How companies can improve their return on digital investments

6 minute read 16 Feb 2021
Authors
Laura McGarrity

EY-Parthenon Principal, Digital Innovation, Ernst & Young LLP

Leading digital transformation efforts for clients. Extensive experience in emerging technology and start-up ecosystems. Gardening pro.

Sonal Bhatia

Americas EY-Parthenon Transaction Strategy & Execution Leader

Passionate about helping clients achieve their full potential through rigorous execution of their growth, portfolio and M&A strategy. Ardent supporter of diversity and inclusiveness in the workplace.

6 minute read 16 Feb 2021

M&A can drive digital transformation, but talent, resources, operating model and strategy are key to success.

The pandemic has accelerated digital investment as companies look to pivot their operating models and stay competitive. Those that remain agile amid changing conditions are more likely to succeed.

Many companies –  64% per a recent digital investment index study – are now moving away from building digital capabilities in-house and instead are leveraging the right mix of buy, build and partner to accelerate their digital agenda.1 With the pandemic, operating environments and marketplaces have shifted dramatically. EY teams have started to see that digital M&A has a greater return compared to other digital investment choices. Two thirds of the survey respondents said they need to radically transform their operations in the next two years, and investing organically may not see results fast enough.

While the business case for digital investments is very compelling, aligning executive teams on the right mix of investment choices could be key. To champion the digital agenda takes strong leadership from the CEO, and aligning with the chief financial officer is also critical. One important question the CFO will always ask is: what is the expected return on my digital investment? Bring the CFO in early and make sure that they're your ally in the process.

Digital M&A requires a very different approach to diligence, integration and value creation, so the process needs to be managed carefully. To do this, it’s important to articulate the value and impact.

Companies should:

  • Have access to data readily available to make decisions quickly.
  • Have the mechanisms in place to track the return on their digital investment.
  • Set your KPIs early in the process.

Created in collaboration with CNBC Brand Studio. 

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Summary

In the wake of the pandemic, companies in all sectors seem to be accelerating digital transformation efforts with M&A critical to success. Determining the right investment mix of buy, build and partner may accelerate digital transformation. The success of a digital transformation efforts requires the right talent, operating model, strategy and adequate funding.

About this article

Authors
Laura McGarrity

EY-Parthenon Principal, Digital Innovation, Ernst & Young LLP

Leading digital transformation efforts for clients. Extensive experience in emerging technology and start-up ecosystems. Gardening pro.

Sonal Bhatia

Americas EY-Parthenon Transaction Strategy & Execution Leader

Passionate about helping clients achieve their full potential through rigorous execution of their growth, portfolio and M&A strategy. Ardent supporter of diversity and inclusiveness in the workplace.