Digital transformation has never been more important for organizations. As hybrid and remote work is continued to be experimented with, many companies have looked at how technology can improve the employee experience and productivity.
To get a better picture of this year’s spending on digital products, Ernst & Young has compiled its 2022 Digital Investment Index (DII).
The index is based on a survey of 1,500 global C-level executives with digital transformation and technology decision-making responsibility in a variety of industries across the world.
The current state of digital investments
Spending in the digital world looks set to continue increasing; nearly three-quarters of executives (72%) claim they must radically transform their operations during the next two years to compete effectively in their industry.
Executives are allocating more of their revenue to digital projects than ever before. In 2022, executives are putting 5.8% of their revenue into digital, whereas in 2020 the figure was 3.5%.
That means a company that has a revenue of $10 billion is now expected to move from spending $350 million in 2022 to $580 million.
But how will this money be spent? EY’s survey indicates that an increasing number of companies are looking at how to use technology, rather than how to implement it.
In fact, 31% of digital spending is being spent on ‘building’ capabilities, while 69% is being put into ‘running’ digital solutions.
On the back of this shift, EY reasoned that “companies are pivoting from core internal operational efficiencies to new digital products and services that enable them to get closer to their customers and generate revenue.”
While digital commerce is hugely popular, companies should also consider investing in workplace and employee experience tech amid the ‘Great Resignation‘. The ongoing war for talent has seen millions leave the workforce globally due to employer flaws.
Return on digital investment
With greater investment comes more scrutiny. This is reflected in the fact that over the last two years the number of respondents measuring return on digital investments (RODI) has grown from 23% to 41%.
The action of measuring RODI has been found to lead to a 7.6% average return on digital investment in 2022.
Despite the benefits of measuring returns, it is an area of digital transformation that many companies struggle with.
EY summarized: “Many still struggle to measure and achieve results from digital investments; three out of five (60%) companies still don’t know how much they spent in digital operating or capital expenditures last year or what value it yielded in incremental revenues, reduced cost and working capital.”
Of course, some companies are not even at a stage to evaluate their investments because they are still figuring out where to start on their digital transformation journey.
For those on the precipice of digital investment, EY recommends taking on a systematic approach. This is where finances are allocated to high-value use cases that demonstrate how digital features can improve an organization.
On top of that, companies need to set in stone how they will evaluate the projects before diving in; this can help keep the investment on track. Employers should do this through employee surveys or by having benchmarks that outline desired outcomes.
The digital world is before us all, are you ready to act?