Whatever you're spending on digital transformation, it's probably not enough.October 17, 2018
Digital transformation (DX) is less about the digital technology itself and more about how people harness it to solve traditional problems. And that process looks different for every company.
At the core, it’s about finding ways to deliver more value to customers while being comfortable with maybe not getting it right the first time. The key is having the confidence to go against the status quo and do a bit of experimenting. You’re essentially tossing out the mold for how your company has operated and replacing it with something new. That’s just as hard as it sounds.
So, what are companies spending to develop and implement new digital solutions? Individually, around 5 percent of operating budgets, according to one expert. On a larger scale, organizations are expected to up Digital Transformation spending by nearly 17 percent to more than $1.3 trillion by the end of 2018. Looking ahead, theInternational Data Corporation (IDC) reports worldwide spending on DX will reach more than $2.1 trillion in 2019, making it one of the fastest growing areas of technology spending.
The majority of spending this year has been on supporting new or expanding operating models. The industry is at what the IDC calls a “digital impasse”— a widening gap between the companies leading the change and those lagging behind.
Manufacturing sees a digital transformation spending boost
Certain manufacturing sectors have invested more than $333 billion in DX solutions this year. Smart manufacturing leads spending, along with digital supply chain optimization and digital grids, omnichannel customer engagement and innovation acceleration. A lesser priority has been operationalizing data and information, an indicator many companies are still early in their DX journeys. While every business has different DX priorities and strategies, digital supply chain and logistics automation ($93 billion) and smart asset management ($91 billion) are heavily invested in this year.
Transformation isn’t on everyone’s minds. However, as CEB research paper “The New IT Operating Model for Digital” describes, two-thirds of business leaders believe their companies will lose competitiveness if they don’t become significantly more digitized. But opportunities shift quickly and it’s hard to manage the change.
A true digital transformation requires a significant capital investment and some of the areas driving change are improved efficiency, reduced risk, desire to be more innovative and employee demand. Innovation should be a top priority for every company, as it differentiates in ways that make it hard for the competition to keep up.
To quantify ROI, look across your entire organization including operations, employees, customers, infrastructure and innovation. Then, develop the metrics for measurement both quantitatively and quantitatively. A decent ROI is $10 back on every dollar—but that’s really just a starting place.
More than 66% of digitally evolved companies are seeing returns on digital transformation investments that translate into higher customer engagement and greater satisfaction along with lower operating costs. Encouraging news for everyone else to follow suit.
To recap, spend wisely and fearlessly on innovation, seek to improve the experience and make sure you can prove your results.
Speaking of proving results, have you looked into an IVM Smart Station®?