The Business Case for Intelligent Transformation

The world is changing at a rapid pace, with economic and geopolitical realignments and technology-driven transformation of business operations occurring simultaneously. For businesses, the lingering effects of the pandemic added to the chaos of the past few years, but it also accelerated digital transformation, which is a positive development.

That said, there’s no going back to a pre-pandemic “normal” state. With the rapid evolution of advanced AI technologies like ChatGPT and an emerging shareholder mandate for profitable growth in the near term (“two years runway”), it’s becoming clearer that digital transformation, while necessary, is not sufficient. Instead, business leaders will need to shift focus to intelligent transformation to navigate their organizations through uncharted waters.

The recent past foreshadows the future. Over the last few years, CEOs who lead highly resilient organizations were able to not only weather the pandemic and economic uncertainty that followed, but emerge from it in a stronger position. That same quality — the ability to adapt quickly to disruption and embrace accelerated change — is needed now more than ever.

Here’s a look at some of the challenges CEOs will likely confront in the years ahead and how business leaders can embrace intelligent transformation to evade risk and capture new opportunities in a changing world.

Macroeconomic Changes and a New Business Mandate 

Macroeconomic notions about Western-led globalization are falling by the wayside as a war rages in Europe, democracies experience political instability and national debts approach destabilizing levels. Businesses of every size are contending with the fallout: widespread and persistent economic uncertainty.

Investors are reacting to these changes with a new business mandate: growth alone isn’t enough — profitable growth is now required. This business mandate underscores the need for organizational resilience because the companies that can change course quickly and adapt to new circumstances will be best positioned to grow and generate profits in the years ahead.

Digital transformation has been the way forward for more than two decades now. Companies responded by integrating technology throughout their operations and changing the way they do business. They’ve looked for ways to tap into the power of big data, and many are putting the fundamentals in place as part of ongoing digital transformation efforts — for example, by breaking down silos and centralizing data using cloud-based ERPs.

The next step will be intelligent transformation, which will replace digital transformation as the path towards greater resilience and profitability in precarious times. Building on the foundation laid by digital transformation, intelligent transformation will enable greater levels of automation to increase efficiency, boost productivity and support strategic decision making.

Prioritizing Intelligent Transformation

Business leaders who prioritize the evolution from digital to intelligent transformation can gain a competitive advantage by increasing organizational resilience and becoming more responsive to the challenges and opportunities of geopolitical and economic changes. In transformed businesses, people will have more time and technical resources to focus on strategy.

A recent McKinsey report on generative AI’s economic potential provides details. It estimated that generative AI tools will likely automate half of current work activities between 2030 and 2060. This will give the next generation of employees more time to analyze emerging trends and plan for multiple scenarios so they can minimize risk and maximize opportunities.

Employees will have generative AI tools to accelerate this work, including advanced scenario modeling tools and market and research analysis technologies that tap into historical data and current sentiment. McKinsey’s research indicates that generative AI could supercharge productivity, adding up to $4.4 trillion in value to the global economy each year if fully implemented across more than 60 use cases the firm studied for the report.

By making the shift to intelligent transformation a top priority, company leaders can reap the benefits of accelerated automation, increased productivity and efficiency, and predictive analytics that help them remain agile in the face of disruption. In short, they’ll achieve greater organizational resilience and profitability.

Start Planning for Tomorrow Now

CEOs have their role to play in this transition — they’ll chart a course that leads to new opportunities amid uncertainty. For CEOs, embracing accelerated change is an imperative because it delivers the agility they need to outperform targets and pivot when external forces increase risks or open new possibilities.

But while CEOs will play a vital role in outlining the vision, CFOs are taking the lead in executing the shift from digital to intelligent transformation. CFOs outgrew their “bean counter” function many years ago when they spearheaded technology investments to drive digital transformation. Modern CFOs maintain their focus on efficiency by leveraging technology to improve productivity and by supporting colleagues as they deploy digital tools.

That’s because the CFO holds a unique position at the strategy table, with a granular view of how the organization generates value. CFOs can pinpoint where costs are too high and how expenses can be reduced, where productivity is strongest and how output can be increased. And that’s why CFOs will be essential to the success of intelligent transformation efforts.

The business case for intelligent transformation is clear given the pace of technological advances, and the timetable is short due to persistent uncertainty and a rising demand to show profitable growth. Midmarket companies, the engine of economic growth, can prepare by centralizing data and embracing emerging technologies like generative AI. The task has never been more urgent than it is today.

Written by Mike Ettling.
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