Dive Brief:
- The right mix of technology and strategy alignment can uncover a potential market capitalization upside of $1.25 trillion, a Deloitte report found. The company processed financial disclosure documents from 4,651 companies listed on the New York Stock Exchange.
- Market valuation was two times higher among companies with alignment between technology and strategy, compared to non-aligned counterparts.
- Despite the upside to transformation, just 44% of companies have a high maturity related to digital strategy.
Dive Insight:
The top performing businesses define a digital strategy, align tech with that strategy and are able to commit to digital change. It's what Deloitte defines as the digital trifecta, a sweet spot that correlates with a 5% higher market valuation.
On the flip side, technology for technology's sake is indicative of less favorable financial performance, according to Tim Smith, principal at Deloitte Consulting LLP and head of Technology Strategy & Business Transformation at Deloitte US.
"If you have your enterprise just focused on the change aspect … but you cannot prove that that is linked to your enterprise strategy, or you cannot prove that that is linked to the technology you selected etc., that's actually a value destroyer," Smith said.
The Deloitte study found a correlation effect, in which companies with disjointed digital strategies had a lower market cap than those who acted more intentionally.
At the center of these changes is the CIO, an executive role that's not growing as fast as other C-suite positions, but continues to have clout with other members of the executive team. More often than not, CIOs report directly to CEOs and are expected to help shape or support broader enterprise strategy.
As companies build out their transformation plans, CIOs will be "expected more and more to prove out a value case that will stand the test of time," Smith said.