Differentiate with digital

A Digital Strategy Is A Prerequisite To Maximize The Return On Digital Investments

Dan Bieler
Principal Analyst
December 11, 2017

At the core of all ROI calculations are costs and benefits. However, there is no single catchall equation that allows your organization to calculate the ROI from digital investments. Benefits from digital investments need to be aligned with the business requirements for a specific value chain stage. Hence, these benefits are tied to usage scenarios throughout the value chain — from supply chain to after-sales. To track and measure these benefits accurately, firms must define clear and transparent KPIs. The ultimate way of measuring digital benefits needs to ensure alignment with customer outcomes.

To positively disrupt their business, drive revenue growth, and boost margins, technology leaders need to break down technological and operational silos between their business divisions. Digital transformation initiatives depend on cross-divisional operational structures and a collaborative working culture. This requires a cultural mind shift. Compared with the technology challenges, the cultural adjustments will take much longer to address and will bring about many more unexpected stumbling blocks.

Focus On Customer Expectations When Calculating The ROI

To overcome these stumbling blocks, technology leaders must work hand in hand with business leaders to adjust business processes and develop new business models. To maximize the value of transformational investments, investment plans need to clearly focus on customer expectations. Cultural transformation sits at the center of this endeavor. To maximize the return on transformational investments:

  • Think outside-in to deliver relevant outcomes for your customers. Customer expectations evolve ever more quickly, driven by the speed of digital technology evolution. Importantly, leading companies in sectors other than yours are setting your customers’ expectations. This matters, as these expectations ultimately define your customers’ experiences. Therefore, your digital investment strategy must evolve as your customers’ expectations change.
  • Focus on your customers’ underlying desires — not point-solution investments. Your digital investments need to target your customers’ desired outcomes. This requires you to address both his explicit demand and his hidden aspirations or unvoiced problems. For instance, Airbnb introduced Experiences and Places to satisfy customers’ expectations for a more personalized and stimulating journey — rather than just obtaining accommodation. The Experiences offering provides activities like cooking classes, boat rides, or wine tasting as part of the customer’s travel plan. Under Places, Airbnb offers quirky guidebooks on various activities at the customer’s destination.
  • Invest in ecosystems to support end-to-end customer experiences. No business can single-handedly plan, build, and run end-to-end experiences that address the entire customer life cycle. To boost their ROI from digital investments, businesses will need to plan investments around ecosystem partnerships. For instance, Bosch is offering its IaaS and PaaS solutions through its growing partnerships with the likes of IBM, Software AG, Amazon, GE, and SAP. Meanwhile, GE’s transportation management solution provides end-to-end shipping visibility across modes of transportation and distribution nodes. This requires a new approach to digital investments, as no single provider on its own is can deliver end-to-end shipping visibility.

The upcoming report “Building The Business Case For Your Digital Investments” provides a framework for ROI calculations of transformative digital investments. It highlights examples of customer usage scenarios and how to design ROI calculations to ultimately measure customer benefits at different stages of their value chain.

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