World Economic Forum

Digital Transformation Initiative

Maximizing Return on Digital Investments

Executive Summary
In collaboration with Accenture

May 2018

The views expressed in this summary of a White Paper are those of the author(s) and do not necessarily represent the views of the World Economic Forum or its Members
and Partners. White Papers are submitted to the World Economic Forum as contributions to its insight areas and interactions, and the Forum makes the final decision on
the publication of the White Paper. White Papers describe research in progress by the author(s) and are published to elicit comments and further debate.
Foreword
Digital transformation is occurring at an unprecedented pace. It is a key driver of sweeping change in the world, improving people’s lives and creating a more connected world. It also
opens new opportunities for businesses to grow and create value.
Companies are using new technologies, such as the internet of things (IoT), robotics, artificial intelligence (AI), big data analytics and mobile/social media to build new business
models, enhance customer experiences and drive new efficiencies. While the applications have significant potential, only a few organizations are ready to take full advantage of them,
which is fuelling a debate around the productivity impact of digital investments. Organizations must identify where to best take advantage of digitalization and invest in the activities that
will have the most positive impact and accelerate their performance in the long term.
Most business leaders understand the potential effect of digital transformation on business and society. However, many do not see a clear path to bridging the gaps that inevitably
occur when innovation moves faster than existing organizational and societal frameworks. This creates a gap between leadership’s strategic digital intent and its operational execution.
This is one of the main inhibitors to unlocking the value of digitalization and to the Fourth Industrial Revolution.
This paper, which forms part of the World Economic Forum Digital Transformation Initiative (DTI), aims to contribute to the debate on the return on digital transformation. Through
quantitative and qualitative analyses of existing digital investments, it provides a framework to give business leaders the best possible chance of addressing many challenges – driving
cultural change, bridging the digital skills gap across workforce levels, changing customer expectations, data privacy and security – and maximizing the return on upcoming
investments.
Launched in 2015, the DTI serves as the focal point for new opportunities and themes arising from the latest developments in the digital transformation of business and society. Since
its inception, the initiative has analysed the impact of digital transformation on 12 industries and several cross-industry themes to drive engagement on some of the most pressing
topics facing industries and businesses today. DTI is part of the World Economic Forum System Initiative on Shaping the Future of Digital Economy and Society and supports the
Forum’s broader activities around the theme of the Fourth Industrial Revolution.
This paper was prepared in collaboration with Accenture, whom we thank for their support. We would also like to thank the World Economic Forum community of digital leaders and
industry experts who helped shape the insights and recommendations.
The paper embodies the World Economic Forum’s commitment to helping leaders understand the implications of digital transformation. We are confident that the findings will support
them on the journey to shape better opportunities for business and society.

Jonas Prising Arne Sorenson Bruce Weinelt

Chairman and CEO President and CEO Head of Digital Transformation
ManpowerGroup Marriott International, Inc. World Economic Forum

2.
Introduction
Background and Objective Approach

• Digital technologies have opened new avenues for companies to accelerate • Quantitative analysis of over 16,000 public companies
growth and productivity. However, the relationship between investments across 14 industries to estimate the productivity impact
in new technologies and growth and productivity is still unclear of investments in new technologies
• Companies want to understand how new technologies impact • Analysis based on new ICT spend data from IDC and
productivity Ovum with financial data from Capital IQ (2015-2016)
• Key questions are: • Comprehensive text analysis of leading business and
− How much value are companies getting from digital investments? IT publications to identify key enablers
• Four technology categories were identified based on
− How do returns on digital vary by company, industry and technology?
investment levels and their place in the production
− How can companies maximize returns from their digital investments? process:
− How can companies successfully execute on digital investment projects? Cognitive IoT / Connected
• The aim is to make a significant contribution to this debate by analysing the Technologies1 Devices
business value impact of investments in new technologies, and
providing recommendations for maximizing the value from those Mobile / Social
Robotics2 Media
investments

The Digital Transformation Initiative

The Digital Transformation Initiative (DTI) is a project launched by the World Economic Forum in 2015 to serve as the focal point for new opportunities
and themes arising from the latest developments in the digitalization of business and society. Over the past two years, DTI has analysed the impact of
digital transformation across 12 industries and five cross-industry themes with inputs from more than 450 subject-matter experts, including over 200
CEOs. Now in its third year, the DTI’s focus is on driving the global conversation to enhance societal and business value from digital.

3. Notes 1) AI and Big Data Analytics, 2) Does not include Robotics Process Automation
 Five enablers for maximizing the value from
Executive Summary digital investments:

Productivity and New Technology Return on Digital Investments Agile and Digital-Savvy
Investment Trends
Leadership
• Companies in our sample have realized • Return on investment in new technologies is
growth in revenue and productivity over positive overall, with 3x productivity
the past decade increase realized when technologies are
• However, gains are not evenly distributed. deployed in combination
The growth was driven by a small group of • Return on digital varies by industry, and Forward-Looking Skills
companies: industry leaders1 industry leaders outperform followers for Agenda
• Companies are investing in new most industries
technologies to accelerate growth and • Chemistry and Advanced Materials, Metals
productivity. Total investment spend is and Mining and Professional Services
expected to increase to $2.4 trillion by showed the biggest productivity
2020, led by IoT (42% of total spend) increases from new technology Ecosystem Thinking
• These investments are made to drive new investments
efficiencies, enhanced customer • Leaders in majority of industries tend to be
experiences and new business models, larger companies by revenue
with new efficiencies the most prominent • Asset-heavy industries realize more value
driver from Robotics whereas asset-light Data Access and
• While there are concerns about industries realize more value from Management
technologies such as AI and Robotics Mobile/Social Media
Process Automation causing worker • While industry leaders realize higher
displacement, employment levels have overall return on digital compared to
remained stable over the past decade followers (70% vs 30%) led by Robotics
and Mobile/Social Media, followers do Technology Infrastructure
better on IoT and Cognitive Technologies Readiness
4. Notes 1) Top 20% companies by productivity within each industry
Revenue and Productivity Trends
Companies in our sample experienced an overall growth in revenue and productivity over the last decade. That growth has
been driven by a smaller set of companies
Average Revenue, Productivity and Employment Trend (2006-2016, Average Productivity Trend - Industry Leaders vs Followers (2006-2016,
baseline 2006)1,2 baseline 2006)1.2,3
12% CAGR
160 220
Index (2006 = 100)

Index (2006 = 100)

140
180
120
140
100
100
80

60 60 2% CAGR
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Productivity Employees Revenue All Companies Industry Leaders Industry Followers

Analysis findings
• Average revenue and labour productivity have increased considerably over the past decade, also driven by an improved business environment and growing
consumer demand
• However, not all companies realized increases in productivity. The overall productivity increase was primarily driven by the top 20% productive companies (industry
leaders), who doubled their productivity during this period, while remaining firms (industry followers) saw average productivity fall. Even in the period after the
economic crisis (2011-2016), industry leaders delivered 12% CAGR in productivity while followers managed only 2% CAGR
• Although there are concerns about worker displacement due to investments in technologies such as AI and Robotics Process Automation, employment levels for
our sample of companies were stable

Notes 1) Accenture analysis based on Capital IQ data from 16,000+ companies across 14 industries, 2) Labour productivity represents EBITDA per employee, 3) Industry leaders are identified as the top 20% of
5.
companies by labour productivity within their industry. Leaders and Followers classification is based on the OECD method for productivity levels.
New Technology Investment Trend
Companies are investing in new technologies to accelerate growth and productivity. Total investment spend is expected to
increase to $2.4 trillion by 2020, led by IoT
Analysis findings Corporate Spending on New Technologies (2016-2020)1
% share by technology cluster
• Companies are investing in new technologies to accelerate growth
and productivity, also supported by the reduced cost of technologies 13% CAGR
such as 3D printing and Robotics
• IDC estimates corporate spending on new technologies to grow by 2,500 2,426
13% CAGR to $2.4 trillion between 2016 and 20201
16%
• While Mobile/Social Media remains one of the key technologies, it is

Corporate spending ($ billion)

expected to lose share of overall spend from 35% to 25%, potentially 2,000
6%
to new technologies such as augmented/virtual reality and
10%
cybersecurity 1,503
1,500
• The growth will be led by investments in IoT, which is estimated to 11% 25%
contribute 42% of the total new technology spend (~$1.0 trillion) by 5%
9%
2020
1,000
35%
42%
500
41%

0
2016 2020

IoT Mobile/Social Media Cognitive Technologies Robotics Other

Notes
1) Based on new technology spending estimates from IDC, excluding cross-industry spend ($80 billion in 2016 and
$166 billion in 2020).
6.
Drivers of Digital Investment Case study: Siemens
Siemens digitalized its major electronics plant in
Amberg, which is by now at an automation rate of
Investments in new technologies are made to create new efficiencies, enhance about 75%. The digitalization improved the
customer experiences and build new business models efficiency of the plant, as the output was
increased by a factor of 10 with a consistent
Investment Enables bottom-line Enable topline number of employees. It also increased speed
drivers efficiencies growth (~1 product manufactured per second), flexibility
(~1,200 different products built with small lot size)
New efficiencies Customer experiences New business models
and outcomes and quality of the production line (99.99885%
quality rate).

Case study: Marriott International

Key • Automation of entire value chain, • Customized offerings that create • Address market needs with a
‘moments of truth’ for customers combination of new and existing
The hotel chain believes data drives great
from decision-making to
investment and support decision journeys data and technologies customer experiences. They aim at building
operations
areas 360º customer profiles and making them
• Efficient use of resources such as • Integrated customer information • Build deep understanding of the
time, energy, raw materials and across platforms to reduce friction value chain and the scalability available to personalize the entire travel journey,
assets and increase transaction speed potential of opportunities which requires accurate data collection and
• Initial specific efficiency • New experiences led by privacy • Address cannibalization of analysis.
objectives with potential to and trust, customer relationship existing business by
expand to new business models management, digital marketing concentrating on overall
Case study: Kuehne + Nagel
and customer experiences and access to the right talent/skills consumer demand and the
opportunity cost of not investing Logistics provider K+N’s subsidiary LogIndex
Enabling • IoT and Robotics to automate • Big data analytics for • Big data analytics to identify new produces and commercializes its digital services.
technologies processes and collect data personalization areas of customer demand LogIndex’s gKNi product uses big data and
(examples) • Combination of big data analytics, • Cloud to reinforce data • Social media and mobile predictive analytics to provide nowcasts of
AI, 3D vision and digital platforms management technologies for engagement economic indicators and real-time insights into
to analyse data to identify • Social media and mobile global supply chains. This new business model
incremental efficiencies technologies to improve helps customers improve decision-making and
engagement
allows K+N to monetize data.
Complexity • Typically low complexity, similar to • Typically medium complexity • Typically high complexity
traditional capex investments • Impacting non-traditional • Relatively uncertain business case Sources: GoldCorp, Marriott International,
• Relatively clear business case customer experience metrics with Kuehne + Nagel
7. eventual topline growth
Return on Digital by Technology
Return on investment in new technologies is positive overall, with 3x productivity increase realized when technologies are
deployed in combination
Analysis findings Return on Investment by Technology (2015-2016)1,2
Impact of a $1 new technology investment on revenue per employee and labour productivity at the average company.
• Robotics is estimated to generate the highest standalone productivity E.g. $1 invested in combined new technologies has yielded $2.2 – or a 120% increase in revenue per employee.
impact
• Cognitive Technologies are the most significant drivers of topline 2.5
growth but that does not translate into the highest productivity level 2.2

Revenue, EBITDA ($ per employee)

• IoT, which contributes over 40% of total spending on new 2.0 1.9
1.8
technologies, doesn’t deliver the highest productivity impact
1.5
• Investment in a combination of appropriate technologies drives 3x 1.5 1.4
1.3
higher returns than technologies deployed in isolation 1.2 1.2
1.1 1.1

Key insights 1.0

• To understand the application and integration of multiple technologies

to maximize returns, companies need a clear strategic objective and 0.5
long-term approach to new technology investments
0.0
Robotics Mobile/Social IoT Cognitive Combined
Media Technologies Investments

Revenue per employee Labour productivity (EBITDA per employee)

Notes
1) Econometric analysis based on 16,000+ companies across 14 industries with data sourced from IDC, Ovum and
Capital IQ
2) Combined Investments shows the impact of investment in all four technologies combined (i.e. total amount
invested in four technologies analysed)
8.
Return on Digital by Industry
Return on digital varies by industry, and industry leaders by productivity outperform followers in most sectors. Industry
leaders are also observed to be larger companies on average across most industries
Analysis findings Return on Investment by Industry (2015-2016)1,2,3 Size of an Average Company
Productivity change after a $1 increase in the amount invested for (2015-2016)1,2,3
[Industry leaders are identified as the top 20% of companies by labour the average company in 14 industries
productivity within their industry]
Asset-light Retail 1.1
9.9
24.4
1.0
• Most asset-heavy industries realize greater average productivity industries
1.2 7.9
increases than asset-light industries Healthcare 1.1 5.0

1.8 7.3
• Chemistry and Advanced Materials realizes the highest return on Professional Services 1.4 3.8

digital, followed by Professional Services and Mining and Metals Consumer 1.3 20.3
1.3 7.3

• Industry leaders tend to be larger organizations by revenue across Financial Services 1.6 7.0
1.2 8.0
most industries
Media 1.2 7.5
1.0 4.2

Key insights Chemistry and Advanced Materials 2.2

2.6 9.9
8.1

Mining and Metals 1.7 10.6

• Variance in performance across industries (asset-heavy vs asset- 1.6 9.5

light) and across companies (leaders vs followers) requires further Automotive 1.1 18.0
1.0 7.4
investigation into the nature of their investments in new technologies
Oil and Gas 1.1 53.9
(see following slides) 1.1 30.2

Logistics 1.3 10.2

1.1 6.3

Aviation and Travel 1.5 24.0

1.2 7.4

Telecommunications 1.5 30.4

Notes 1.3 10.9
1) Industries are organized by asset intensity, with the most ‘asset-light’ industry at the top.
Electricity 1.5 7.0
‘Asset-light’ industries are those with Capex / (Capex + Opex) < 7% 1.4 7.3
2) Econometric analysis based on 16,000+ companies across 14 industries with data sourced
from IDC, Ovum and Capital IQ Asset-heavy Industry Leaders 0.0 1.0 2.0 3.0 0 20 40 60
3) Leaders and followers classification is based on the OECD method for productivity levels. The industries EBITDA ($ per employee) Revenue ($ billion)
Industry Followers
top 20% of companies are extracting significantly more value from digital than their peers
9.
Return on Digital: Asset-Heavy vs Asset-Light Industries
Asset-heavy industries realize more value from Robotics whereas asset-light industries realize greater value from
Mobile/Social Media
Analysis findings Return on Investment: Asset-Heavy vs Asset-Light Industries (2015-2016)1,2
Productivity change for the average company after a $1 increase in investment for each technology. E.g. $1
• The average firm in asset-heavy and asset-light industries realizes similar invested in new technologies overall has yielded $1.9 – or a 90% increase in labour productivity for asset-heavy
companies from Robotics
levels of incremental productivity from digital investments
• However, they make these productivity gains investing in different sets of
technologies 2.0
1.9 Asset-heavy
Asset-light
Key insights 1.7

EBITDA ($ per employee)

1.5 1.4 1.4
• Asset-heavy industries make greater investments in hardware-based 1.3
technologies such as IoT and Robotics (80% of new technology spend, 1.2
2016-20). They have achieved greater productivity from Robotics
than IoT 1.0 0.9
1.0
0.8 0.8
• Asset-light industries make greater investments in software-based
technologies such as Mobile/Social Media and Cognitive Technologies
(70% of new technology spend, 2016-20). They have achieved greater 0.5
productivity from Mobile/Social Media than Cognitive Technologies

0.0
Robotics Mobile/Social IoT Cognitive Combined
Media Technologies Investments

Notes
1) Econometric analysis based on 16,000+ companies across 14 industries with data sourced from IDC, Ovum and
Capital IQ
2) Combined Investments shows the impact of investment in all four technologies combined (i.e. total amount
invested in four technologies analysed)
10.
Return on Digital: Industry Leaders vs Industry Followers
Industry leaders realize higher overall returns on digital led by Robotics and Mobile/Social Media. Followers do better on IoT
and Cognitive Technologies
Analysis findings Return on Investment: Industry Leaders vs Industry Followers (2015-2016)1,2,3
Impact of a $1 new technology investment on labour productivity. E.g. For leaders, $1 invested in combined new
• Industry leaders1 realize more than twice the overall productivity technologies has yielded $1.7 – a 70% increase in labour productivity.
increase from digital investments than followers: 70% vs 30%
• Industry leaders are maximizing the value they extract from Robotics Industry Leaders
and Mobile/Social Media investments 2.0 Industry Followers
1.8
Key insights 1.7

EBITDA ($ per employee)

1.5
• The biggest gap between leaders and followers is in Robotics. 1.3 1.3
Leaders, who tend to be large organizations, have realized higher 1.2 1.2 1.2
returns because it is a comparatively mature technology, so 1.1
1.0
implementation and integration with existing systems and processes is 1.0 0.9
simpler
• Cognitive Technologies and IoT have yielded lower returns for industry
leaders than followers, perhaps because strong data management 0.5
and legacy system integration is a challenge at larger organizations

0.0
Robotics Mobile/Social IoT Cognitive Combined
Media Technologies Investments
Notes
1) Industry leaders are the top 20% of companies by labour productivity within their sector
2) Econometric analysis based on 16,000+ companies across 14 industries with data sourced from IDC, Ovum
and Capital IQ
3) Combined Investments shows the impact of investment in all four technologies combined (i.e. total amount
invested in four technologies analysed)
11.
Key Enablers and Execution Principles to Maximize Return on Digital
Based on research and discussions with industry leaders, there are five key enablers and four underlying execution
principles for maximizing returns on digital
Key enablers

2. Forward-looking skills agenda 3. Ecosystem thinking

Infusing a digital mindset in the Collaborating within the value chain
workforce by making innovation the (e.g. with suppliers, distributors,
focus of training and hiring customers) and outside (e.g. start-
programs ups, academia)

1. Agile and digital-savvy

leadership
Strategic vision, purpose, skills,
intent and alignment across
management levels ensure a
nimble decision-making process
4. Data access and management on innovation 5. Technology infrastructure
Strong data infrastructure and readiness
warehouse capability combined Building required technology
with the right analytics and infrastructure to ensure strong
communication tools to drive capabilities on cloud,
competitiveness cybersecurity and interoperability

Establish clear Invest in use Follow an Fail fast,

ownership of digital cases, not outcome-based fail cheap
investments technologies approach

12. Execution principles

 Agile and Digital-Savvy Leadership Case study: Royal Dutch Shell

Royal Dutch Shell started its digital

Strategic vision, purpose, skills, intent and alignment across management levels journey with the objectives of protecting
ensure a nimble decision-making process on innovation margins, reducing costs, increasing
productivity and finding new revenue
Driving digital leadership across levels streams. Now digitalization is a board
To become the disruptor, not the disrupted, companies must make a deep cultural shift. The best leaders recognize this and level topic rooted in the overall company
will help their workforce to understand digital change and innovate in four key areas: strategy.
1. Provide a vision and purpose Digital Leadership Roles
• Leaders lay out a vision and purpose for their digital
A corporate culture is fostered in which
journey with ongoing communication innovation can emerge from anywhere:
Leadership drives change by
2. Cultivate a company-wide digital culture encouraging employees,
from senior or middle management to
• Innovative ideas require a company-wide culture of leveraging networks, and creative, entry-level employees. That
entrepreneurialism enhancing governance to enable culture relies on communication,
• ‘Digital culture’ involves team-based engagement with faster decision-making
new technologies, risk-taking and continuous skill Executive workforce-wide alignment on the
development company vision and effective change
Middle management takes
3. Infuse a start-up mentality an active role in empowering management. Design thinking workshops
• Transition from structured, predetermined development their teams to experiment and agile development methodologies
processes to a ‘start-up’ or experimental approach Middle Management with new technologies are applied to further drive digital
• Reduce resistance to change and empower teams to fail innovation.
with minimized cost of failure Teams are encouraged
4. Drive efficient and transparent decision-making to present ideas, and
• Leaders focus on giving employees clear digital given access to Source: Royal Dutch Shell
performance KPIs which increase their motivation and Workforce requisite capabilities
help leaders make faster decisions

Key considerations and challenges

 Organizations tend to be tied up in long vertical chains of command; management is invested too much in
the status quo, has cultural inertia to change and is risk averse
 Digital leadership skills and competency are often scarce across organizations

13.
 Forward-Looking Skills Agenda Case study: AT&T

Between 2007 and 2015, 150,000%

Infusing a digital mindset in the workforce by making innovation the focus of training growth in data traffic on its network
and hiring programs forced telco giant AT&T to move towards
software-defined systems. Needing
Developing a digital skills agenda experts in cloud computing, coding and
Digital opportunities are linked to one another and their full
64% of companies do not have personnel with the skills data science, in 2013 it invested $250
necessary for digital transformation million in education and professional
potential can only be uncovered if people have the right skills
to identify them. Getting the right people in the right place Source: TU Munich and SAP, 2017 development programs, while spending
means assessing skill requirements through the lens of an $30 million annually on tuition assistance.
overall digital vision and translating the results into a forward- Only 3% of organizations plan to increase investment in
looking agenda covering four key areas: training programs significantly in the next three years
Source: Accenture Research, 2018 With approximately half of its workforce
participating, AT&T credits re-skilling with
1. Re-skilling 2. Attracting new talent a 40% decrease in its product
• Companies now understand the need to enhance their • Companies are aligning new hiring efforts with their development cycle and a 32% decrease
workforces’ digital and technical skills to keep pace with digitalization needs in time to revenue.
industry-wide digital transformation • Additionally, new roles are created that give employees a
• Lifelong learning is of utmost importance to meet the ever- sense of purpose (e.g. clear goals, greater accountability,
Sources: AT&T’s Talent Overhaul,
evolving requirements of new technologies self-directed growth)
Harvard Business Review (October 2016
3. Utilizing a flexible workforce 4. Building accountability Issue)
• The skill requirements for digital transformation are such • Businesses use digital-specific metrics or KPIs to monitor
that organizations must seamlessly access the best talent digital readiness and associated capabilities of employees
• Appropriate talent is managed via internal and external • These are included in annual reviews and incentive plans
employment models to ensure progress

Key considerations and challenges

 Traditional industries face tough competition from digital-native companies for scarce talent
 With the rapid development of new technologies, it can be challenging for businesses to keep their
skills agenda clearly aligned with company strategy

14.
 Ecosystem Thinking Case study: Iberdrola

Iberdrola invests in collaborations within

Collaborating within the value chain (e.g. with suppliers, distributors, customers) and the value chain and outside the value
outside (e.g. start-ups, academia) chain through a number of channels.

Building a digital ecosystem For example, with suppliers, the company

engages in proof of concept initiatives
As technology revolutionizes the way products and services are produced, distributed and consumed, visionary enterprises are
stretching their boundaries and tapping into other digital businesses, providers, customers and even competitors to create and programmes to develop innovative
‘digital ecosystems’ that harness ingenuity from across industries and disciplines. Using different models, they drive open procurement models from small and
collaboration with other participants in their ecosystem to make the most of data-driven opportunities. medium-sized enterprises.
Open collaboration Ecosystem participants and options for collaboration
• Successful digital transformers are the most advanced With start-ups in its ecosystem, Iberdrola
in leveraging skills and capabilities that lie beyond engages with the help of its corporate
Suppliers Distributors Customers
their core organization venture capital programme, which has
• They do this via existing platforms and/or partner €70 million ($87 million1) available to
organizations that can help enhance their competitive Co-innovation, Data sharing
advantage, and thus maximize success invest in disruptive technologies and
businesses.
Data-based value co-creation Company
• Ecosystems can be both a source of data and a
means to utilize it through collaboration with value- With universities, research collaborations
chain participants Industry alliances, JVs, Partnerships are conducted, e.g. a $10.3 million
• Successful digital ecosystem collaborators achieve a collaboration with the Massachusetts
balance: generating and using data within their Competitors Start-ups Universities
ecosystem, while still protecting it from external Institute of Technology to advance
misuse and maintaining their own competitive edge technologies that contribute to the energy
transition.
Key considerations and challenges Source: Iberdrola
 Collaboration with start-ups requires careful curation of the process due to the high failure rate
 Resistance to collaboration is often embedded in large organizations through cultural differences and
prejudice towards competitors, customers and start-ups

15. Notes 1) Based on EUR-USD exchange rate on 16th Feb 2018

 Data Access and Management Case study: Evonik

Specialty chemicals company Evonik has

Strong data infrastructure and warehouse capabilities, combined with the right developed a ‘Digital Lab’ to improve data
analytics and communication tools, drive competitiveness management and give it all the
prerequisites for building and scaling
Building the foundations for data-driven efficiencies and new business models cognitive solutions. Those prerequisites
Matching robust data infrastructure, plus warehousing and analytics capabilities to strong communication tools can help
range from data quality and structuring to
companies actualize the full potential of technologies such as IoT. This is impossible without an intelligent and connected data good use cases and business questions.
infrastructure that helps firms keep pace with actual business requirements while allowing for potential new revenue streams.
Best practices in internal data
Data management cycle Strong data infrastructure to enable origination
management are the foundation for
• Data-driven digital environments that are aligned to business requirements
• Creation of tangible and unique data lakes (e.g. derived data such as cookies, Evonik’s outward-facing digital innovation
Data creditworthiness, health, lifestyle) can provide significant competitive advantage activities such as a strategic partnership
Origination • Enabling customer and employee devices/assets helps generate and store data with IBM and the University of Duisburg-
Robust data warehousing to enable storage Essen.
• Data warehouses that mix centralized and decentralized systems
Communication • Combinations of on-premise, cloud and hybrid models deliver storage capability
and Action
Data Storage Sources: Evonik, Evonik website
Capabilities to structure and analyze data
• Efficient ways to process data and extract relevant elements for decision-making
Data • Strong analytical tools make the best use of data
Structuring and
Analysis Tools and assets to communicate and take action on insights
• Communication tools such as Slack, Trello or Collabee facilitate smooth
collaboration and decision-making
• Structured and analysed data support real-time decision-making

Key considerations and challenges

 Data management should be aligned with business objectives and use cases
 Data access and management requires strong technology infrastructure and must fulfil basic data security
and privacy requirements

16.
 Technology Infrastructure Readiness Case study: Sedicii

Ireland-based data-security start-up

Building required technology infrastructure to ensure strong capabilities on cloud, Sedicii has developed and patented a
cybersecurity and interoperability technology based on the Zero Knowledge
Proof Protocol that eliminates the
Fitting organizational infrastructure to transmission, storage and exposure of
technology application 58% of companies already use cloud services to support private user data during authentication or
some aspect of their business1 identity verification.
New technologies rely on a set of core underlying technologies
for successful implementation, e.g. IoT would not be possible ~50% of the cost of implementing IoT solutions will be in
without the cloud, connected devices, data management and integration and security through 20182 This reduces the risk of impersonation
high-speed connectivity. The right infrastructure is fundamental and any fraud resulting from the identity
to scale new technologies up and down quickly. That 60% of digital businesses will suffer major service failures by
2020, due to the inability of IT security teams to manage risk3
theft. While primarily a cybersecurity
infrastructure has four key elements:
measure that helps to build digital trust
Cloud Interoperability and thereby enable the monetization of
• Digital transformers no longer have to debate whether to • Companies must integrate new systems with legacy data, it can also improve customer
use the cloud; the question is how much to use it systems for seamless processes and data flows service and experience.
• Most companies are investing in cloud capabilities to • They can typically do that via APIs, standard formats and
increase their data storage capacity and meet enhanced harmonization of systems
requirements Source: Sedicii

Cybersecurity Transparency
• Robust cybersecurity is not only essential but also enables • The legal and ethical implications of new technologies must
new business models around data monetization, e.g. be made clear to all stakeholders
fintech and Tier 2-3 banks see data as a potential new • Ensuring digital solutions comply with regulation helps
revenue stream maintain transparency and reduce compliance costs

Key considerations and challenges

 A ready-to-use and state-of-the-art technology infrastructure requires high investment to build and maintain
 Compliance with regulatory standards and privacy norms needs to be continuously assessed

Notes 1) Gartner, Market Insight: Cloud Computing's Drive to Digital Business Creates Opportunities for Providers, 24 May 2016, refreshed 24
17. July 2017 2) Gartner, Hype Cycle for the Internet of Things, 2017, 24 July 2017; 3) Gartner, Special Report: Cybersecurity at the Speed of
Digital Business, 30 August 2016, refreshed 7 December 2017
Guiding Principles for Execution
Four guiding principles can help companies to successfully execute on the key enablers

Establish clear ownership of digital investments

• Build clear ownership and hierarchy for each
investment at organization and project levels
• Set goals and incentives for investment owners
that align with the overall digital vision

Fail fast, fail cheap Invest in use cases, not technologies

• Use ‘trial and error’ methods, prototypes and Guiding • Ensure each digital investment is built upon a clear
dynamic structures to optimize project lifecycles principles use case that is integrated with an existing
and associated investments company function (e.g. sales, supply chain)
for
• Reduce costs of failure by dividing projects into • Create digital-specific KPIs and metrics, then track
identifiable, short-term goals and defined stage-
execution performance on how they help to achieve
gates traditional business objectives

Follow an outcome-based approach

• Take an outcome-based approach, and be clear
about the issue to solve and the relevant digital
solution
• Focus leadership on digital, understand key
stakeholders’ long-term digital demands and
assessments of technology infrastructure readiness
18.
Measuring the Performance of Digital Investments Case study: Kaiser Permanente
When US-based healthcare maintenance
organization Kaiser Permanente needed to
Traditional KPIs are not well suited to digital investments, so companies are implement an integrated digital platform, and they
exploring new ways to evaluate projects realized that it might not break even for more than
10 years, they developed a clear set of over 25
Difficulties of measuring digital Guiding principles for digital specific operational goals. These goals were used to
demonstrate the project´s value to the leadership
investments investment and project evaluation team and to monitor the project from development
through deployment and scaling. New metrics, such
Intangible outcomes Lifecycle thinking
as electronic drug prescriptions, online requests for
• Technology investments often translate directly into • Understand the lifecycle phase of current business
appointments, video visits or online laboratory
intangibles like customer satisfaction, rather than new models. This acknowledges the impact of digital
revenues or cost savings disruption, and helps to adjust business case calculations results are now part of Kaiser Permanente´s annual
by taking diminishing future returns into account report.
Long payback cycles
• New technologies often need a considerable amount of Mix of financial and non-financial metrics Case study: Morgan Stanley
time until payback starts • Identify clear business objectives for digital projects and
apply an appropriate mix of financial and non-financial When Morgan Stanley introduced its wealth
Uncertainty metrics for controlling and evaluating management platform, usage fees were not an
• Faster lifecycles and developments in competing • Examples of well-suited non-financial metrics include option. The business objective was to give more
technologies make outcomes uncertain customer satisfaction and loyalty, and efficiency metrics options to clients and increase customer
such as overall asset utilization engagement, resulting in performance metrics such
as net acquired assets and transactional revenue.
Options thinking
Limitations of Net Present Value (NPV) in a • Investments in digital technologies are about increasing Case study: Adobe
digital context options in an uncertain world
NPV is one of the most used metrics for initial investment • If investment projects can be continuously monitored and Adobe changed its business model from selling
evaluation, but it is an unsatisfactory measure of easily stopped, the new options they give can be more boxed software to a cloud subscription model and
innovation-led projects because of three major valuable than the initial investment adjusted its Executive Incentive Plans accordingly. It
limitations: moved from using revenue and operating profits to
Digital traction metrics using the value of bookings for Adobe marketing
• It assumes that cash flows are predictable
• Digital traction metrics prove that someone wants a cloud and digital media cloud subscriptions as key
• It emphasizes internal costs of capital, an increasingly company’s digital product or service metrics for executive incentives.
arbitrary metric • Combining behavioral metrics (e.g. frequency of use,
• It assumes returns from existing businesses are customer engagement and number of users) can
communicate the popularity and the momentum in
Sources: Morgan Stanley, Kaiser Permanente,
steady and unchallenged Kaiser Permanente Annual Report 2016, Adobe
market adoption of a digital product or service
19. proxy statements 2009 and 2017
Questions for Further Investigation
Companies can determine tangible next steps by considering some key questions:

Measuring the Performance of

Drivers of Digital Investments Key Enablers to Maximize Return on Digital
Digital Investments
• Agile and digital-savvy Leadership:
- How are you re-skilling your leadership team on the applications of new
technologies?
- Do they have the right mix of business and technology skills?
• Digital Coverage: How much of your • Digital Performance Metrics: How do
- Is the purpose of digital transformation clearly communicated across management
business is driven by digitally enabled you measure performance on your
levels?
products or services? digital investments? Are they part of
• Forward-looking skills agenda: management rewards?
• Digital Agenda: Are your digital
- Does the entire workforce understand the case for change, and the significance of
investments serving your overall • Stakeholder Engagement: Is the
augmenting skillsets by combining technology applications with human ingenuity?
strategic objectives as well as tactical objective of your digital investments
- Does the leadership have a clear view of the skill gap and required skillsets for
needs? Are these projects scalable? clearly communicated to stakeholders?
digital transformation?
• Digital Investment Portfolio: Does Are the performance incentives aligned
- How does your organization enable and incentivise lifelong learning?
your investments in new technologies to the achievement of that objective?
• Ecosystem thinking:
have a balanced focus on driving new
- Are your value chain participants such as suppliers and customers already
efficiencies, enhanced customer
identified and approached as partners for data-based value co-creation?
experiences and new business models?
- How do you engage start-ups as part of your ecosystem collaboration efforts? Is
there a clear approach to measure the value impact of their engagement?
• Data access and management:
- Are you already capable of accessing data in the required quality and structure to
support investments in technologies such as IoT?
- Do you have the ability to make data-based decisions in real-time?
• Technology infrastructure readiness:
- Do you have a sufficiently strong technology infrastructure to support digital
investments?
- How do you assess the technology infrastructure readiness?
20.
Acknowledgements
We would like to acknowledge and extend our sincere gratitude to the broad community of cross-industry contributors who participated in the
subject matter expert interviews and in-person meetings and workshops
Industry, Government and Academia
• Meade Monger, Managing Director, Alix Partners • Mike Wilson, Global Head of Logistics and Manufacturing, Executive Vice-President, Panalpina
• Gurjeet Singh, Chairman of the Board of Directors, Ayasdi • Eugene Chung, Founder and Chief Executive Officer, Penrose Studios
• Erik H. Scheer, Partner and Member of Global Executive Committee, Baker & McKenzie • Jeroen Tas, Chief Innovation and Strategy Officer, Philips
• Ben Allgrove, Partner and Member of the Innovation Committee, Baker & McKenzie • Kelly Downey, Vice-President, Marketing Operations, Personal Health North America, Philips
• Victor Matarranz, Global Head of Santander Wealth Management, Banco Santander • Lars Raunholt, Chief Executive Officer and Founder, RDS
• Sinead O´Connor, Director, Bank of the Future, Banco Santander • Arthur de Crook, Managing Director, RoboValley
• Alexander de Croo, Deputy Prime Minister and Minister of Development Cooperation, the Digital Agenda, • Jay Crotts, Executive Vice-President and Group CIO, Royal Dutch Shell
Telecommunications and Postal Services, Belgium • Alisa Choong, Executive Vice-President Technical and Competitive IT, Royal Dutch Shell
• Jorge Heraud, Chief Executive Officer, Blue River Technology • Shwetha Shetty, Senior Director, Corporate Strategy Group, SAP
• Oliver Campbell, Global Head of Client Service Solutions, Clifford Chance • Carlos Javaroni, Vice-President, IoT Strategy & Digital Services Factory, Schneider Electric
• Rita Gunther McGrath, Strategy Professor, Columbia Business School • Rob Leslie, Founder and Chief Executive Officer, Sedicii
• John Williamson, Senior Vice-President and General Manager Digital, Comcast • Detlef Zühlke, Executive Chairman, SmartfactoryKL e.V
• Matthew Hogan, Chief Executive Officer and Founder, Datacoup • Jan Mrosik, Chief Executive Officer of Digital Factory, Siemens
• Nigel Morris, Chief Strategy and Innovation Officer, Dentsu Aegis Network • Hans Georg Arnswald, Vice-President, Head of Strategy and Business Excellence, Digital Factory, Siemens
• Erik Ekudden, Group Chief Technology Officer, Ericsson • Sarajit Jha, Chief Digital Value Acceleration, Tata Steel
• Henrik Hahn, Chief Digital Officer, Evonik Industries • Martijn Wisse, Professor Biorobotics, TU Delft
• Ajay Chadha, Head of Engineering and Chief Technology Officer, FiscalNote • Virginia Dignum, Associate Professor, Social Artificial Intelligence, TU Delft
• Jon Bruner, Director, Digital Factory, Formlabs • Nick Costides, Global Vice-President, Information Technology, UPS
• Brent Bergeron, Executive Vice-President, Corporate Affairs and Sustainability, Goldcorp • Joshua Hoffman, Chief Executive Officer and Co-Founder, Zymergen
• Martijn Bertisen, Sales Director - Retail, Google World Economic Forum
• David Hanson, Chief Executive Officer and Founder, Hanson Robotics
• Jeremy Jurgens, Managing Director, Head of Industry Agendas and Knowledge Engagement, Managing Board
• Rob Monk, Global Director, Enterprise Architecture and IT Digital Innovation, Heineken
• Cheryl Martin, Managing Director, Head of Global Centre for Entrepreneurship and Innovation, Managing Board
• Stone Long, Chief Technology Officer, HNA Technology
• Richard Samans, Managing Director, Head of Policy and Institutional Impact, Managing Board
• Agustin Delgado, Chief Innovation and Sustainability Officer, Iberdrola
• Derek O’Halloran, Head of Digital Economy and Society System Initiative, Member of the Executive Committee
• Beatriz Crisóstomo Merino, Head of Innovation Management, Iberdrola
• Mark Spelman, Head of Thought Leadership, Digital Economy and Society, World Economic Forum
• Jamie Ferguson, Vice-President, Health IT Strategy and Policy, Kaiser Permanente
• Bruce Weinelt, Head of Digital Transformation, World Economic Forum
• Mark Goodburn, Chairman, Global Advisory, KPMG International
• Mehran Gul, Project Lead, Digital Transformation, World Economic Forum
• Joao Monteiro, Head of Global Business Development of Contract Logistics, Kuehne + Nagel
• Marjorie Lao, Chief Financial Officer, Lego Group Accenture
• Jonas Prising, Chairman and Chief Executive Officer, ManpowerGroup • Mark Knickrehm, Group Chief Executive, Accenture Strategy
• April Dunn, Senior Vice-President, Chief Marketing Officer, ManpowerGroup • Peter Lacy, Senior Managing Director - Growth, Strategy and Sustainability, Accenture Strategy
• Arne Sorenson, President and Chief Executive Officer, Marriott International • Anand Shah, Engagement Partner, Digital Transformation Initiative, Accenture Strategy
• Stephanie Linnartz, Global Chief Commercial Officer, Marriott International • Svenja Falk, Managing Director, Accenture Research
• Adam Malamut, Chief Customer Experience Officer, Marriott International • Tomas Castagnino, Accenture Research and World Economic Forum Secondee
• Leigh Zarelli Lewis, Senior Vice-President, Global Digital, Marriott International • Laura Converso, Accenture Research
• Stephanie Woerner, Research Scientist, MIT Center for Information Systems Research (CISR) • Vincenzo Palermo, Accenture Research
• Paul Mitchell, General Manager Technology Policy, Microsoft • Ankit Dhamani, Project Manager, Accenture Strategy and World Economic Forum Secondee
• Jeffrey McMillan, Chief Analytics and Data Officer, Morgan Stanley • Martin Gehlen, Accenture Strategy and World Economic Forum Secondee
•21.Arun Sundararajan, Professor of Information, Operations, and Management Sciences, New York University • Inge Chen, Accenture Strategy and World Economic Forum Secondee
• Lauri Oksanen, Vice-President, Research and Technology, Nokia Solutions and Networks