A question frequently asked about digital transformation is its return on investment. Will the effort pay off and result in higher efficiencies as well as expanded economic opportunities for companies? Rajeev Sawhney, president of strategic business at Mphasis, said not only is the investment worthwhile, it is also an imperative in the digital age.
Knowledge at Wharton spoke with Sawhney recently at the “Fast Forward: Executive Strategies for Personal Digital Transformation” conference, sponsored by Mphasis.
What follows is an edited version of that conversation.
Need for Digital Transformation
The question is, really, is there a choice? Do they have a choice whether they can or can’t go into digital transformation? The world has just been taken over by a tsunami, which has hit industry, government, academia, you name it. In the last 35 years, I’ve seen many transformations taking place, and this inflection point is the mother of them all.
I say that because the time in which things are happening is getting compressed — compressed quite radically. The leadership of most companies has been caught off guard. They knew it was coming, it’s just that they didn’t know at what pace it was coming. So these changes have been quite substantive in nature and I really think that companies don’t have a choice but to go towards the digital transformation way.
Define Digital Transformation
Digital transformation, first of all, is not just bringing in bits and pieces of mobility or cloud and calling that digital transformation. As the word transformation suggests, it is a substantive change done in a very short period of time. And in the way that digital transformation is taking place, we have companies that have completely changed the face of the business landscape and in the way they transact with consumers. So in many cases it will require almost rethinking the processes and the methodologies and the way to engage with customers.
Having said that, you can’t let go of your existing businesses. The physical world is there; the analog world is there to stay. It will erode rapidly… and digital will come in. But it’s got to be a situation where you’re in a bimodal world and you’ve got to coexist in both.
“In the last 35 years, I’ve seen many transformations taking place, and this inflection point is the mother of them all.”
As things develop in the digital arena, you’ve got to start cutting costs on the analog side. So I guess for some time, which may be two years, three years — who knows — but your preparedness to deal with both these and the uncertainties that exist around them is going to stay.
Convincing Businesses to Transform
Frankly, you don’t need to convince them at all. Everybody knows that it’s there. The real issue is about identifying the specific projects or the specific programs [that need change]. Today, a number of companies have randomly allocated budgets because the leadership knows that they’ve got to make investments going the digital way. And each proposal has to be viewed on its own merit in terms of what kind of return on investment you’re going to get with all of this.
So the way to look at it is that over a 3-year period, if you’re going to undertake a new way of doing things, a new way of engaging with customers, you’ve got to take a look at what is the net present value that you are going to derive out of this program, having invested that money.
But it’s easier said than done because uncertainties exist, whether it is on the customer side or it is on the vendor side. You have to take a collaborative approach — which is why at Mphasis we have taken this approach. We co-create the new opportunities that we identify.
Measuring Return on Investment
I don’t have any metrics that I can quote off the top of my head right now. What I can certainly say is that the investments will more than pay for themselves in a very short period of time.
You have an all-connected world today — we heard that in a planet of 7 billion people, there are 3 billion devices, and 2.5 billion of them are smartphones. When you’ve got such staggering numbers, the return on investment on digital is going to [come quickly]. There wouldn’t be a need to be doing any major justifications in my view.