Digital transformation has, over the past 10 years, been one of the most important drivers of consulting demand—and it’s had a profound effect on the work clients are buying and the types of firms they want to buy from. As a result, every large firm has had to wrestle with the question of what it means, exactly, to become a leader in the digital space.
Building that kind of a reputation is often easier said than done. The challenge of positioning your firm as a digital leader is a multi-faceted one, encompassing everything from the way you deliver client engagements through to the strength of your digital ecosystem through to the quality of the thought leadership you’re putting out into the market. We spoke to Miriam Hernandez-Kakol, the Global Head of Management Consulting at KPMG, in order to understand the steps that her firm had taken to set itself up for success in the digital transformation market.
Digital transformation can mean many different things in different contexts. How do you personally define the term?
I think there are two different aspects we need to consider when we talk about digital transformation. The first is the question of how businesses can use modern technologies to increase throughput—i.e. how they can increase the level of connectivity within their organisation and improve their ability to meet their customers and their employees where they are. Second, you need to consider the value creation aspect: What's the output of that increased connectivity? How are those technologies going to help you reduce costs, increase your revenue, or better serve your customers?
It's important that we don't lose sight of the fact that, while technology acceleration is the enabler of digital transformation, the value it creates comes from increased connectivity between businesses, their employees, their ecosystems and their customers. These concepts of connectivity and the connected enterprise have become even more important since the start of the pandemic; digital tools compensate for the increased physical distance that COVID has placed between people. Any successful digital transformation must be oriented around these twin questions of how you intend to increase connectivity, and how you're going to use that connectivity to create value for all stakeholders, including the well-being of your employees.
And how, in your view, can a firm like KPMG help its clients to find the right answers to those questions?
Our focus at KPMG in the digital space has been as an enterprise-wide transformation journey partner. There's a whole range of different components that need to be in place to make a transformation successful—the strategy, the mature capabilities an organisation must develop, the modern technology stack designed with the future in mind, the people component, the measurement and the tracking of value—and we position ourselves shoulder-to-shoulder as a partner who provides support and expertise to our clients across all of those different dimensions. In order to do that, we've developed a proposition we call 'Connected. Powered. Trusted.'—a package of technologies, processes, operating models, insights and solutions that provide paths to accelerate agility, connectivity, resilience, and profitable growth.
Making digital transformation work requires building trust with stakeholders—customers have to know that you're using their data responsibly, and key stakeholders need to know that you've embedded a risk mitigation and compliance agenda right at the heart of your transformation vision. Historically, I think that this trust component is one that has often been overlooked both by consultants and their clients—but now, partly because of the pandemic, it's started to play a much more prominent role. For example, clients are starting to look for opportunities to use AI and transaction insights to build resilience within their supply chains to address some of the risks that have been highlighted by COVID.
What sort of impact do you think the pandemic has had on the way clients think about digital transformation?
There are certain elements of the broader digital transformation agenda that have risen in prominence because of COVID. For example, there's a lot of focus right now on the future of work, and the balance between in-office and remote working. Although most organisations were able to solve the technology challenge of remote working fairly early on in the pandemic, they're still dealing with a whole range of longer-term issues connected to that challenge—in particular, this question of how you incorporate remote working into a model that's sustainable in the long-term without sacrificing employee development or mental health and wellbeing. It also has implications for the ability of organisations to retain talent; when you'll be working from the same place regardless of who your employer is, why not jump ship when a better offer comes along? Over the next few years, I think that these questions around new ways of working, retention, and new service delivery models will be a major driver of consulting spend.
What other trends have you noticed recently in terms of clients rethinking their digital priorities?
The ESG agenda has become much more important for clients over the past few years. Increasingly, our clients are thinking about not just their profit margins, but the broader impact their businesses have on key stakeholders, such as customers, employees, investors and communities. I think that this question of how to be a good corporate citizen—and how to convey that to, and gain the trust of, your stakeholders—is going to play an increasingly important role as a driver of digital transformation.
Innovation is also a topic that's become increasingly important for our clients—and a lot of them are grappling with this question of how you make sure innovation continues to happen within your organisation when your teams aren't spending as much time physically together. As a result, there's more interest than there's ever been in the idea of co-creation, where clients, consultants and tech alliance partners come together to develop new products and solutions. In response to this need, we at KPMG have recently upped our investment into our innovation capabilities. We've created a deeper level of connectivity within our business and deployed the technology and delivery model to allow for integrated teams that span multiple different capabilities—something that is vital to do when you're running these 'art of the possible', co-creation projects that produce innovative outcomes.
How has this rethinking of what digital means to clients impacted the types of skills that a firm like KPMG needs access to in order to win work in the digital transformation space?
Clients' accelerating digital priorities have definitely had an impact on the skills and expertise that a firm like ours needs access to. The table stakes are still there; the need for technical capability, functional knowledge, regulatory expertise, and so on hasn't gone away. But there are also additional skills that are becoming increasingly important. Low-code solutions, for example, have become a preferred approach to help clients build and manage their technology stack. And then you have other rapidly accelerating technologies, such as cloud, analytics, and AI. All the businesses I talk to—clients and competitors alike—are having an extremely difficult time hiring people with those skillsets. Transformation delivery leaders and architects across the stack and in the business are critical in today’s environment. On top of that, there's also the fact that you need to find people who know how to build effective, trusted relationships in a virtual environment, rooted in empathy and a genuine human connection.
As clients change the way they buy digital transformation work, it's become increasingly important for consulting firms to know how to deliver at pace. Every client wants to accelerate their outcomes and time to market—so we need to help speed up that time to value. All the while consultants are having to re-evaluate their approach to pricing. The idea that price should equal hours times rate is going out the window; instead, clients want the cost of projects to be tied to business outcomes and value created. They want consultants to help them achieve their goals—particularly around overall business performance. That, of course, puts a lot of responsibility on the consulting firm to manage scope, talent, budget, and delivery against expectations.
In my experience, collaboration around common goals is the key leadership element that determines whether a transformation is successful. First, you need to have client leaders who are invested in the change; and yet that, by itself, isn't enough. You also need to be working shoulder-to-shoulder, in a fully collaborative way, with your clients and their teams at every level of the organisation—and you need to make sure that your stakeholders are fully invested in seeing the transformation through.
What, in your view, is the most effective thing a consulting firm can do if it wants to position itself as a digital leader?
If you want to position your firm as a leader in the digital space, you must be willing to demonstrate flexibility, and a willingness to explore non-traditional delivery and pricing models. Technical capability and scale are table stakes. Brand and reputation for delivery, of course, play a major role as well. We believe that your clients should be your biggest advocates—and that's why we've been actively looking for opportunities to help clients network with each other and build relationships. In fact, some of our biggest wins recently have come as a result of us introducing clients to one another. And given that clients are very interested right now in exploring opportunities for joint initiatives and co-creation, most are open to the idea of consultants playing this kind of relationship-building role in the middle of the ecosystem.
A few years ago—at the time when every firm, including KPMG, was buying up digital assets—there was a debate within KPMG about launching a 'KPMG Digital' brand. In the end, we decided not to—largely because we saw digital technology as such a foundational component to the idea of transformation. After all, what would an 'analogue transformation' even look like? Instead we chose to put our billion-dollar investment in building the capabilities, solutions, and global reach to better serve our clients as their transformation journey partner. Ultimately, I think that approach has worked well for us. It doesn't mean that we don't have digital assets to bring our clients; we do, and strong, differentiated ones at that. It just means that we've tried to centre our propositions and our approach around the business results we want to help clients achieve in addition to developing the digital solutions driving transformation.
How important is thought leadership as a tool for firms looking to build digital credibility?
Thought leadership is a vitally important brand-building tool for firms looking to establish a name for themselves as digital leaders. More importantly, it is an important conversational tool for discussing with clients the state of their industry, their business processes or their markets. At KPMG, we've centred our thought leadership around a 'future of' perspective—sharing our vision of the future for different sectors and business functions. Given that digital transformation is such a foundational issue for clients, we need to speak to those C-suite concerns. For example, CEOs are trying to figure out what their industries are going to look like in three to five years' time; they want to know what market, customer, and technology trends they absolutely can't afford to miss.
Looking ahead to the next two to three years; how do you think clients’ digital priorities are likely to continue to evolve over that timeframe?
I think that one of the biggest changes we're likely to see over the next few years will be the transition away from monolithic ERP systems in favour of more low-code based platforms. You can see a lot of evidence for that shift if you look at the types of acquisitions that tech vendors like SAP and Oracle are making right now. As we turn the corner with AI, and AI-based tools become a much bigger part of our lives, corporate clients are going to be able to manage their IT infrastructure in a more federated and democratised way, leaning more heavily on citizen developers and leaders.
