deloitte report on digital transformation.
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C-suite buy-in, financial investment and a dedicated chief transformation officer (CTrO) are the leading indicators of successful transformation programs, according to a newly released study by Deloitte.

The firm’s 2022 Chief Transformation Officer Study also found that nearly 50% of executive respondents said that setting clear expectations with a sufficient timeline to show a return on investment is a critical success factor.

C-suite engagement

C-suite buy-in is one of the most accurate predictors of transformation success, according to the study. This includes the ability to set clear expectations around timing and impact realization and committing meaningful executive time.

Additionally, executives who successfully realized their transformation ambition spent 18% of their time guiding and shaping the program. Thirty-eight percent of executives cited that a straightforward, compelling “north star” narrative is critical to success.

SEE: Guide to becoming a digital transformation champion (TechRepublic Premium)

Financial investment

Sufficient and appropriately distributed investment is also a critical success factor for transformation initiatives. Half of the survey respondents indicated that their organizations invest between 1% and 5% of annual revenue on transformation programs, and 22% of respondents indicated an investment of 6% to 10% of annual revenue, although many believed their organizations underinvested.

Organizations invested the most significant portion of the transformation budget in technology (26%), followed by business changes (19%) and process changes (18%).

However, 52% of respondents said they underinvested in talent, and 31% believe they underinvested in change management and communications initiatives, which can lead to challenges with uptake, behavior change, confidence in the program or clarity of vision, the report said.

CTrO dedication

An empowered CTrO, who devotes time and energy to drive the transformation forward, is one of the leading predictors of transformation success. When a CTrO contributed an additional 15% of their time, the probability of success improved by approximately 16%, the report said.

On average, CTrOs dedicate roughly half of their week to a transformation; however, most believe that driving successful outcomes requires them to increase their commitment to at least 60% to 65%.

SEE: Digital transformation: A CXO’s guide (free PDF) (TechRepublic)

When and why organizations transform

The increased frequency, uncertainty, and potential impact of disruptions — such as the COVID-19 pandemic, the “Great Resignation,” and supply chain challenges — have forced organizations to reimagine the nature of transformation in order to adapt to constant changes in the business environment.

Deloitte said survey respondents fell into one of three primary transformation ambitions:

  • Optimize the business, including streamlining operations, improving performance and building cash reserves to fund investments (37% of respondents)
  • Expand the business, including increasing existing revenue streams and entering adjacent markets (42% of respondents)
  • Re-imagine the business, including entering new markets and leading disruptive change (21% of respondents)

A wide range of external and internal forces trigger the need for transformation. The survey found three catalysts that were most frequently cited by transformation executives. More than half of survey respondents noted that digital technology opportunities and operational process inefficiency were the top two drivers, while 48% of respondents cited restructuring for growth as the third transformation trigger.

The evolving role of the chief transformation officer

Many successful organizations recognize the need for an always-on transformation capability, and today, dedicated transformation leaders, such as chief transformation officer or vice president of transformation with a persistent transformation management office (TMO), have become increasingly commonplace, according to Deloitte.

To help be successful, the chief transformation officer should embody a range of skill sets and should play multiple roles as a strategist (big-picture architect), operator (skilled general manager), technologist (platform and tech architecture impacts), controller (financial custodian) and change champion (people-oriented, storyteller).

CTrOs often toggle between these roles, the report said, with respondents spending most of their time in the strategist persona (31%), followed by change champion (23%). The majority of CTrO respondents indicated a desire to spend even more time in the strategist and change champion roles. The survey findings also indicate that big thinkers who are also storytellers are more likely to succeed in the role of a CTrO.

“Transformation is not a discrete response to individual events. It’s an enterprise capability that should be ingrained in the DNA of every organization to help enable continuous and effective change,” said Deloitte’s Anne Kwan, principal and transformation strategy & design market offering lead, in a statement.

Deloitte said its study includes insights from more than 300 transformation executives across various industries who discuss what it takes to design transformation programs effectively.

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