London, UK 26 April, 2023 – Expleo, today unveiled new research showing that enterprises are struggling to deliver their business transformation initiatives, with 76% missing at least one transformation target – up from 60% last year. Organisations are most likely to miss targets related to delivering on time (42%), closely followed by keeping to budget (40%).
The decreased capacity to meet their business transformation targets reflects an evolving market landscape shaped by a multitude of factors, including COVID-19, inflationary pressure and supply chain issues.
Expleo’s Business Transformation Index (BTI) 2023 comprises insights from 1,395 transformation leaders from large enterprises across France, Germany, India, the Republic of Ireland, the UK and the US. It provides a comprehensive overview of business transformation initiatives in large organisations, including the major drivers and barriers to success. Industries represented in BTI 2023 include aerospace, automotive, BFSI, energy and utilities, manufacturing, and transport.
Transformation ambitions remain high
Despite challenging market conditions, the appetite to transform remains strong: on average, businesses are investing 11% of annual revenue in their transformation programmes with an average value of €960m.
Four dynamics holding back business transformation initiatives
The BTI 2023 has identified four common factors that are contributing to the challenges business are facing when implementing their transformation programmes:
- The skills gap and talent shortages remain the number one concern for businesses today. A lack of skills and experience in key digital technologies such as AI/machine learning, AR/VR and data poses a challenge, with 77% of those surveyed identifying this as a problem. This is playing out in an ever-increasingly competitive hiring landscape to such an extent that 70% report being unable to retain technology talent due to unaffordable salaries.
- Macro-instability and uncertainty are growing concerns for businesses and now represent the second biggest challenge they face in 2023, compared to sixth in 2022. Geopolitical conflict, the longtail effects of COVID-19 and rising interest rates have combined to create a highly volatile environment. Consequently, 67% of those surveyed are scaling their plans back as a direct result, with cost inflation (48%) and economic uncertainty (41%) the most common reasons.
- Heightened customer experience expectations remain a priority for businesses and are the highest-ranked focus area of 13 for the second consecutive year – 51% cite this as a key driver of their business transformation efforts. However, nearly half (44%) are missing their targets for customer satisfaction and user acceptance, and just 23% believe they offer a market-leading customer experience.
- The need to do business more sustainably is having a significant impact on how businesses operate. Legislative and societal pressures are growing to the extent that sustainability is no longer a ‘nice to have’. Of those surveyed, 42% admit to losing customers or revenue due to their sustainability performance while 50% have stopped working with a supplier due to dissatisfaction with their environmental performance.
People and technology the path to success
Investing in training for staff will be the number one priority for businesses in both the short and long term to address skills shortages. Businesses will also look to broaden their prospective talent pools by diversifying the backgrounds they hire from; 79% have set targets for improving diversity in their workforce while 26% see themselves making strong progress against targets to date. In the short term, utilising specialist expertise remains a priority, with 62% of those surveyed planning to use contract labour or outsource certain functions to third parties.
In parallel, the use of automation, AI and embedding of hyperautomation principles have been identified as the third-ranked action to tackle talent shortages – 47% intend to pursue these to address long-term challenges. 40% of organisations also indicated they intend to have a major focus on hyperautomation and 30% on digital twin as key technologies to optimise processes, unlock efficiencies and maximise productivity.
Rajesh Krishnamurthy, CEO at Expleo commented: “The combination of economic, regulatory and societal pressures of the past three years have begun to mount and create a greater challenge for businesses and their transformation programmes. The result is that many are starting to stumble where they were previously able to weather the storm. These will not be resolved overnight, so organisations must remain agile and keep focused on their goals.
“As a technology and engineering services provider to a diverse range of industries, we are seeing ever-growing demand for new technologies – such as generative AI, automation and green fuels – which have the potential to supercharge transformation programmes. Having the right people, however, is the secret to real success. Whether through internal resources or an external partner, the correct blend of skills, experience and culture is what truly makes the difference.”