5 Ways to improve digital transformation return on investment

    IT leaders can take actions to boost the long-term value that their organizations derive from digital transformation project dollars. Consider these tips.

    Worldwide spending on digital transformation technologies and services will reach $2.3 trillion in 2023, forecasts IDC in its Worldwide Semiannual Digital Transformation Spending Guide. That will mark an important milestone, notes Craig Simpson, research manager at IDC’s Customer Insights and Analysis Group: It will be the first time digital transformation will account for the majority of IT spending (53 percent) in the IDC forecast.

    But IT leaders can take a number of actions to boost the long-term value that their organizations derive from digital transformation dollars. Taking these steps is especially important now for IT leaders, who face greater funding hurdles as the pandemic puts pressure on technology budgets.

    1. Find a focus

    “It is crucial that there is agreement on what the transformation will deliver in very specific terms,” Ebert says. “Strategic transformation direction may be hard to quantify, so some flexibility may be necessary to drive particularly innovative or critical efforts.”

    This becomes the North Star guiding the initiative. For example, many organizations may be currently focusing on projects that increase business resiliency, which has proven vital during the COVID-19 crisis.

    “Establishing that direction, building consensus, and setting expectations in terms of ROI/investment is key,” says Ebert. “Aligning with the business strategy foundation is likely to unlock ROI contributions that accelerate return through revenue uplift or tapping into new customer segments or markets.”

    2. Ask (and answer) the right questions

    IT leaders who achieve the best results from digital initiatives use comparative analytics to measure the effectiveness, adoption levels, and business impact of their digital programs, says Shafqat Azim, partner in the digital practice at global technology research and advisory firm ISG. Specifically, they gather data that helps them answer three important questions:

    • Is the organization adopting and scaling the right digital capabilities at the right pace?
    • Is the organization investing in the right capabilities at the right levels?
    • Is the organization getting the expected value and returns from its digital investments?

    3. Assemble a dream team

    “Truly transformative digital initiatives will be cross-functional, so the team needs to represent the parts of the organization that will benefit from the targeted outcomes,” Ebert says. This not only creates the necessary business and technical understanding foundation for the initiatives but also engenders greater commitment to the long-term success of the effort.

    “High-functioning teams will consider business and technical challenges more holistically and drive to higher quality outcomes and ROI,” Ebert says.

    4. Don't over-rely on DIY

    Internal expertise is critical. However, those organizations that see the biggest bang for their bucks do so with a little help from their digitally experienced tech partners. “The most successful organizations are leveraging market expertise to accelerate digital transformation,” Azim says, “versus trying to do everything themselves in-house.”

    5. Consider agile bursts

    Ebert advises structuring transformation efforts into “agile bursts” of activities that allow the organization to continually refine objectives as more is revealed during the journey. “Long transformation efforts run the risk of being unwieldy to manage and stay focused on objectives,” Ebert says.

    “Smaller work segments allow a ‘try and learn’ approach to continuously respond to rapidly changing business conditions but accelerate delivery of targeted outcomes.” IT leaders are more likely to prevent project overruns and other inefficiencies by taking this approach.