Economic uncertainty has spurred many tech executives to pump the brakes on riskier innovation projects, but digital transformation is still perceived as the right target for investment. Leaders interviewed in February 2023 by Deloitte see it as worth the money and rife with opportunity.1Executives surveyed ranked modernizing digital infrastructure as high in potential benefit and relatively low in terms of the challenges in achieving it. The outcomes they expect from their digital transformation efforts include boosting efficiency, improving current offerings, and creating new products and services. Reducing costs, although still important, ranked fourth (see figure).
Although there are many strategic priorities vying for limited resources, digital transformation rises to the top for technology industry leaders. “You have digital transformation goals, cost optimization goals, talent challenges, and reductions. You have other projects like sustainability. You have to look at the portfolio and that’s what makes it difficult. I would say that digital transformation is still top of mind for 2023,” one leader told us.
Another noted, “I think that digital transformation investments aren’t taking a hit because it is the future. It’s not something that can be paused because if you don’t do it, it’s clearly an opening for the competition.”
This wave of digital transformation efforts will likely look different than those of the past few years. As tools powered by artificial intelligence (AI) are incorporated into more enterprise software and business processes, digital transformation is expected to evolve beyond infrastructure modernization.
“It used to just be—how do you get to the cloud? Now it’s—how do I use AI and machine learning to make proactive decisions? How do I use [generative AI] in my workforce and automate all the things that I was doing manually? How do I use data to break down silos and create streamlined processes that give me more transparency and visibility into the business?” one leader noted.
The consensus seems to be that increasing automation in a challenging economic environment could be sensible—and leaders are looking to AI to contain costs, reduce errors, and automate processes, all of which can increase efficiency.2
The leaders with whom we spoke see AI as a catalyst for transformation, but they aren’t yet exploring its potential impact on customer-facing processes and products. “The focus is on AI-driven solutions, real-time solutions, real-time decision-making, and conversational chatbots. We have developed our AI lab internally, and we are putting a lot of money into research,” one executive said.
“From an automation perspective, AI and machine learning is a pretty large investment area for us, but it’s not yet: ‘How do we bake it into the service that we’re offering to our customers?’ It’s much more of, ‘How do we internally save a bunch of money and time, hardening the platform, or doing way more with fewer people?’,” said another.
For many, digital transformation still simply means infrastructure modernization, better data management, and software upgrades. The benefits of those transformation efforts include achieving efficiency, improving existing products, and reducing costs. Even with the advent of AI, it still appears that companies are more focused on these goals. Are they missing out on the bigger prize? Are they focused on improving internal productivity at the expense of new capabilities, products, and growth initiatives?3
One consideration to avoid becoming myopic when it comes to AI-powered digital transformation is to focus on value. As one executive said, “Our digital transformation is across the board. It’s not only related to technology. It is all about how we are delivering value to our customers. Moving to the cloud doesn’t mean that it’s digital transformation; it’s just one part of it. Overall, the business transformation as well as IT transformation, [and] how that transformation is adding value to us and our customers, this is how we look at it.”
As AI becomes an integral part of digital transformation efforts, business leaders may ask:
