6 minute read 6 Apr 2021
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How technology execs can help their customers with digital capabilities

Authors
Barak Ravid

EY Global Technology, Media & Entertainment, Telecommunications Leader for Strategy and Transactions, Ernst & Young LLP

Energized by all things at the intersection of technology and strategy. Passionate about the strength of diverse and inclusive teams. Love sailing, soccer and snowboarding. Father of three girls.

Peter Ulrich

EY-Parthenon Principal, Digital Strategy and Transactions, Ernst & Young LLP

Digital Innovation in Strategy and Transactions. Knowledge in industrials, automotive, machinery, construction, infrastructure, mobility, and logistics.

Glenn Engler

EY-Parthenon Global Digital Leader; EY Americas Strategy and Transactions Digital Leader

Helping organizations shape their business strategy in a digital world. Relentlessly curious. Passionate board member. Husband. Father.

6 minute read 6 Apr 2021

Technology company executives can grow their businesses by guiding customers through their digital strategy process.

In brief
  • As the COVID-19 pandemic continues, digital transformation has become a top priority for companies across all sectors.
  • Technology companies, who power these transformations, can play an important role in helping customers to develop more resilient digital strategies.
  • By sharing leading practices, technology companies may also have an opportunity to substantially grow their businesses.

Today, some companies are implementing digital transformation in a matter of weeks as opposed to years. To better understand how companies in all sectors are adjusting digital strategies, EY-Parthenon and Oxford Economics recently surveyed more than 1,000 executives with technology decision-making responsibility across industries worldwide about their digital strategies and results. The EY-Parthenon Digital Investment Index, conducted in the third quarter of 2020, provides a snapshot as organizations recalibrate strategies in response to the COVID-19 pandemic. Technology companies can use the survey findings to help customers adjust their strategies.

EY-Parthenon Digital Investment survey finds most companies lack the right digital strategy, but technology companies can help

The EY-Parthenon survey shows that digital performance leaders from all industries have clearer strategies and technical execution prowess, resulting in higher digital return on investment and revenue growth. But the data also indicates that 63% of companies say they do not have a clearly defined digital strategy.

Technology companies can use this insight as an opportunity to assist customers with formulation of their digital strategy either directly or more proactively through channel and alliance partners. Each customer’s strategy will be unique based on the business function and industry they serve and their current digital maturity. It is important for tech companies to partner with customers to think through opportunities, risks and enterprise-wide implications of different digital strategies with an emphasis on differences between operations vs. growth. It is also critical to keep in mind who the customer is and what their end goals are. Technology companies that influence their customer’s digital strategy can benefit by offering a holistic business solution based on a deeper understanding of the customer, while simultaneously receiving the correct level of executive sponsorship.

Managing data challenges

Additionally, the survey found that all companies continue to experience challenges around incomplete data, lack of a strong data analytics function and deficient data monetization strategies. This prevents some companies from realizing return on their digital investment. Technology companies can use their expertise in this area to help their customers connect data sources and add clarity by implementing high-value gates on data to increase usability. For example, a large automotive manufacturer created a set of “digital signals” to analyze high-value behaviors (vehicle configuration, inventory searches, pricing comparisons, etc.) to better target the customer experience based on predicting where the consumer was in their shopping journey. The manufacturer was then able to deploy precise sales and marketing solutions, freeing up significant manpower and capital.

The survey reveals that nearly all companies continue to prioritize the Internet of Things (IoT), artificial intelligence (AI) and cloud technologies, which drive increased data availability and improve capabilities in automation and data processing, but, surprisingly, very few have yet to realize the full benefits of these technologies. In fact, many respondents indicated that they do not have the right emerging technology to execute their digital strategy. This presents a plethora of opportunities for tech companies to drive value by continuing to emphasize IoT, AI and cloud business solutions. By providing solutions that simplify and automate data management, tech companies can benefit from customers reallocating capital to other digital initiatives.

EY-Parthenon DII survey tech sector company progress tech investments

Tracking financial impact and measuring return on digital investments

The survey also found that companies are struggling to track financial impact, with only 24% indicating that they measure return on digital investments (RODI). Our findings show that companies that measure the impact of their digital investments achieve higher returns. But many are not able to do this because they lack executive alignment on digital goals and digital use cases to correspond to a desired financial impact. We’ve seen that digital leaders increase returns on their digital investments by using two key factors. First is an integrated set of metrics or key performance indicators (KPIs) that they consolidate and track in one place. Second is an organizational ecosystem that cohesively pursues opportunities.

Digital KPIs can help a company ascertain how far it has progressed on their digital strategy and to what extent it is improving their digital business outcomes. However, most companies who are implementing digital strategy lag digital ambition. For example, they are aware of the targets they aim to achieve within a given time frame but are unaware of the parameters that they need to track to measure the advancement in their operations. In general, there are no standard digital transformation KPIs that can be applied to all organizations and across all digital initiatives, so firms need to customize KPIs in parallel with management priorities. Companies can do this more effectively by setting sub-goals that should be tracked in terms of return on investment, increase or decrease in value or volume across any specific parameter. These parameters can include operational efficiency, customer satisfaction and lifetime value creation.

EY-Parthenon DII survey tech sector leading KPIs show low RODI metric

To diagnose the strength of a customer’s organization ecosystem, technology companies should ask their customers who owns digital. If digital is owned by marketing, the metrics may be around e-commerce, social media impressions, media optimization and channel mix. If digital is owned by IT, the customer may want to focus on digital tech platforms and software, cyber, the cloud and digital tools. If ownership lies somewhere else (strategy, finance, or, especially, direct report to CEO), a total business view is likely addressing both operations and growth across all areas of the business.

Return on digital investment often cannot be attributed to a specific digital solution, rather it is due to several solutions that combine to solve a specific business need. For tech companies, this illustrates the challenge of finding the right buyer within an organization. It also can be an opportunity to help customers think through digital KPIs with an approach that makes it possible to demonstrate impact to key stakeholders. By using their experience to showcase where customers can see value from a business perspective and partnering with them to formulate digital KPIs, a case can be made for future digital investment.

Technology companies can provide holistic solutions

Survey respondents also indicate that they are also struggling to scale digital initiatives due to talent shortages, funding constraints and ineffective operating models. Most companies indicate that they have yet to realize the full benefits of the digital initiatives across their organization. Tech companies can be strategic sellers by providing holistic solutions consisting of both products and consultative services. These solutions can bridge gaps where the customer has deficiencies. Specifically, they can help customers accelerate digital adoption by giving input during the research and ideation stages and by validating business use cases.

For example, a technology services company provided holistic assistance to a large telecom client in implementing business support processes and operations support systems through a multi-phased approach across its organization. The technology firm further assisted a global asset management organization in adapting a cloud managed services model to reduce costs and improve ongoing operational efficiencies. The holistic approach now drives software companies to understand the business model and connect layers within an organization’s software suite (two or more software programs bundled and sold together), in contrast to providing a single, specific-use-case solution.

Summary

Companies across all sectors of the economy are increasingly adopting digital transformation and leveraging technology to improve every aspect of their business. Technology companies have an opportunity to expand their businesses significantly by guiding customers through the digital transformation process, offering leading practices and holistic solutions.

About this article

Authors
Barak Ravid

EY Global Technology, Media & Entertainment, Telecommunications Leader for Strategy and Transactions, Ernst & Young LLP

Energized by all things at the intersection of technology and strategy. Passionate about the strength of diverse and inclusive teams. Love sailing, soccer and snowboarding. Father of three girls.

Peter Ulrich

EY-Parthenon Principal, Digital Strategy and Transactions, Ernst & Young LLP

Digital Innovation in Strategy and Transactions. Knowledge in industrials, automotive, machinery, construction, infrastructure, mobility, and logistics.

Glenn Engler

EY-Parthenon Global Digital Leader; EY Americas Strategy and Transactions Digital Leader

Helping organizations shape their business strategy in a digital world. Relentlessly curious. Passionate board member. Husband. Father.