What’s yourdigital ROI?
Realizing thevalue of digitalinvestments

Contacts

TorontoNadir Hirji
Partner, PwC Canada+1-416-687-8417
nadir.hirji@strategyand.ca.pwc.com
Gale Geddes
Director, PwC Canada+1-416-687-8351
gale.geddes@strategyand.ca.pwc.com

2

Strategy&About the authors

Nadir Hirji, Ph.D., is a leading practitioner in digital strategies for
Strategy&, PwC’s strategy consulting group. He is a partner with PwC
Canada. Based in Toronto, he co-leads PwC Canada’s digital practiceand focuses on creating value through the reinvention of the digital
experience for customers and employees alike.
Gale Geddes is the director of digital strategy in the digital services
practice at PwC Canada. Based in Toronto, she is an innovative
business leader with more than 20 years of experience delivering Web,
e-commerce, mobile, app, and wearable solutions to market with a focus
on the user experience, strategic planning, new product development,
transformation, and optimization.

Strategy&3

Executive summary

Digitization is transforming how companies in every industry go tomarket, interact with customers, and carry out their operations. The
digital transformation required, however, is complex, time consuming,and expensive, and it affects every aspect of the enterprise. So it’s
essential that companies actively plan and monitor their digital
investments in order to get their money’s worth out of the effort.
To that end, every company should put together a process andgovernance mechanisms by which they can manage and measure theirdigital return on investment and innovation — the progress they aremaking toward digitization and the value they are capturing. This
process should be carried out across the enterprise, in six key strategic
focus areas: customers, employees, operations, safety and soundness,
infrastructure, and disruption and innovation. Metrics for measuring
digital ROI, both quantitatively and qualitatively, need to be developed
and linked clearly to the company’s overall strategy and goals.
A strong process and proper governance, however, are not enough toguarantee success. Digitization has the potential to reinvent work
entirely and change the way organizations function fundamentally.
Key elements of digital transformation include focusing on the digital
experiences of both customers and employees, quickly testing ideas
early and rewarding the willingness to take risks, managing thedisruptive effects of digitization on your operations and culture, andtaking an all-encompassing view of how digitization will impact yourbusiness.
The only way companies can successfully manage the process andreach their strategic goals is by measuring their digital ROI every stepof the way.

4Strategy&

Returning value

The age of digital disruption is upon us, and no company is immune
to its effects. Across every industry, customers and employees alikeare demanding greater mobility; easier, more transparent access to
information of all kinds; and flexible, pleasing user experiences.
Internal operations, too, are being transformed as companies look
to digitize and automate everything — the factory, the supply chain,even marketing and sales.
And if you think your company should be cautious in its approach todigitization, think again, because even if you’re moving slowly andcarefully, your competitors aren’t. They aren’t just paying more
attention to social media or capturing more information about theircustomers’ preferences. Rather, they’re completely reimagining theirbusiness models to take advantage of the imminent wholesale shift
from strategies based on selling physical products to strategies built
around selling the data and services now becoming available throughdigitization. According to a recent Forrester study, a large percentageof executives think that almost half of their revenue will be influenced
by digital by 2020.
Already, companies are dedicating huge resources to the effort todigitize. PwC’s 2015 Global Digital IQ survey found that 31 percentof companies globally, and 44 percent of Canadian companies, areassigning more than 15 percent of their revenues to digital investments.
By 2019, companies around the world are expected to have spent a totalof US$2.1 trillion on digital transformation, according to IDC.
This level of massive investment brings with it huge risks, especially forcompanies that neglect to take into account the full impact of digitizationin every aspect of their business. IDC also predicts that by 2018, 70
percent of siloed digital transformation initiatives will ultimately fail.
But failure isn’t an option when the very survival of your business is atstake. So how can your company make sure it is getting a positive returnon investment from the money and resources it is dedicating to its digitaltransformation? That’s where the concept of digital ROI comes in.
Strategy&5

Integrated value

Companies moving forward on a digital transformation are well advised
to take an enterprise-wide view during the planning and prioritizing
process if they hope to fully align their investments to their overall
digital strategy. To that end, the framework illustrated in Exhibit 1,
next page, offers an integrated approach not just to the planning andimplementation process but also to how companies can best measure
the returns they are gaining from their investments in digitization.
The key to the digital ROI framework lies in balancing, and measuring,
digital investments across six strategic focus areas, including customers,
employees, operations, safety and soundness, infrastructure, anddisruption and innovation. Each focus area is associated with specificmetrics and related key performance indicators (KPIs) that allow
companies to track and measure the impact of their digital initiatives
more accurately, reset the implementation process when necessary,and make teams accountable for their roles in achieving the desiredtransformation goals.
Many of the metrics companies should develop will be quantitativein nature, but they should be balanced with softer, more qualitative
judgments of progress. In either case, they must be designed to beappropriate to the company’s industry or sector focus and geography,
and aligned to its overall strategy. And they must be made a part ofevery employee’s individual performance objectives in order to drive
the change required.

6

Strategy&Exhibit 1The digital ROI framework and potential metrics
Focus areas
Customers

Employees

Operations

Creating
compelling
experiences;meeting andexceeding
customer
expectations

Enabling andengaging
employees

Digitizing businessprocesses

Safety andsoundness

Infrastructure

Disruption
and innovation

Protecting
digital assets andcustomer data

Implementing
and running new
systems and tools

Prototyping,testing, andlearning; promoting
digital culture

Examples of possible metrics or KPIs
Net promoter
scores or likelihood
to recommend
Number of social
media mentions;social media
sentiment

EngagementscoresManufacturingthroughput

Collaboration

Just-in-timeinventory levels

Likelihood torecommend

Supply chain
efficiency

Turnover
Customer reviews
and feedback

Digital adoption

Response timesof emails/chats/phone calls
Number ofinteractions
resolving issue
on first contact

Number of threats
detected anddefended

Speed of newtechnology
implementation

Number of privacy
breaches

UptimePercentage ofbudget allocatedfor disruptive
technologies andservices

Response time toresolve issues/outages

Proportion of new
ideas that reachconcept design

Fraud losses

Number of new
customers/
segments/sectors
from new products
and services

Source: PwC Strategy&analysis

Strategy&7

Creating digital value

Of course, making the transition to digital successfully isn’t only amatter of measuring your progress. Becoming digital is a long and,for many companies, difficult journey, and it requires that they rethink
and transform how they conduct business. How best to go about thatcan be summarized through 10 key practices that should serve as thefoundation for the effort to capture and measure digital value.
Focus on digital experiences. It’s essential to start with and always
focus on the kinds of digital experiences your customers and employees
expect. Human-centered design puts the individual at the center ofthe interaction and is critical to determining how your customers andemployees will interact with each other and what experiences theyneed, want, and expect. Create profiles of your customers andemployees as groups, including traditional segment information but
also focusing more on the needs and desires of each group. Imagine
and then map out the full customer journey, from initial interaction toongoing contacts to customer support, and identify the key “momentsof truth” that might lead to the decision to buy. This is as much art as
science, so don’t depend solely on quantitative data about yourcustomers during the design process. Include more subjective inputs
that might be gained by collaborating with top customers in co-creating
the imagined journey.
Crowdsource digital ideas. The best ideas often come from yourcustomers, employees, partners, and other stakeholders. By regularlyinteracting with them to identify new opportunities and ideas throughsurveys, innovation challenges, and vendor partnerships, companies
can gain an essential outside-in innovation pipeline. All ideas are notcreated equal, however, so it is critical to put in place a formal vetting
process to filter ideas and target the best opportunities.
Co-create. Creating the digital future is invariably a company-wide
effort, so it needs to be carried out in collaboration with all affectedparties. As you shape your digital strategy, include both leaders andemployees. This way, leaders will better understand the reasoning
behind the plan and gain a clearer view of the implementation process,
8Strategy&while employees will gain a stronger sense of joint ownership and will
be more likely to buy in to the effort, accelerating its acceptance andimplementation.
Test early, often, and fast. In today’s fast-paced business environment,
taking months to plan your strategy, making incremental improvements
to each aspect, is no longer acceptable. Speed is a must. Companies
need to get projects out in weeks, by releasing products and services
and perfecting them later, testing them with customers early, andmaking changes as needed, quickly.
Balance disruption, innovation, and optimization. All too often,
companies concentrate on optimizing their current processes in hopesof making them more effective, efficient, and engaging. That’s
important, of course, but by itself it won’t lead to digital success.
Instead, they need to balance the urge to perfect their current systems
and processes with actively supporting innovative — even disruptive —ways to meet stakeholders’ rapidly changing digital needs.
Put culture at the center. It may be a cliché, but the notion that “cultureeats strategy for lunch” certainly applies to all digital transformations. In
almost every survey we’ve conducted on digital, and in our experience
helping companies reinvent their business, cultural change can be either
the biggest accelerator of change, or the biggest hurdle.
Co-creation may be necessary in ensuring stakeholder buy-in, but it
isn’t sufficient. All stakeholders must fundamentally understand what
it means to have a digital culture — a willingness to move quickly, toexperiment, to fail. Tools that measure and assess digital culture, suchas our Digital Fitness Assessment tool, can help companies understandtheir level of digital maturity and where to focus their training andcommunication efforts.
Transform the business, not the technology. Too often, digital
investments get defined as technology projects, and the digitization
discussion ends up focusing primarily on features and functionalities,
and not on the goals of the overall digital transformation. That’s why it’s
critical to focus on creating the right digital experiences — not just forcustomers but for employees as well, so that they fully understand andare aligned with the customers’ experience and don’t simply fall backon the technology when interacting with them. Create what we call“experience drops”: the capabilities and tools/information needed, atthe right time, to have a real impact on customers’ decision-making
process.
Reward risk taking. The virtues of failure have been heavily hyped
in the media, but they are true. Reward your most entrepreneurial
Strategy&

9employees, those who are willing to take risks, drive thetransformation, and champion change. Think about ways to turnfailures into success, by integrating both your successes and yourfailures into your company’s ongoing activities and new projects.
Link digital outcomes to overall strategic goals. It’s important
to clearly define the right metrics, and time lines for achieving theperformance you’re looking for, in each aspect of your digitaltransformation. In most cases, the metrics should be tangible andquantifiable, but in the more innovative, disruptive initiatives, they may
be more qualitative, as when measuring customer perception. Whether
progress is measured through soft or hard metrics, the goal of every
initiative should be to support the company’s overall strategic goals.
Take an enterprise view. Given the sheer size of the investments indigital that companies must make if they are to succeed in the digitalworld, and the often confusing wealth of options as to where to focus
those investments, it is critical to maintain an enterprise-wide
perspective on how each investment fits into the desired digitaloutcome. Doing so allows the company to balance its digital investments
across business units and strategic initiatives, plan ahead for future
investment needs, decide on the path forward, and then move in a
unified way toward the goal.

10Strategy&Are we succeeding?

The rewards of completing a successful digital transformation will begreat, but companies embarking on the process are well advised toexpect a long, complex, and expensive process. Only by measuring
every step of the way — in terms of what is working and what isn’t, howmuch time it’s taking, and whether it is boosting revenues and cutting
costs — will companies have an accurate picture of their progress. The
digital ROI framework can provide the holistic view companies need ifthey are to ensure a fast, efficient, and orderly transformation, while
adhering to their strategic goals.

Acknowledgments
The model described in this report wasdeveloped by PwC Digital Services
with specialists from Strategy&,
PwC’s strategy consulting group. It
incorporates feedback from our crossindustry digital discussion panel. We’d
like to thank the panel for its advice andinsights for this report.
Trish Barbato, senior vice president,innovation, at Revera Inc.
Karla Congson, former chief marketing
officer at Dundee Corp.

Susan Doniz, corporate board director
at DIACCJohn Hall, senior vice presidentof customer experience at Rogers
Communications
David Nicholl, corporate chief
information and information technology
officer for the province of Ontario
Michael Ptasznik, former chief financial
officer at TMX, currently CFO of Nasdaq
Robert Siddall, chief financial officer atMetrolinx

Strategy&11

Strategy& is a global teamof practical strategists
committed to helping you
seize essential advantage.
We do that by working
alongside you to solve yourtoughest problems andhelping you capture yourgreatest opportunities.

These are complex andhigh-stakes undertakings— often game-changing
transformations. We bring
100 years of strategy
consulting experienceand the unrivaled industry
and functional capabilitiesof the PwC network to thetask. Whether you’recharting your corporate
strategy, transforming afunction or business unit, orbuilding critical capabilities,
we’ll help you create thevalue you’re looking forwith speed, confidence,and impact.

We are part of the PwC
network of firms in 157
countries with more than
208,000 people committed
to delivering quality inassurance, tax, and advisory
services. Tell us whatmatters to you and find out
more by visiting us at
strategyand.pwc.com.

www.strategyand.pwc.com
www.strategyand.pwc.com/ca© 2016 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for furtherdetails. Mentions of Strategy& refer to the global team of practical strategists that is integrated within the PwC network of firms. For more about Strategy&, see www.strategyand.pwc.com.
No reproduction is permitted in whole or part without written permission of PwC. Disclaimer: This content is for general purposes only, and should not be used as a substitute for consultation
with professional advisors.