Let’s talk about: the path to resilient business growth
A new IDC research commissioned by Autodesk concludes that success in an increasingly digital world depends on wringing real-world business outcomes from digital investments.
In the aftermath of COVID, growth and resilience are top of the corporate agenda. But what’s determining success in either category now that yo-yoing between lockdowns and returns to ‘normal’ have become a standard feature of economic life?
Autodesk commissioned IDC to look again at the strategic drivers and underlying enablers in the AEC and manufacturing industries to understand the success factors behind both trajectories. How much has changed in nearly two years? Giulia Carosella, IDC’s European Digital Transformation Practice Lead and principal analyst on the report, shares her perspective.
Tell us more about IDC's concept of the K-shaped recovery curve?
After a year or more of unprecedented change, the one thing we've learned is that the volatile, uncertain, complex, and ambiguous business environment we all find ourselves in is here to stay. While each company has its own path to recovery, everyone will hit a fork in the road. At IDC, we call this the K-shaped recovery curve.
On the upward fork of the K, companies can accelerate their growth by laying the foundations for future success. On the downward fork, companies will face the threat of falling behind and have no choice but to fight for survival.
What will determine an organization's path on the K-shaped curve is the digital investment strategy and the extent to which it can deliver outcomes relevant to the business.
Where do you think the AEC and manufacturing industries currently are on their digital transformation journeys? How do they compare with other sectors?
Manufacturing and AEC have been highly impacted by the pandemic due to business shutdowns and severe supply chain shortages.
AEC companies have been on a faster return path to growth thanks to the release of lockdowns and national resiliency and recovery plans supporting smart buildings. Because it's more fragmented and exposed to supply chain bottlenecks, the manufacturing industry is on a slower path.
Digitalization has accelerated in both industries, with 37% of companies in the most advanced stages of digital maturity compared to 31% in 2019. The quickening pace is driven by the need to react to changes brought about by the pandemic and the need to edge ahead of competitors.
You say in the report that success in the future will be measured by ‘return on digital’. How do you define it?
Manufacturing and AEC organizations' investments in digital have grown massively in the past few years and have reached more than $480 billion worldwide by the end of 2021. However, most organizations are still struggling to generate value from those investments. Half have seen a less than 10% improvement in financial results or haven’t been able to quantify the financial impact at all.
Success is linked to generating a return from digital investments, which is measured as an impact on either the top line, such as new revenue streams from digital products and services, or the bottom line from cost savings and new efficiencies.
You make the point that CEOs need to take direct responsibility for digital transformation. Why is that so important?
IDC research shows that the main challenges preventing companies from generating returns from investment are not linked to the technology itself but rather to a lack of leadership vision and support. Sometimes that manifests as a process-heavy managerial approach; in other cases, it's a failure to set the right KPIs or taking a siloed approach to digital budgets.
CEOs need to be on the digital front line and take direct responsibility for digital transformation, working closely with the entire C-suite to drive their digital agenda. Only if leadership truly understands the strategic role digital technologies play in moving their organizations forward can they reap the benefits of technological investment.
What are the accelerators of digital ROI?
We identified five main areas that allow organizations in manufacturing and AEC to generate ROI from digital investments:
How should digital ROI be measured?
Every company will have to develop its own set of digital ROI metrics based on two things: the strategic digital business goals they want to achieve and the roadmap to getting there.
Some examples are an increase in existing revenue streams, the generation of new revenue streams, increased customer satisfaction, talent attraction and satisfaction, innovation rate/number of new products and services launched, higher brand trust, and higher environmental sustainability-related performance metrics.
Where should those at the early stages of digital transformation start?
The first step toward understanding how to move forward is to carefully assess where your organization is today in terms of digital maturity. Benchmarking against industry peers, for example, can show you where the end goal is and enable you to identify critical steps to improvement.
Second, becoming a digitally enabled enterprise is not an overnight journey. At IDC, we treat the road map as a series of horizons, from immediate to long-term. The stages on the map are defined by use cases and are enabled by technology like intelligent buildings, augmented maintenance, and asset performance management.
What is the one thing manufacturing and AEC companies can do to translate digital investments into business outcomes?
Make business outcomes the starting point. The most important thing is to be clear about strategic priorities and the related business outcomes that you want to achieve. Then you can focus on digital initiatives with a clear ROI that’s relevant to those priorities.
This is where technology comes into play as an enabler of digital initiatives. Collaboration across the leadership team is also vital to delivering business value. With over half of all IT budgets now in the hands of the business functions, individual objectives must be viewed in the context of the organization-wide digital strategy and agenda. This often requires a culture change, which has to be driven by the C-suite, acting as what we would call a Digital Dream Team.
Download the full report, Building Resilient Manufacturing and AEC Companies, here.