research on the exponential enterprise has found that on average, a company with above-median scores on both the ability to win and capacity for change indices enjoys measurable rewards. These firms saw a price-to-earnings ratio that's 53% larger and share price volatility that's 21% less than industry rivals with below-median scores on both dimensions based on data from 2015–2020.

The language of digital transformation should have one foot on the business side and one foot grounded in downstream technology and operations, steering clear of technical terminology to ensure that all parties can understand and contribute to the conversation. Leaders across industries recognize the need to connect the two spheres in an approachable, universal way. As Tighe Wall, chief digital officer at Contact Energy, explains: “If you want to get closer to and become more vital to the business and its strategy, you need to speak the same language as the business. Every company will become more technologically and digitally focused in the coming years. The ones who will be successful are the people who have already bridged that gap and are already speaking the same language in the business as they are in technology.”

Five imperatives to drive digital transformation

We’ve identified five business outcomes that technology impacts and enables that can help to build that common language. By thinking thematically across these five digital imperatives—experience, insights, platforms, connectivity, and integrity—organizations can communicate across functions in a way that puts strategy before technology and can lead to initiatives that deliver a more modular, flexible technology core that better delivers transformation and strategic value. These business-techno concepts can act as guardrails to help leaders avoid the trap of falling into a technology-led conversation. They can also help frame digital strategies that are linked to technical realities and workforce implications. In essence, they create a bridge for coordinated discussions between business and technology strategists and workforce and operations leaders.

Drilling down into more detail:

1. Experiences: Focus on optimizing interactions with users, whether they be customers, the workforce, or other stakeholders within the ecosystem

2. Insights: Assess what data, analysis, operating model, and workforce are required to enable organizational strategies

3. Platforms: Focus on the location and management of information across an organization or its network3

4. Connectivity: Involves the flow of information between platforms, experiences, and insights, encompassing the future of the internet, and networking with other organizations and ecosystems

5. Integrity: Focuses on improving resilience, security, ethical tech, and trust across all internal and external facing business systems and processes with a cyber-minded culture to address continuously evolving threats

There will be more than one technology to consider for each imperative. Thinking about the imperatives as categories, or “capability stacks,” can be useful. Themes allow change categories to become fixed as technology changes. This way, leaders can consider today’s enabling and disruptive technologies (that is, cloud, IoT, blockchain, AI, cybersecurity, mobile, 5G, digital reality, edge computing, quantum, and others), while leaving the same strategy in place for future disruptive and horizon-next technologies to meet the same strategic objectives (figure 1).

Putting the imperatives to work: Align strategy and drive transformation

Organizations can use these imperatives as a vocabulary to build a digital strategyaligned to the organization’s strategic north star (figure 2).

Start by considering how that overarching ambition cascades across business, technology, and workforce considerations:

  1. What’s the enterprise objective for the digital transformation? Capacity to change? Ability to win? Both?
  2. Across each of the five digital imperatives, ask the following questions:
    • What is the strategic business goal that best supports our enterprises’ objective(s)?
    • How do we need technology to support this business goal in terms of purpose, function, security, and risk requirements?
    • What will the operations and workforce impacts be for those business and technical or security decisions? Conversely, how might workforce strategies and capabilities impact the transformation strategy in a way that considers profound changes across leadership teams, operating models, ecosystems, and the workforce aligned to strategy?
  3. We can then arrive at a technology strategy, with planned technology investments that ladder up to the overarching organizational ambition and align with organizational and workforce transformation needs.

Let’s look at an example to explain what we mean: Creating a smart factory strategy. First, assess the enterprise objective for the smart factory, for example, to manufacture small batches or to personalize items at reduced cost versus current mass manufacturing approaches. Second, build the digital business strategy by considering how each of the five imperatives aligns to these manufacturing goals in terms of the insights needed, the platforms and connectivity required and, finally, how to do so with integrity. Then, broadly consider your technology requirements aligned to the digital business strategy down the list of digital imperatives. Instead of starting with cloud as an assumed investment, discuss a range of technologies (that may or may not include cloud), and the implications of those technologies on the workforce and operations. The result could be better strategic alignment across the digital business strategy, technology investment strategy, and organizational or workforce transformation agenda.

Change, compete, win: Getting to value with the five imperatives

While our proposed framework may be new, the challenging practice of adopting an integrated, cross-functional approach to digital transformation is not. But achieving such an integrated approach is vital. When we analyzed data from 2,860 global business and public-sector leaders responding to Deloitte’s 2021 Digital Transformation Executive Survey,4 we saw that the technologies listed in our survey that align with these imperatives were rated as the top five most important to enable digital transformation. Additionally, we saw that the more digital imperatives these organizations adopted, the greater their digital maturity and profitability.5 Further, more digitally integrated organizations measurably outperformed on their strategic objectives, capacity to change, and ability to win.6

To effectively gauge the value organizations can gain from increased adoption of the digital imperatives, we broke respondents into two groups:7 “digital all-rounders,” who have implemented three or more digital imperatives (~13% of respondents), and “digitally developing,” who have implemented fewer than three digital imperatives (~87% of respondents). While ~67% have embraced at least one digital imperative, when organizations combined them in an integrated digital strategy, they saw greater value.

Digital all-rounders lead digitally developing organizations in terms of:

  • Capacity to change: Digital all-rounders were better able to scale, more frequently achieving full-scale implementations (77% vs. 64%), and said their digital capabilities significantly helped them deal with the challenges of COVID-19 (35% vs. 24%).
  • Ability to win: All-rounders also reported successfully achieving revenue growth rates that are above industry average (74% vs. 65%) and cited their digital capabilities as a key differentiator (36% vs. 25%).

Whether they realize it or not, many organizations are already taking this integrated approach. We interviewed four global leaders responsible for their organizations’ digital transformation, each in different business and technical functions, industries, and geographies, and found that they were already approaching transformation in this way—but without a clear language and framing to guide them. From these conversations, we learned that this framework can effectively guide organizations with three digital transformation objectives: Optimize one digital imperative across business, technology, workforce; integrate multiple imperatives to build a more comprehensive single strategy; or adopt a combined approach that integrates multiple imperatives across these strategies (figure 3).



Prudential, for example, focused on optimizing the insights imperative across business, technology, and workforce and operational strategies. When designing its algorithm to automate underwriting, they engaged underwriters to gain greater adoption and value from the transformation. Robert Huntsman, chief data scientist for Prudential Financial’s Life Insurance and Retirement business, explained, “The way they work is changing, so, knowing that, underwriters have been involved from day one in helping to write the requirements, to craft how the model works as well as in changing their own processes for how they would interact with the model. Now, for 60% of applications, you can get an expedited decision … reducing the amount of time an underwriter needs to spend on evaluating an application. That’s a huge cost saving for the company which enables us to be more price competitive and provide our customers the services they need faster.”

Alternatively, the framework can help organizations to consider building a more integrated business strategy that includes platform, insights, experience, connectivity,and integrity. Manoj Raghunandanan, president of Global Self Care and the Consumer Experience Organization (CxO) at Johnson & Johnson Consumer Health, articulated a digital transformation business strategy touching on all five of the imperatives: A platform approach to improve end-to-end data connectivity across customer insights and experience in a way that considered data integrity. He explained, “we're focusing on connecting our organization from end-to-end to create an improved and more transparent experience for our consumers, customers and our suppliers [of] ingredients. This requires connecting all the data from the very beginning of research & development, through the supply chain, to our retail customers, and through to the consumer.

British American Tobacco and Contact Energy looked at a combination of several of the digital imperatives aligned across business, technology, and operations/workforce strategies. Elaine Chum, area head of digital transformation, British American Tobacco, North Asia, explained how she is leading her organization’s online retail platform strategy in Japan to create a direct-to-customer buying experience within the regulatory integrity requirements to drive increased sales revenue. She explains, “In today’s world, I should be able to deliver within 24 hours. We started looking at consumer experience and restrictions,” and with those three imperatives in mind, advised, “Put the consumer experience in the front, middle and back of your company’s agenda. Look at the strategy element, the internal business processes and how it can enable transformation, the technology and its platforms that we own and operate in, the capabilities that we have, talent, people, resources, [and] the organization structure” notably emphasizing the unique challenges of operating in a region that values stability over change and finding Japanese-speaking digital talent.

Additionally, Wall of New Zealand’s Contact Energy is extending the digital platform his organization initially created to optimize customer experience to reduce friction for its customer service representatives, enhancing workforce operations. Having a comprehensive, matrixed strategy in place can allow for this type of flexible, synergistic decision-making that keeps the overall organizational ambition in mind.

A language for today’s transformation—and tomorrow’s

Our digital imperatives can enable organizations to drive transformations that align to their overarching ambition while remaining open to future strategy changes. They acknowledge the importance of AI, cloud, and cybersecurity today but leave room to evolve toward “horizon next”8 technologies, avoiding the trap of leaping at every shiny new technology. Ultimately, they help design-adaptive business processes and technology architectures (modular “capability stacks”) that embrace constant change and reconfiguration in the face of ongoing disruption and risk with the goal of compatibility for multiple possible futures. As Raghunandanan states, “We’re not done. We’re not going to be done. We’re only done at the speed of technology being done and, if you look at it, it’s changing every single day.”

Driving an effective digital transformation

The framework we’re proposing can help organizations take the following key actions:

  • Develop adaptive strategies. This framework can help organizations to be more honest about where the future lies and to ask the tough questions needed to drive change: Are we making the right strategic technology investments to add clear value that can be explained to the board and shareholders? Do we have the right leadership, operating model, and workforce to execute that strategy? Are they empowered and equipped to work together to transform and reinvent the organization? It can guide organizations on how to work in an integrated way across leadership.
  • Translate across teams. If your leadership team isn’t talking the same language, spend time educating to get to the same language. Keep in mind, it’s not going to happen organically. There has to be intervention to find common ground across the organizational functions and ecosystem partners.
  • Build ‘no regret’ muscles. Many organizations can’t break the inertia of cost concerns, risk aversion, and legacy tech. Use this framing to guide investments. Look to the overarching strategy as a north star to guide what’s truly risky—and what’s calculated risk. Take a hard line to shut down nonessential investments, and instead, make a smaller number of bigger bets aligned to the digital imperatives with leaders accountable for adoption, change management, and eliminating friction/resistance.
  • Seek a state of dynamic equilibrium. Assess which digital imperatives are most important to your organization to achieve a fluid, fungible, integrated technology strategy where the variables in the equation are unchanging over time, that remains in a steady state even as reactions and shifts are continuously occurring.9 Name a C-suite leader to oversee the integrated business and tech strategy, and consider forming a digital transformation committee that is fluent in the shared language to drive change and assess shifting needs.

  1. Janet Foutty, How digi tal transformation—and a challenging environment—are building agility and resilience , Deloitte Insights, April 29, 2021.View in Article
  2. Andrew Adams et al., “Why technology is the strategic issue of our time ,” Deloitte, accessed August 23, 2021.View in Article
  3. The digital imperative defines platforms in terms of the infrastructure organizations will need to support their digital strategy. We will discuss the evolving integrated nature of platform technologies such as IoT, edge computing, and cloud further in future research, including how all five imperatives are mutually reliant on each other, with platform acting as a key enabling "glue." The use of platforms here should not be confused with platform and ecosystem business models. For more on that topic, see the following: Deepak Sharma, Maximilian Schroeck, Anne Kwan, and Venki Seshaadri, Digital platform as a growth lever: Platform strategy can help companies transition from a "make one, sell one" model to become network orchestrators , Deloitte Insights, July 29, 2020.View in Article
  4. Analysis of data from a survey of 2,860 executives and public-sector leaders from seven countries, conducted by KS&R Inc. in November 2020 and January and February 2021, for the 2021 Digital Transformation Executive Survey, Putting digital at the heart of strategy .View in Article
  5. We define here digital transformation success as the ability to successfully deliver the digital transformation program aligned to the business strategy. This differs from digital maturity which is defined in the first annual Digital Transformation Survey report, Pivoting to digital maturity . Three of the four digital imperatives also line up with 10 years of technology trends research on the most important technology categories as presented in Deloitte's annual Tech Trends research.View in Article
  6. A particular organization is embracing a particular digital imperative based on its past commitments toward that imperative, present impact they are witnessing from it, and their future perception about the enabling technologies.View in Article
  7. While successfully implementing all five digital imperatives is the ultimate goal, currently only a small minority (31 respondents) have transformed using all five, making this the preferred methodology for analysis.View in Article
  8. Christina Brodzik, Kristi Lamar, and Anjali Shaikh, Tech Trends 2021 , Deloitte Insights, December 2020.View in Article
  9. PrepScholar, “What is dynamic equilibrium? Definition and examples ,” July 12, 2018.View in Article

 

The authors would like to thank the many Deloitte leaders who contributed their perspective, insights, and support to this research, and a special thanks to Bill Briggs, David Schatsky, Jeff Loucks, Andrew AdamsKhalid Kark, Ranjit Bawa, Nicole Scoble-Williams, and Jay Parekh.

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Rich Nanda

Rich Nanda

Principal | US Monitor Deloitte Practice Leader

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