Companies are making record-breaking investments in digital transformation this year, up 65% from 2020. There have been breakthroughs in uncovering returns for these investments, but the picture can still be murky. Are digital funds being well spent?
This is the question posed in a recent survey of 1,500 global executives from EY-Parthenon, which finds that after years of heavy digital investment, companies are still figuring out ways to show hard-number results.
Executives are optimistic, but still in mainly the dark when it comes to tangible results from their investments. Only 16% of respondents strongly agree they have a clearly defined strategy for digital. However, the numbers do suggest progress compared to the last survey — when only 1% indicated having a strategy.
“Many still struggle to measure and achieve results from digital investments,” the EY authors note. “The concept of measuring ROI for digital projects, programs and use cases is still not applied systematically.” Three out of five companies 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.
Still, there is abundant optimism that investing heavily in digital is the right course of action. Executives even feel their spending increases will nearly double their return on digital investments this year compared to last year. More executives are also measuring return on digital investment. Forty-one percent report measuring “return on digital investment} — up from 29% two years ago.
The pressure is intense to spend the money. Still, speed and success are critical, as nearly three-quarters of executives (72%) say they must radically transform their operations during the next two years to compete effectively in their industry — up from 62% in 2020.
Executives plan to allocate 5.8% of their revenues to digital as compared with 3.5% in the 2020 survey — an increase in spending of 65%, not accounting for increases in revenues.
More companies are connecting their digital strategies with successful implementation, factoring in culture, agility, clear accountabilities, measurement and execution pathways. Companies that measure return on digital investment expect a 7.6% average return on digital investment in 2022, which would exceed the 4.4% ROI reported in 2021.
This year, 31% of digital spending is being dedicated to building capabilities, while 69% of spending has shifted to running — up from 64% in 2020. “This suggests 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,” the survey’s authors state.
The survey’s authors urge the following actions to see more tangible results from their technology spending:
Establish governance, key metrics, and realistic timelines and goals to achieve positive investment results. Seventy-nine percent of the most forward-looking digital leaders have a formal program to identify, measure and report digital investment outcomes, the survey’s authors report.
Build a flexible, open work culture that encourages innovation. This includes development of strategies that can be adjusted in the event of unforeseen disruptions. Forty percent of digital leaders say they maintain a fail-fast culture that encourages employees to be unafraid of experimentation and allows for increased agility and speed. In addition, forward-thinking leaders “empower teams to socialize and champion digital projects requiring more scrutiny. A vast majority of leaders have also taken to heart lessons of the pandemic: ensuring flexibility in their workplace, developing new strategies to attract talent and formalizing approaches to measure digital investment outcomes.”
Decouple innovation operating models, incentive structure and measures of success from the mother ship to encourage futureproofing. Focus digital investments on innovation and new products and services, the survey’s authors recommend. They are “judicious about investing and scaling foundational technologies so they can quickly focus on advanced initiatives aimed at bringing greater integration and agility to the operating model. They are successful at bringing together corporate, business units and functions to collectively focus on specific customer needs.“
Take a lean portfolio approach, carefully prioritizing use cases and establishing a formal funding process with milestones tied to the investment and corporate objectives. “Leaders create an outcome management office-style governance program with an agile operating model to provide rigor, speed and meaning to investment decisions,” the survey’s authors state. This office can also track user and customer feedback using formalized, real-time dashboards to provide direct input into current and future strategies.”
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
