While many forerunning businesses invested in digital transformation prior to 2020, it was the start of the pandemic that accelerated the digitalization in organizations of all sizes, locations, and industries. In order to adapt to the new normal, companies around the world had to incorporate new innovative systems, processes, and tools.
Markets, customer expectations, and tools have drastically changed for good. For this reason, digital transformation will only continue to gain momentum.
Digitalization in in 2022. What can CEOs and business owners expect?
According to a report issued by International Data Corporation (IDC), IDC FutureScape: Worldwide Digital Transformation 2022 Predictions, more than half the global economy will be based on or influenced by digital in 2022.
In fact, IDC’s findings indicate that the direct digital transformation investments will accelerate the rate of return (RoR) that is required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each period of the investment’s life span. This rate, known as compound annual growth rate (CAGR), is said to grow to 16.5% in 2022-2024, up from a 15.4% CAGR in 2019-2024.
This means that by the end of 2024, direct investments in digital transformation will account for 55% of all information and communications technology (ICT) investments.
Investing in digital solutions alone, however, does not guarantee success.
The digital investment ROI (return of investment) has to be taken into consideration in order to invest wisely. Consequently, every decision about digital investment has to start with the company’s business objectives and goals. Is it crucial to consider the business outcome of a digital investment and its value to the organization. Only then the question of how much a company is willing to invest to achieve a particular outcome can be answered.
How to prepare your business for digitalization in 2022
During a FutureScape webinar, IDC analysts, Shawn Fitzgerald and Bob Parker, covered the key predictions that will impact CIOs and IT professionals. Those predictions are related to digital transformation in the next one to five years.
Some of their predictions include:
- Organizations accelerated their investments in digital in response to the pandemic. It is predicted that more than half the global economy in 2022 will be based on or influenced by digital.
- 90% of organizations worldwide will invest in digital tools to augment physical spaces and assets with digital experiences by 2023.
- By 2026, 54% of CIOs will drive business transformation via strategic technology roadmaps. This will be achieved in order to enable an agile, data-driven, collaborative workforce.
- By 2023, 1 in 2 companies will generate more than 40% of their revenues from digital products and services, as compared to 1 in 3 in 2020.
In addition to the above insights, Shawn Fitzgerald, who is a research director at IDC and is responsible for Worldwide Digital Transformation Strategies, said: “For the first time ever, we see that the majority of enterprise organizations, at 53%, have an enterprise-wide digital transformation strategy, a 42% increase from just two years ago.”
Taking this under consideration, what can you do to ensure that your business stays competitive and adjusts to the current market conditions and trends?
The complexity of a digital transformation project requires a sturdy foundation from which to proceed. Besides determining the expected outcome and its desired business value, it is essential to set a budget for it that accurately reflects the scope of the initiative while remaining achievable and realistic.
However, determining such a budget – as well as getting it signed off – can be a difficult task. To help you get started on the right foot with digitalization, we have provided practical tips in the next section. We also discuss some of the crucial considerations you’ll need to make to ensure your budget truly supports your organization’s strategic needs.
Creating an achievable budget plan for your company’s digital transformation
We asked our Senior Digitalization Consultant with over 30 years of experience in helping companies with digital transformation, Kris Honkola, to share tips about setting up a realistic budget and plan for digitalization in 2022:
- Define the desired business outcome of the digitalization
Digital transformation has to have its roots in the business process of the company. Therefore, setting up a proper outcome is a must. It is also crucial to answer a question of how much are you willing to invest in order to achieve a desired outcome and how much the agreed business outcome is worth for the company. For instance, if you want to increase profits by 10%, how much are you willing to invest in order to achieve this?
- Be open to new ideas
Digital transformation is an innovative process with numerous advantages for organizations. However, in order to use its potential to the fullest, being open-minded and ready to improve various business processes is key.
- Utilize outside help for ideas, execution and the process
Cooperating with external and more experienced vendors on digital transformation is getting more and more common across organizations. Having an outside perspective enables going deeper into the internal processes at the company can lead to finding out what needs to be improved before integrating digital solutions.
Business Value Assessment Workshops. How can they help you budget for digitalization in 2022?
Business Value Assessment is a process-based consulting that estimates the returns of different technology investment options against the overall goals of the organization. The business value of different technology investment options is investigated with use cases – models that are used to predict the impact of the outcome when the technology is upgraded.
Business Value Assessment workshops are a great tool which can help your company with:
- Creating a detailed and data-driven plan for digitalization (where to invest, how much to invest and how to lay out a plan for its adoption based on calculations and the business needs).
- Defining the ROI of digital investment.
- Accelerating the approval process for digital investments and aligning investments with business outcomes.
- Generating new ideas and alignments while looking at potential issues (for instance, the problem or need for digitalization might be somewhere else than initially thought).
Do you want to gain a competitive edge through a digital transformation of your company?
We have been helping various businesses with digitalization for over 10 years. Contact using the form below and one of our experts will get in touch with you.