How to design for digital-enabled growth

The 2022 Digital Investment Index (DII), an EY-led research survey, revealed that only 16% of companies strongly agree that they have a clearly defined strategy for digital — an essential factor in the success of digital investments. The 2022 DII surveyed 1,500 global C-suite executives from more than 30 countries and eight major sectors with revenues of US$1b or more regarding how they monitor, measure and report their company’s return on digital investment.

Major steps in developing a digital roadmap include:

• Outlining strategy, objectives, and needed business and functional capabilities;
• Evaluating condition and objectives of each application or digital asset;
• Creating future digital scenarios and directions;
• Developing migration and investment plans; and
• Designing the future support model and governance for these assets.

These actions will bring clarity on reducing technical debt, an area that many organizations often overlook. The journey to digital enablement is a great opportunity to establish a culture for attacking accumulated technical debt. In the end, it’s not just about leveraging new and digital technologies, but rather building technology that will grow the business — and benefit key stakeholders such as customers and suppliers. A few important questions to consider on this journey include:

• Are the capabilities, and corresponding technologies, to drive growth clear across the business, functions and stakeholders?
• Are the business and IT equally behind this digital roadmap?
• Does the digital roadmap address the technical debt at hand?

2. Drive the transition to digital products

Many organizations are still using project-based methodologies — driven by budget, risks and a traditional waterfall approach — instead of product management methodologies with agile and DevSecOps processes that improve assets, delivery, security and reduce time to market. Within IT, a product could be a vital set of applications for customers, suppliers or human resources, or groupings of key processes that are critical to operations and growth.

This shift toward product orientation and management puts the customer at the center. The technologies, processes and roadmap thus revolve around the customer as well. The customer, of course, can be internal or external. However, the conversion to a product-centric organization can be complex, but can result in improved alignment on direction, value and clarity in articulating how IT will deliver products and services, as well as a standardized and maintained service catalog.

Evaluating the existing product delivery models used to identify the portfolio of technology-based products and the standardized product management model is critical. However, organizations typically need to invest in the skills and training to have sufficient capabilities to launch a product-focused development model, as well as addressing the short- and long-term goals for the product portfolio and how they will be maintained. This will require business leadership to also assign or hire product team resources to develop the business capabilities and architectures. Figure 2 outlines several new roles that will also need to be established to effectively optimize IT product teams to help drive this transition, the interaction with the business and the success of this new model for IT delivery. 

Based on this exercise, organizations can develop a pilot for a new approach to product management that prioritizes product transition, customer focus and agile methodologies to mobilize team members. It is critical that organizations adopt a pilot-first model to evaluate and learn from new approaches. In addition, the organization design must be carefully thought-out, with roles and governance in mind. After teams are mobilized, the portfolio and other future products should be consistently monitored. More and more, we are seeing the key differentiator between companies that realize significant benefits from their technologies is the successful implementation of product management approaches, teams and mindset. In short, it is not the technology but the product orientation, evolution and governance that drives success and delivers value.

3. Redefine the IT organization to deliver the most critical services

Digital transformation cannot be designed without an aligned, and properly prioritized, IT organizational model. The vision should be aligned with the future state business strategy and focused on enabling transformation. In this way, the shared digital roadmap is positioned to achieve long-term growth, backed with a plan to develop necessary skills with clear role definitions. There’s also an enhanced focus on delivery transformation and improved workplace decision-making processes.

This process starts by assessing the current talent and skills to reveal gaps. Reskilling the current resource pool is imperative, with well-documented standards within training, processes and recruiting practices. Leading practices include adding a chief digital and transformation officer (CDTO) focused on business transformation in parallel with the chief information officer (CIO) or chief technology officer (CTO), while clearly documenting differences in role descriptions and knowledge management.

It is also important to understand what digital services the IT organization needs to build to enhance its contribution to business growth and the bottom line. Figure 3 below outlines an example of how to segment IT services to determine and align across the organization as to which are most important and require more time and investment. The most critical capabilities and services that enable the business strategy call for focused investment and yield sustainable competitive advantage. Those classified as less critical, or commodity services, require less investment and attention but should be maintained relative to competitors or to drive scale and low-cost delivery in those processes. These less critical or commodity services are often prime candidates for outsourcing or a leveraged delivery model.

4. Establish modern digital delivery methods 

Today, iterative processes, ways of working and flexibility are table stakes. Product management methodologies with agile and DevSecOps processes take a longer-term view — for instance, by building on work from quarter to quarter, representing an evolution delivered swiftly. Shifting IT operations to an agile delivery method and DevSecOps has provided companies with faster delivery times and better business-IT service alignment. These areas provide specific benefits, and the integration of these forms the basis of a modern delivery and supports the broader product shift (see Figure 4).

With this step, it is crucial to verify that processes and roles are aligned with the business through business relationship managers (BRMs) to help prioritize capabilities and design specific functionality to each digital product, and that processes are maintained, documented and followed. Often, teams will fall back into old habits like operating in “wagile” approach (a combination of waterfall and agile). There must be clear intentions when standing up the methodology, and following the process is key to operating efficiently.

5. Enable data analytics — and insights 

Companies understand how vital data is for strengthening strategic decision-making — and position this as a critical competency. However, data strategies often fail because they lack connection to the business objectives, don't have the organizational buy-in, and are not enabled by a proper operating model. To avoid these pitfalls, establishing an enterprise data strategy that can broadly address how they manage, and enable benefits from, their data. A solid data strategy follows the business objectives and describes how technology and data (analytics) support and accelerate those objectives. This includes a solid set of use cases, strong governance, clearly defined data assets and metrics that enable measuring success. As part of that strategy, a structure for managing data-related issues and decisions should be created to define data operating model groups. The groups should include roles and responsibilities, ownership and effective communication flow.

Moreover, assigning designated data stewards and owners with a standardized process around data management is vital to the success of enabling analytics. There should be a clear order of operations in the handling of data. Lastly, it is often appropriate to establish a community of practice for analytics, sometimes called a center of excellence (COE). Such efforts pay off through a verified and reliable source of truth, requiring less time to perform business analytics, and with greater accuracy, through automated tools.

Putting the pieces together

An EY team recently helped coalesce these efforts at a consumer product company that had been spun off from a larger parent company. The CIO’s initial task centered on standing up the IT organization from scratch: to get laptops, applications and servers up and running securely, along with other foundational concerns. But after several years, the CEO and board of directors needed more — transformation analytics and digital technologies were needed to drive their growth agenda.

EY teams split up the product transformation into different aspects: commercial, corporate, data and supply chain, along with an ongoing enterprise resource planning (ERP) implementation. The digital roadmap exercise revealed the IT gaps to address, such as inconsistent processes, redundancies in application coverage, data access and integration gaps, and skill gaps. The analysis from the digital roadmap also revealed the needed business capabilities to prioritize, along with a clear plan to reduce technical debt that had been weighing down functions and increasing technology costs. By driving the above five directives, the IT organization and company is now better positioned to make that shift toward digital-enabled growth.

Other contributors to this article include John Schenken, Senior Manager, Technology Consulting, Ernst & Young LLP; and Daniel Mataya, Senior, Technology Consulting, Ernst & Young LLP.