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1、The Estimation Game:What do business transformations really cost?IntroductionBefore any business transformation can deliver game-changing value,senior decision-makers must understand the purpose and goals of the work ahead.Organizations pursuing technology change,for example,must set different strat

2、egies than those aiming for geographic expansion or a sustainability makeover.To better understand how organizations navigate their respective transformation journeys,Oxford Economics and SAP partnered to field a survey of 800 global business executives.We asked how they communicate goals and expect

3、ations,deal with challenges,and define success,then analyzed the data to highlight key factors for success.Among the general rules of transformation success are:Clearly establish what the transformation aims to achieveas well as the teams and individuals that will be involved in carrying it out.Secu

4、re buy-in from the broader workforceand make it clear that the end result will be worth the effort.Calculate the risk each transformation will bringand seize opportunities as they emerge.Knowing what a given transformation is meant to achieve and what it will require is of critical importance.Our re

5、search shows that only 57%of completed transformations are deemed worth the investment of time,money,and effort.We explored four key transformation types in greater detail to find out where shared strategies break off into curated ones:(1)entering a new marketplace geography;(2)transitioning to beco

6、me a net-neutral carbon emitter;(3)creating an entirely new product or service offering;and(4)adopting an overarching cybersecurity framework or policy for technology migration(e.g.,moving data storage or IT systems from on-premise to off-premise).Best practices for each of these broad areas are hig

7、hlighted in the discussions below.Transformations are never easy or quick.They take time,skills,and money,with well over half(58%)of projects exceeding budget projections.Nearly two-thirds(63%)of respondents struggle to navigate budgetary pushback from leadership regarding the merits of transformati

8、on efforts.This paper will explore the critical differences in strategy and outcomes of these transformation types,as well as provide direction to executives looking to maximize the value their unique transformation visions demand.The Estimation Game:What do business transformations really cost?|2Re

9、search methodologyOxford Economics and SAP fielded a survey of 800 business executives about their business transformation strategies.Respondents come from 29 countries;all represent organizations with at least$500 million in annual revenue.Responses were collected equally across ten industry sector

10、s:Financial services;Consumer products;Oil and gas;Industrial manufacturing;Chemicals;Life sciences(pharmaceuticals,medical devices,biotech);Utilities;Retail;Automotive;and High tech).For the purposes of this survey,we provided all survey respondents with a uniform definition of what“business transf

11、ormation”means;96%of respondents agree that this definition matched their own understanding of the phrase.Fig.1:Demographic breakdown by geography8.1%0.5%Business transformation refers to the strategic evolution of a business from its current operating or business model to a new operating model or w

12、ay of doing business.This kind of wide-ranging,strategic evolution,whether pursued stepwise or all at once,typically involves four core dimensions of any businesspeople,processes,applications and technology,and dataand necessarily takes all these dimensions and their interactions into account.Organi

13、zations typically undergo business transformations not only to meet strategic objectives but also to develop the critical business capabilities needed to remain agile,resilient,and sustainable in the face of new and emerging opportunities and competitive pressures.The Estimation Game:What do busines

14、s transformations really cost?|3Starting the transformation journeyBusiness transformation comes in various shapes and sizes,and a consensus on what the definition of business transformation looks like is a frequent obstacle to transformation.Nearly all respondents agree that our preset definition o

15、f the term“business transformation”seemed accurate to them,but uncertainty remains when trying to achieve consensus.Two-thirds of respondents say that individuals and organizations often misunderstand the true meaning of business transformation,and nearly half(45%)do not feel as though the phrase“bu

16、siness transformation”is even part of their organizations vocabulary.And with 70%of respondents saying that the definition of business transformation has changed over time,consensus is a moving target.Things get even trickier when the term“transformation”is applied to very different inputs and desir

17、ed outcomes.Before addressing some specific types of transformation,though,we looked at general best practices that should guide any transformation program.These common practices are high-level and strategic in nature;executives consistently report that they have created an organization-wide mission

18、 statement that codifies the organizations expectations for the transformation.Initiatives typically have clear objectives that directly connect transformation efforts to overall strategic goals and are linked to clear and appropriate value drivers(see Fig.2).Best practices also include focusing on

19、a culture of transformation and solidifying risk management practices.Four out of five respondents say they can grow,scale,and operationalize human collaboration with machines on transformation efforts(82%),and nearly three out of four respondents say their team is adept at performing risk assessmen

20、ts related to transformation initiatives(73%).But as executives get into the actual work of transformation,there are fewer common practices,and they may vary by market and the nature of the initiative.Fig.2:Laying the transformation foundationQ:To what extent do you agree with the following statemen

21、ts about how your organization implements business transformation initiatives?“Somewhat”and“Strongly”agree responsesSomewhat agreeStrongly agreeThe transformation initiatives usually have clear objectives at my organization.38%41%Senior leadership directly connects transformation initiatives to its

22、overall strategic goals.44%35%Transformation initiatives are connected to clear and appropriate value drivers at my organization.47%31%The ownership,roles,and responsibilities of each department are clear throughout transformation initiatives.45%24%Transformation initiatives impact my department/fun

23、ction more than other areas of the organization.41%26%My organization often undertakes/plans business transformation around the potential of emerging technologies(e.g.,AI,RPA,cloud).40%26%Transformation initiatives usually help improve my organizations operational performance.45%19%Multiple departme

24、nts and functions at my organization are usually consulted about transformation initiatives before decisions are made,and many contribute to the execution of those initiatives.42%18%The Estimation Game:What do business transformations really cost?|4Some transformations are easier than others to succ

25、essfully execute.Executives who were focused most on entering a new marketplace geography in the past three years are more likely to see positive results than those pursuing other types of transformation.These executives are most likely to say:transformation efforts have a direct impact on the organ

26、izations overall performance(66%vs.60%all other types of transformations)efforts are worth the time,money,or effort(65%vs.57%)efforts are successfully completed(60%vs.54%)efforts go according to plan(54%vs.51%)The desired outcomes for organizations pursuing market expansion are quite different than

27、the expected outcomes of other transformation types.Executives are more likely to say they expect expanding their geographic footprint to increase profitability(62%vs.56%all other transformation types)and improve cost efficiency(32%vs.26%),but are less likely to expect the effort to improve customer

28、 or client satisfaction(38%vs.44%).And while four out of five respondents say they are“confident”or“very confident”that their specific transformation effort led to increased profitability,those expanding their marketplace geography are more likely to fall into the very confident category(40%vs.33%al

29、l others).TRANSFORMATION SPOTLIGHTEntering a new marketplace geographyThe Estimation Game:What do business transformations really cost?|5Creating and carrying out a plan of actionThe majority of respondents agree that organizations should align stakeholders around transformation strategy.Organizatio

30、ns frequently consider the collaborative demands of their initiatives and the impact each initiative will have on the broader workforce.To that end,roughly two-thirds of all respondents say they have hired people for designated roles and formed cross-functional teams to carry out transformation effo

31、rts(68%).And nearly as many have created working groups to carry out and communicate strategic initiatives(63%).This focus on ways of working helps justify the pursuit of transformation initiatives to decision-makersit is the most important criterion to consider when evaluating a projects merit,acco

32、rding to 26%of executives(the most common“most important”selection);when including“very important”responses,this figure increases to 56%.Moreover,62%of executives say the number of individuals or functions that will be affected by transformation efforts is very important or of top importance.Even if

33、 companies have the right people in place,they often overestimate the effectiveness of their communications.Three in five say the plan for their most significant business transformation was well communicated to the broader workforce,but fewer say the plan was clearly defined(53%).With 61%claiming th

34、at getting the workforce to embrace new ways of work is very or prohibitively challenging,decision-makers may want to invest more in ongoing communication planning and assessment to ensure that the message is not only clear but received.TRANSFORMATION SPOTLIGHT|Transitioning to become a net-carbon e

35、mitterThe corporate search for more sustainable operations has been among the most discussed business initiatives over the last decade.However,the nature of challenges appears different in a business transformation aimed at becoming a net-neutral carbon emitter compared with other types of business

36、transformations.For instance,executives supporting the transition of IT systems to the cloud must strongly consider the impact that transitions will have on existing ways of working61%say this is a significant concernbut those pursuing net-neutral carbon transformation are far less likely to encount

37、er this challenge(51%).Similarly,43%of executives say the workforce training considerations that adopting an overarching cybersecurity framework brings is a crucial focus;just one-third of net-neutral carbon transitions are held back by the same challenge.Instead,sustainability transformations must

38、justify the expected ROI of the carbon-neutral effort.Well over half of these respondents(54%)say this,compared to just 44%of total respondents.Additionally,40%of executives pursuing carbon-neutral operations say they must carefully consider the tools and technologies required for achieving net-neut

39、ral status,in contrast to 28%overall.There are two primary value drivers behind efforts to become carbon neutral.Executives expect,first,to become more profitable(53%)a goal that executives of all types expect.Second,they are more likely than any other type of respondent to expect their transformati

40、on to improve customer satisfaction(50%vs.42%all others).Just 3%say they have achieved the transformations endpointearly responses indicate that these executives are slightly more likely than the survey average to have increased profitability resulting from their efforts.The Estimation Game:What do

41、business transformations really cost?|6Transparency and analysisIf executives hope to keep transformation initiatives running smoothly,keeping transparency throughout the business will be crucial to monitoring efforts and staying on track.Businesses find themselves in two different camps,with only a

42、bout half of respondents(52%)reporting that leadership is transparent with employees about data and decision-making related to business transformation efforts.At the same time,organizations are struggling to ensure that the data is accurate and reliable.With 70%of respondents finding it“very”or“proh

43、ibitively”challenging to determine if the data they have is reliable,data woes may push transformation initiatives off course.Fig.3:Leadership has the transformation data it needsbut few actually use it.Q:To what extent do you agree with the following statements about how your organization collects,

44、manages,and shares data?“Somewhat”and“Strongly”agree responses onlySomewhat agreeStrongly agreeSenior leadership has access to reliable data regarding the business process and IT landscape.48%36%My organization provides a sufficient level of access to data to successfully carry out business transfor

45、mation initiatives.45%34%Data gathered and analyzed is conveyed to senior leadership quickly and effectively.38%30%My organization has/collects a large amount of relevant data that we do not currently know how to use effectively.39%28%We collect enough of the data we need to drive value and operate

46、effectively.43%24%My organization uses real-time data insights to modify and adjust business transformation efforts mid-stream.36%23%The data my organization collects is used to prioritize areas for improvement and provide recommendations for next steps.37%16%There is another clear divide between or

47、ganizations that use analytics capabilities to derive data insights and those that are still working toward that goal.About half of organizations(49%)have not yet moved beyond the pilot stages of enterprise analyticsand of the other 51%that have surpassed this stage,just 8%describe themselves as“lea

48、ding”in their rollout.This is especially noticeable among respondents involved in specific transformations,such as those migrating IT systems to the cloud(54%)or transitioning to become a net-neutral carbon emitter(57%);these respondents are even less likely than others to have progressed beyond the

49、 pilot stage.When it comes to transformation,the problem does not seem to be a lack of data.The opposite is actually true,as executives agree that access to data is sufficient(79%)within their organizations.Instead,the problem lies in its lack of proper utilization;only about half(53%)agree that the

50、 data they collect is used to prioritize improvement areas and inform next steps(see Fig.3).The Estimation Game:What do business transformations really cost?|7Struggles to turn information into business action can also be seen in specific data types relevant to implementing changes efficiently and e

51、ffectively.For example,nearly half of survey respondents(47%)describe their organizations as underperforming at deriving insights from enterprise architecture data or process data in ways that drive decision-making.Innovation via new offerings requires a plethora of information to justify the invest

52、ment.Executives that have been primarily involved in creating these new offerings are far less likely to say getting access to necessary data that drives transformation has been challenging(23%vs.33%survey average).On the opposite end of the spectrum,respondents that are mostly involved in“Adopting

53、an overarching cybersecurity framework/policy”are far more likely to encounter data access hurdles(43%).Executives involved with creating new products and services hope their efforts will yield value in the form of financial benefits,including increasing profitability(64%vs.56%all others)and improvi

54、ng cost efficiencies(34%vs.26%).Most feel they have been successful in achieving these goals;83%feel confident the new offerings they created have improved profitability,and roughly two-thirds feel their costs have become more efficient(65%).TRANSFORMATION SPOTLIGHT|Creating an entirely new product

55、or service offeringThe Estimation Game:What do business transformations really cost?|8Adopting technology to drive transformationImplementing a robust technology strategy is essential for organizations aiming to mitigate analysis challenges and accelerate their overall transformation efforts.From ch

56、oosing the right technology to accurately allocating budget for investments,executives are strategically navigating their options to enhance their technological capabilities.Executives report implementing a wide range of technologies and are at varying degrees of maturity.For instance,about two-thir

57、ds of respondents report at least early use of tools like systems of record for IT assets(70%)or project management tools(66%).And while these well-established capabilities are commonplace for most,other valuable technologies see less widespread use.Less than half of respondents find their organizat

58、ions at least in the early use stage for capabilities like change management tools(49%),benchmarking tools for process performance(42%),and process mining software(36%).Only a quarter of organizations have advanced beyond the pilot stage with robotic process automation(RPA)software(25.7%),and curren

59、t use cases tend to be industry specific.There is some question whether senior leadership is moving fast enough to implement helpful technologies,as 40%explicitly disagree that the organization is agile enough to adopt systems that improve business transformation efforts.That agility is particularly

60、 important when it comes to artificial intelligence.As AI continues to proliferate across various sectors,regions,and business functions,moving swiftly to leverage the opportunities it offers will be critical to gaining a competitive advantage.Optimism surrounding AIs potential is split.About half o

61、f respondents(52%)believe AI will significantly alter their transformation efforts,while the other half(48%)are not yet convinced that it will revolutionize transformation processes.Moreover,actual implementation of AI for transformative purposes remains limitedonly 34%of organizations currently emp

62、loy AI to recommend steps for improving transformation processes.For executives to fully embrace AI as a transformative tool,many believe the ethical implications of its use must first be addressed.A significant portion of organizations prioritize the ethical use of AI over simply deriving value fro

63、m it,but this strong emphasis on ethics is not yet matched by comprehensive governance:Only 35%of organizations have robust AI governance policies in place(see Fig.4).The Estimation Game:What do business transformations really cost?|9Interestingly,larger organizations operate a tighter ship.High-rev

64、enue businessesspecifically,those earning$10 billion and aboveshow stronger adherence to ethical guidelines and governance.Within this group,25%strongly agree that they have clearly communicated AI governance policies and conduct thorough AI risk assessments(vs.17%for all others).Furthermore,high-re

65、venue organizations exhibit a stronger agreement that AI is being used effectively to guide transformation steps,with 43%affirming this(vs.32%).Fig.4:Ethical AI is top of mind,but many have yet to establish AI ground rules.Q:To what extent do you agree with the following statements about your organi

66、zations use of AI?“Agree”and“Strongly agree”responses only76%My organization cares more about safe and ethical AI use than about maximizing the value of AI.55%My organizations AI governance policy was created using feedback from multiple teams across the business.52%My organizations use of AI will d

67、rastically impact the way we carry out transformation efforts.47%My organizations AI governance policy has been clearly communicated and demonstrated to the entire workforce.43%My team performs thorough assessments regarding risks related to our AI usage in transformations.35%My organization has a r

68、obust AI governance policy.34%My organization uses AI to suggest steps to better carry out transformation efforts.The Estimation Game:What do business transformations really cost?|10Understanding challenges to mitigate riskAll types of transformation encounter challenges,with the most common being c

69、ost overruns,inadequate ROI,and failure to finish the job.Transformations encounter execution issues for a variety of reasons,and any one might face a different combination of challenges.For example,those respondents who have taken part in their organizations adoption of an overarching cybersecurity

70、 framework are more likely to encounter difficulties getting access to the data they need to complete their transformation(43%vs.33%survey average)while those who are creating an entirely new product or service offering are far less likely to encounter this hurdle(23%).Alternatively,the challenges f

71、or those transitioning to net-neutral carbon emission are deeply rooted in people-oriented factors.Getting the workforce to embrace new ways of working(72%vs.61%survey average)and receiving pushback from senior leadership about the merits of transformation(73%vs.63%)are more commonly encountered by

72、these executives than those leading any other transformation.The unpredictability of transformation outcomes brings inherent risk to any business commitment.Not surprisingly,then,respondents often encounter significant delays and budgetary setbacks throughout the transformation process.Pushback tend

73、s to occur most frequently when transformation advocates present the justification for an initiative to decision-makers at the convincing or pitch stage59%of respondents say this is a top-three stumbling pointbut roadblocks emerge nearly as frequently during the research and validation stage(51%)and

74、 alteration and modification stage(50%).If executives can secure budget and a thumbs-up from leadership,however,the pilot stage is a safe haven for experimentation.Only about 16%of respondents say they experience delays or budget holds during this early implementation stage.Executives report that 58

75、%of transformations end up going over budget.Only 57%of transformations end up being worth the time,money,and effort they require.Barely half of transformations go according to plan(51%).Almost half of these transformations have not yet reached completion(46%).The Estimation Game:What do business tr

76、ansformations really cost?|11Executives recognize that all transformations inherently involve risk,and many have developed risk assessment capabilities to avoid missteps.Two-thirds say their team has a good understanding of the risks associated with a business transformation,and over half regard the

77、se reviews as either a large or very large influence on their decision-making processes(see Fig.5).Navigating these uncertainties is crucial;risk plays a major role in justifying and driving transformational efforts,but the lack of robust performance tracking mechanisms casts doubt on the true abili

78、ty to assess risk exposure.Risk tolerance levels are mixed among survey respondents.Two out of five(42%)characterize their organizations as“cautious”in the face of transformation,but only 7%describe themselves as completely“risk averse.”This indicates that most are open to taking actionand with over

79、 half(53%)describing their approach as“opportunity-driven,”it is clear many see the value in supporting transformation efforts.Fig.5:High confidence in risk management abilitiesQ:To what extent do you agree with the following statements about how your team assesses the risk of potential business tra

80、nsformation initiatives?“Agree”and“Strongly agree”responses onlyMy team is adept at performing risk assessments related to our transformation initiatives.73%My team has a good understanding of the risks associated with business and/or business transformation.65%My organization knows how to respond t

81、o the risks we uncover in our business transformation initiatives.63%The need to mitigate business risks is a key driver of the transformations we pursue.63%My teams decisions around transformation rely heavily on the outcomes of risk assessments.60%My team performs continuous risk assessments throu

82、ghout the transformation journey.57%Risk assessments determine how and where emerging technologies are applied in transformation efforts at my organization.55%My team maps,anticipates,and assesses transformation risk before embarking on our journey.48%The Estimation Game:What do business transformat

83、ions really cost?|12Executives involved with certain transformation types exhibit stronger risk capabilities than others.Even transformations underneath the same general transformation umbrellafor example,technology migrations of different typestend to involve different approaches to risk.On-premise

84、 to off-premise data storageThe movement of data from one premise to another brings a unique type of risk;the potential leakage or loss of precious employee or customer data could bring about significant reputational loss or regulatory issues.Executives that have been predominantly involved in movin

85、g data storage in this way are more likely to say their team has a good understanding of the risks associated with the transformation(78%vs.64%all others),is adept at performing risk assessments related to transformation initiatives(78%vs.74%),and that those assessments are continuous throughout the

86、 transformation journey(65%vs.56%).The primary goal of moving data between on-premise and off-premise locations is more likely to center around increasing revenue compared to other types of transformation(42%vs.35%all others).And while they are no more or less likely to have witnessed value in the f

87、orm of increased revenue,they are more likely to see improved cost efficiency benefits(75%vs.68%).IT systems to the cloudMoving IT systems to the cloud brings a slightly different set of risks.Instead of data risks during migration,organizations may bring about their worst-case scenario:subjecting c

88、ustomers to lengthy downtime during the transition.Our data reveals that executives pursuing this transformation are generally less focused on the risks their transformation can bring.They are less likely to say their team is adept at performing risk assessments(67%vs.74%all others),that their teams

89、 transformation decisions rely heavily on the outcomes of risk assessments(55%vs.61%),and that those assessments determine how and where emerging technologies are applied in transformation efforts at my organization(49%vs.55%).TRANSFORMATION SPOTLIGHT|Technology migrationThe Estimation Game:What do

90、business transformations really cost?|13SummaryEven though the transformation playbook varies from one effort to another,a few similarities are characteristic of all types of transformations.Companies perform best-in-business transformations if they can use their data to predict the value of initiat

91、ives as a basis for decision-making,not only to assess but also plan for potential risks and establish collaboration and communication models that include the workforce intelligence early on.They also will be able to focus on how the processes will need change after the transformation initiative and

92、 make sure the enterprise architecture is being adapted accordingly to remain modern and efficient in the long run.It is key to establish best practices around the management of business transformation according to use cases,considering the significant cost of such transformations9.5 million euros w

93、ithin three years(as indicated by the research results)and that budget and timelines are still very likely to be overrun.To excel in business transformation management,enterprises need to tackle the following common challenges that stand out for all investigated use cases:Overcoming roadblocks in th

94、e research and validation and modification stages Turning data into insights,whether about where to make impactful decisions;measurement criteria,process change,skills requirements,or technology roadmap planning;and Increasing agility to enable quick moves to the latest technology that will help mai

95、ntain a competitive edge.Conquering these challenges will empower companies to strengthen their efforts,get buy-in across the board,and continuously innovate while running numerous transformations in parallel that allow them to adapt to the changing nature of the business,expand into new geographies

96、,meet new customer demands,and become more sustainable.The Estimation Game:What do business transformations really cost?|14Message from the sponsorPublished January 2025Copyright 2025-Oxford Economics.All rights reserved.To successfully navigate business transformations,companies must understand,pro

97、actively manage,and optimize their business processes while maintaining a robust enterprise architecture practice that enables full visibility into their IT landscapes and all interdependencies.Continuous,smooth communication and collaboration across business and IT teams are essential,along with th

98、e ability to adapt swiftly to changing circumstances and unforeseen challenges.It is also vital to focus on all dimensions of the organization,including its people,processes,applications,and data.By adopting this holistic approach,companies gain access to the insights,methodologies,and collaboration

99、 capabilities required to align teams,make faster and more informed decisions,manage risks and dependencies,and stay on track and within budget.Aggregating information and turning it into meaningful insights allows companies to discover and analyze the current state and design then simulate the targ

100、et state.They can also create an actionable transformation road map and monitor execution and value generation throughout the process.Additionally,a harmonized approach lays the ground for future transformationproviding a comprehensive foundation for AI-enabled changeand creates a continuous adaptab

101、ility and improvement culture as the organization operates at a new level.To unlock your organizations potential,visit SAPs Business Transformation Management page.About SAPAs a global leader in enterprise applications and business AI,SAP(NYSE:SAP)stands at the nexus of business and technology.For o

102、ver 50 years,organizations have trusted SAP to bring out their best by uniting business-critical operations spanning finance,procurement,HR,supply chain,and customer experience.For more information,visit .About Oxford EconomicsOxford Economics is the worlds foremost independent economic advisory fir

103、m.Covering over 200 countries,over 100 industrial sectors and 8,000 cities and regions,we provide insights and solutions that enable clients to make intelligent and responsible business decisions faster in an increasingly complex and uncertain world.For more information,visit .The Estimation Game:What do business transformations really cost?|15