Just as inflation and interest rates have impacted Canadian consumers, the shifting economic landscape has also had a significant effect on businesses. Many are increasingly looking for ways to do more with less, and turning to digital tools and solutions for help.

Canadian organizations have been talking about digital transformation for years, including adopting cloud-based technologies and automation, with many accelerating their strategies during the pandemic. But as the business environment shifts, the stakes to evolve – and realize value from digital investments – may be even higher.

“Enhancing digital ways of operating is now table stakes. It’s something you have to do to be relevant,” says Nancy Chase, who leads KPMG’s Risk Consulting practice in Canada. “Today organizations must look first and foremost at boosting efficiency and optimizing operations and think about how they can continue to transform, while doing more with less.”

According to the 2023 KPMG Global CEO Outlook survey, Canadian companies are placing a top priority on transformation. Among the Canadian CEOs surveyed, 57 per cent are earmarking more capital for technology, while the remaining 43 per cent are focused on skills development in their workforce.

So, what are the areas executives may want to focus on? Here are five trends that every company should be thinking about.

1. Establishing the tangible potential of generative AI while mitigating new risks

In late 2022, ChatGPT shocked everyone with how well it could answer questions, write paragraphs and automate certain tasks nearly instantly. It also caused almost every business to rewrite their digital transformation plans. KPMG’s survey found that 75 per cent of Canadian CEOs now cite generative artificial intelligence (AI) as a top investment priority, in particular to address labour shortages and bolster cybersecurity.

Connecting generative AI to business outcomes is a must, whether that’s improving operational efficiency, creating more personalized customer experiences or something else. “Generative AI is still nebulous,” says Stephanie Terrill, National Leader of Management Consulting for KPMG in Canada. “Executives are assessing how it will impact their business.” If you’re layering this tech onto an existing digital roadmap, you’ll need to make sure it properly aligns with your current data, infrastructure and employee needs, adds Terrill. “It’s an amazing technology, but how will generative AI integrate into their existing systems and processes?” she asks.

At the same time, companies must also consider the potential negative outcomes of AI. “The technology is moving much faster than regulation,” notes Terrill. “That leaves executives and organizations to navigate these waters on their own.”

The KPMG CEO Outlook survey found that 67 per cent of Canadian CEOs think disruptive technology will negatively impact prosperity over the next three years, with many considering it the number one threat to growth. One key concern is around how AI will impact cybersecurity threats, but business leaders are also wary of ethical challenges, such as privacy, transparency, misinformation, intellectual property and bias in datasets.

Executives also recognize it’s their responsibility to manage its impacts on employees and society at large. “Executives do not want their organization to be seen on the wrong side of the social equation,” says Terrill.

Despite these potential pitfalls, executives have little choice but to start exploring AI. “There’s a fear of being left behind,” says Chase. “If you wait and let others go through the pain of being first adopters, you could lose competitive advantage.” Of course, adopting it for the sake of following market leaders is not enough. Companies will require a careful strategy to ensure it delivers benefits.

2. Reinforcing digital foundations

Advances in AI are also causing companies to think more carefully about how they invest in and govern data. “Effective generative AI requires a strong foundation of reliable data,” says Terrill.

Even before ChatGPT became a household name, companies were challenged to effectively measure, consolidate and categorize data. In many cases, data is still held on legacy systems, while business leaders struggle to understand what data their company has, where it’s located and how to best structure information.

To make progress, executives will need to get more deeply involved in data discussions. “Technologists can’t determine what data is important to a business,” says Terrill. “Business people know what’s important to take market share, beat competitors and make customers happy. They need to partner with technologists to devise the digitals solutions that will get the return on investment.”

3. Optimizing the cloud

Moving data and processes to the cloud has long been a key part of a digital transformation program. Now, though, companies are reconsidering the optimal mix between on-premises computing – either physical servers or dedicated hosted servers specific to their company – and public clouds run by third parties.

At the same time, a number of organizations have faced higher operational expenditures because of the cloud, with many still running older and newer systems. “It has changed budgets,” says Terrill. “Now companies are paying for cloud usage, but they’re still not rid of all of their legacy data centres and processes.”

As companies work to strike a more optimal balance, they will need to do a better job of investing in the right areas and updating their processes so they can get more value from their tech spend. “Significant investment has been made on cloud migration,” says Chase. “Now companies are stepping back to ask, ‘Where do we go from here and how do we make sure we’re optimizing that?’ ‘Where does our business need to adapt to get the best value from those investments?’”

4. ESG shapes digital transformation

As organizations have adopted environmental, social and governance (ESG) reporting, they’re now assessing digital transformation initiatives through that lens. “It becomes an extra layer of strategic thinking about what the outcomes should be,” explains Terrill. “In some cases, the regulatory requirements are accelerating what investments get made.”

Accounting for environmental indicators can include relatively simple items, like replacing travel with virtual meetings, but also digitizing core operations to improve efficiency, particularly in some sectors like energy. “There is an environmental component to all technological advancements,” says Chase.

The social component is increasingly a key consideration as well, especially as businesses seek to train AI models with their data. “How do companies build trust with employees, customers and regulators that they’re using data ethically?” she asks. “There is a huge opportunity for organizations to be thoughtful and transparent.”

Investing smarter

As financing costs increase, and with many people still expecting a recession, Chase expects companies will scrutinize the dollars they’re spending. Having invested in digital journeys over several years, businesses now need to ensure they’re getting the value they expected. “There’s definitely pressure around being able to show greater returns, but with a much smaller budget,” says Chase. “It’s a real challenge because it doesn’t happen overnight, and some of the value is hard to measure.”

There is little doubt that companies cannot afford to delay digital transformation efforts. But they will need to make careful choices to get the most out of every dollar.

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