New Research from Accenture Finds that Digital Core Investments Accelerate Reinvention and Innovation, Delivering up to 60% Higher Revenue Growth Rates and 40% Boost in Profit

Rhea-AI Summary

Accenture's new research reveals that organizations with an advanced digital core, strategic innovation investments, and balanced technical debt management achieved 60% higher revenue growth and 40% higher profits. The study, analyzing 1,500 technology executives across 19 industries and 10 countries, emphasizes the importance of a strong digital core for business reinvention and seizing new opportunities, especially with advancements like generative AI.

The research outlines three key tenets for a reinvention-ready digital core: 1) Build an industry-tailored advanced digital core, 2) Boost strategic innovation investments, including AI-driven systems, and 3) Balance technical debt with future investments. Accenture recommends allocating about 15% of IT budgets to remediate technical debt and maintain evergreen IT capabilities.

Positive

• Organizations with advanced digital core achieved 60% higher revenue growth rate
• Companies with strategic innovation investments saw 40% boost in profits
• AI identified as a tool to manage and mitigate tech debt
• Improving one digital core capability can trigger automatic improvements in others

Negative

• AI cited as a top contributor to technical debt by 41% of executives
• Rapid adoption of AI is adding new technical debt to organizations

Insights

Financial Analyst

The research unveiled by Accenture indicates substantial growth advantages for companies investing in an advanced digital core. Specifically, firms that allocate resources to strategic innovation and balance their technical debt can see up to 60% higher revenue growth and 40% higher profits. From a financial perspective, these figures are significant. They suggest that companies embracing these technological advancements are poised for above-average growth. However, it's essential to consider the cost and risks involved in such investments. The financial outlay for transitioning to a cloud-first infrastructure and integrating AI can be substantial. Firms must ensure that the projected revenue and profit increases justify these expenses. Additionally, the management of technical debt—which includes addressing legacy systems and outdated technologies—requires continuous investment. Companies must strike a balance to avoid overextending their budgets.

For retail investors, the takeaway is that firms prioritizing digital transformation initiatives may offer more substantial growth potential. However, it's important to scrutinize financial health and strategic execution. Look for companies that not only invest in technology but also demonstrate operational efficiency and sound financial management.

Tech Expert

Accenture's findings highlight the critical role of an advanced digital core and AI in driving business growth. Building a digital core involves adopting cloud-based infrastructure, leveraging data and AI for differentiation and ensuring security at every level. For investors, this means that companies leading in digital transformation are likely to be more agile and innovative. The emphasis on AI underscores its dual role: while contributing to technical debt, it also offers solutions to manage it. This is a fascinating dynamic, as AI tools can help modernize legacy systems and automate routine tasks, reducing long-term operational costs.

Investors should pay close attention to how well a company integrates AI and other digital technologies into its operations. This integration can lead to improved efficiency, rapid scaling of new products and services and a better customer experience—all pivotal for competitive advantage. However, it's important to be aware of the challenges, particularly the initial implementation costs and the need for continuous updates.

Market Research Analyst

The insights from Accenture's research emphasize the significant market potential for companies investing in digital transformation. The potential for up to 60% higher revenue growth and 40% increased profits points to a robust ROI for digital investments. This is particularly relevant in industries undergoing rapid change, such as retail, finance and healthcare. Firms with a forward-looking approach to technology adoption are better positioned to capture new market opportunities and respond to disruption.

From a market perspective, it's essential for investors to consider the competitive landscape. Companies that fail to invest in digital transformation may struggle to keep pace with more innovative competitors. Accenture's advice to focus on a balanced approach to technical debt is crucial; excessive debt can hinder progress, while too little attention to future investments can lead to stagnation. Investors should evaluate how well companies manage this balance and whether they demonstrate a clear strategy for ongoing technological reinvention.

Investments in digital core technology pave the way for businesses to thrive amid change and capture the value of generative AI

NEW YORK--(BUSINESS WIRE)-- New research from Accenture (NYSE: ACN) finds that organizations with an advanced digital core, investments in strategic innovation and a balanced approach to their technical debt achieved 60% higher revenue growth rate and 40% higher profits.

New research from Accenture finds that organizations with an advanced digital core, investments in strategic innovation and a balanced approach to their technical debt achieved 60% higher revenue growth rate and 40% higher profits. (Graphic: Business Wire)

“Continuous reinvention is now the default strategy because of the pace of change. Organizations are trying to figure out how technology impacts their business operations, especially amid new advancements like generative AI," said Karthik Narain, group chief executive of Technology at Accenture. "Capturing value from disruptive technologies with an industry-leading digital core is more than a critical success factor, it’s a survival factor. A strong digital core is essential to be ready for reinvention and rapidly seize every new opportunity.”

For the report, “Reinventing with a Digital Core,” Accenture analyzed findings from 1,500 technology executives in 19 industries across 10 countries. Accenture’s research revealed that an advanced digital core is necessary to help enterprises build the technology capabilities needed to be ready for ongoing reinvention across the business. This requires using the right mix of cloud-first infrastructure and corresponding practices for agility and innovation, data and AI for differentiation, applications and platforms to accelerate growth, next-generation experiences and optimized operations—with security at every level.

Accenture’s research also identified AI as a top contributor to technical debt—the cost and effort required to keep IT systems up to date and capable of meeting business needs, accumulated through choices that prioritize speed over long-term maintainability. 41% of executives cite AI as a top-three contributor, tied with applications/platforms. Conversely, AI can also be used to manage and mitigate tech debt, along with new ways of designing systems. Traditionally, this mostly came from legacy code, outdated technologies, and a lack of documentation, but the rapid adoption of AI is adding new technical debt.

Accenture's study outlines three fundamental tenets to achieve a digital core that’s reinvention ready. When these three tenets are adopted concurrently, businesses can experience considerable rewards, attaining up to 60% higher revenue growth rates and 40% boost in profits.

1. Build an advanced digital core, tailored to specific industry needs: Accenture’s research shows that companies need to achieve an "industry-leading" level of digital core capability to empower continuous reinvention. While the journey may seem complex, Accenture’s survey found that improving one capability—like data—can trigger automatic improvements in others. For this reason, companies should first assess where they are across their digital core capabilities, then prioritize “no-regret” moves based on areas of need. This will catalyze a virtuous cycle of continuous improvements across the digital core.

2. Boost investments in strategic innovation, including re-engineering systems for machine (AI) operations: Companies should monitor the rate at which they increase the proportion of their IT spend on innovation, as opposed to operations, as a key performance indicator. Accenture’s research found that a year-over-year increase of at least 6% is necessary to be reinvention ready. Additional budget can be found when companies reduce inefficiencies with actions such as joining vendors for guidance, optimizing cloud costs and operationalizing automation. Companies can use the resulting discretionary funds to redesign business processes, launch new products and services and enter new markets. Pre-integrated solutions from ecosystem marketplaces provide a starting point. Ultimately, companies need a digital core designed for both humans and machines so both can interact seamlessly with each other and create value through intention—not instruction—driven workflows for business processes. The more immediate focus should be to re-engineer systems for machine learning and AI operations.

3. Balance technical debt with investments for the future, using programmatic and autonomous methods: Accenture’s analysis shows that about 15% of IT budgets should be allocated to remediating technical debt, ensuring the maintenance of evergreen IT capabilities. This is the sweet spot—both higher and lower allocations are not optimal—to balance debt reduction with future investments. Maintaining evergreen IT requires a commitment to continuous updates, upgrades and management of software, hardware and services. Programmatic version control systems can be used to update configuration settings for infrastructure following changes to the code. This method brings more automation, flexibility and integration capabilities to reduce future technical debt.

Explore the report in Accenture’s thought leadership app, Foresight, and get a personalized feed of recent latest insights, data, case studies, blogs and more. Download the app at http://www.accenture.com/foresight.

About the research
“Reinventing with a Digital Core” research is based on survey responses from 1,500 C-suite IT executives in 19 industries across 10 countries. We asked IT leaders about the state of their technology stack, their business landscape and financial and operational performance. We triangulated the quantitative findings of the survey with qualitative research, specifically through 20 in-depth interviews and 26 case studies.

About Accenture
Accenture is a leading global professional services company that helps the world’s leading businesses, governments and other organizations build their digital core, optimize their operations, accelerate revenue growth and enhance citizen services—creating tangible value at speed and scale. We are a talent- and innovation-led company with approximately 750,000 people serving clients in more than 120 countries. Technology is at the core of change today, and we are one of the world’s leaders in helping drive that change, with strong ecosystem relationships. We combine our strength in technology and leadership in cloud, data and AI with unmatched industry experience, functional expertise and global delivery capability. We are uniquely able to deliver tangible outcomes because of our broad range of services, solutions and assets across Strategy & Consulting, Technology, Operations, Industry X and Song. These capabilities, together with our culture of shared success and commitment to creating 360° value, enable us to help our clients reinvent and build trusted, lasting relationships. We measure our success by the 360° value we create for our clients, each other, our shareholders, partners and communities. Visit us at www.accenture.com.

Copyright © 2024 Accenture. All rights reserved. Accenture and its logo are registered trademarks of Accenture.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240717721118/en/

Mylissa Tsai

Accenture

+1 617 488 7932

mylissa.tsai@accenture.com

Source: Accenture

FAQ

What revenue growth did companies with advanced digital core achieve according to Accenture's research?

According to Accenture's research, organizations with an advanced digital core achieved up to 60% higher revenue growth rates.

How much should companies allocate to remediating technical debt, as per Accenture's analysis?

Accenture's analysis suggests that about 15% of IT budgets should be allocated to remediating technical debt and maintaining evergreen IT capabilities.

What percentage of executives cited AI as a top contributor to technical debt in Accenture's study?

In Accenture's study, 41% of executives cited AI as a top-three contributor to technical debt.

What is the recommended year-over-year increase in IT spend on innovation for companies to be reinvention ready, according to Accenture (ACN)?

Accenture's research found that a year-over-year increase of at least 6% in IT spend on innovation is necessary to be reinvention ready.