BCGX to enable tech innovation and deliver digital transformation

Delivering results is all the more important as—even amid a climate of uncertainty—a majority of companies expect to increase their investments in digital transformation in 2023, according to a new BCG global survey of more than 2,100 executives. But too often, organizations focus on incremental improvements versus innovative breakthroughs and fail to deliver on digital transformation.

Minu Sirsalewala, Executive Editor, Special Projects, Dataquest spoke to Nipun Kalra, Managing Director & Partner, BCG about BCG X, BCG’s new tech build and design unit, the India perspective, and what makes BCG X exclusive. Findings of the ‘Mind the Tech Gap’ report, why most companies are struggling to deliver bottom-line results for their digital transformations. Here are edited excerpts from the interview.

BCGX – What is the value proposition?

So first, let's take a step back and talk about consulting in general, consulting has not remained an ‘advisory only’ anymore for over a decade. For years consulting has been oriented towards not only ‘just give me advice,’ but actually delivering impactful solutions. Over the last decade, the impact is now not in the form of only some practices being changed because somebody's been enabled in a different way of working. It is actually now new technology that is left behind with the client after a consulting case is over, which then transformed the way they work on a sustainable basis. One cannot just advise and leave behind a new way of working with it. You have to create a new business or you have to transform the way they've been working. You have to leave technology behind. Now over this period, what happened is that BCG was anyway investing in building capabilities. As a top-tier consulting firm, we had a capability on analytics that we had grown in-house, we had something on the technology consulting side -- scholar, and then we had something called digital ventures, building out brand new businesses. What we've done with BCG X is that we've consolidated all those capabilities into one big power. And the way this is structured is that BCG and BCG X together, don't just advise or consult or solve problems, they actually finish the job end to end seamlessly, which means that you can actually deliver, build, design a technology platform and leave it behind for the client. More often than not normally, what happens is that let's say for a strategy consulting firm, they will make a recommendation and somebody else has to come in and implement it. Often, they will be lost in translation, we will not necessarily understand what was the original intent of what was supposed to be and what this eventually turned out to be. There is a gap that is created. Frequently what also happens is that the strategy guys end up talking to businesses inside the client firm and the implementation team talks to IT inside the client firm – there is already a gap here.

This is precisely what is also reflected in our finding in the ‘Mind the Tech Gap’ report; as there are so many areas where something can actually fall between the cracks. According to the report, nearly 70% of digital transformations don’t succeed at the end of the day – primarily because people don't often work very closely together as there is a lack of alignment between different departments or business units.

Digital transformation often does not tend to deliver the kind of impact it was envisaged to the level in the beginning. The organization is not getting galvanized around one, two, or three, big areas of focus. This is where BCG and BCGX – the two go-to-market brands – are expected to plug this gap. The unit will give an end-to-end solution from solving to implementation.

From an Indian perspective, what kind of customer engagement do you foresee?

Indian market is no different when it comes to this big finding that we have. The survey said that Indian companies are also looking at increasing their investments in their digital spending in 2023 over what they've invested in 2022, despite the uncertainties that we have around us. Organizations are actually still quite committed in terms of increasing their digital spending. There are different kinds of spending – some want to spend on transforming their core. Typically, they want to know if they can do something where they can operate the core very differently -- some vendors and partners can come and help them. Another scenario of spending is when they want to go outside the core and capture adjacent valuables and build brand-new businesses. And not just this, in some cases they want to actually build capabilities inside the organization, not depend on people outside. All these three kinds of patterns are quite evident in terms of what's happening in Indian organizations. These are long-tenure engagements where clients are willing to make sizable investments. So, you not only consult or guide in figuring out what needs to be done, you do it, land it, deliver the impact, and actually see them through all the way. So, there is a lot of buoyancy in terms of investments in their digital capabilities, both the actual assets that get delivered and the resources inside the organization without investment. In terms of tractions, there is heightened activity in the financial services space, industrial goods, healthcare, retail, and public services. These are not small, incremental acts. These are bigger unlocks where fundamental capabilities are getting reimagined.

The differentiating factor?

Think about it like this -- strategy-only consulting firms, and tech consulting firms. More often than not, there are some boundaries that are getting blurred, some tech guys will start doing some consulting bit and some strategy consulting firms will start building some oversight for technology kind of capabilities. What is unique about BCG and BCG X is that we still bring the problem-solving capability -- that we've always had -- as a strategic consulting firm and the skills to get it done in-house, with no transition between the two. So this gap is what BCGX fills, to avoid organizations from falling between the cracks.  In our understanding, no large professional services-oriented consulting firms has the technical ability to actually get the job done. So what differentiates us is that we are more oriented towards solving the problem end to end and not just sell technology consulting.

Growth and India market strategy?

Globally, we are already about 10% and we want to double in the next two to three years. The Indian contribution is going to be large. There are over 3000 professionals at BCGX and a sizable chunk of those 3000 people are in India, serving, different markets around the world. There is a sizeable tech talent in India and we want to make the most of it. And then, the domestic market within India is a huge market for us – we will be doubling the figures in the coming year. Both our consulting and delivery teams are growing at a significant pace, expecting a 60% growth in the next year or two as there are big investments coming from the customers.

Tech trends 2023?

Different contexts will need different kinds of technologies to come in. And depending upon the maturity of the starting point of what we're trying to address, it makes a big difference. Advanced artificial intelligence - there is no sector, where some meaningful difference cannot be made with some data, and advanced analytics. There's a very heavy pivot that is happening and there is a lot of investment going on. There are very active conversations on blockchain in general, to see if commercial use cases, and scaled use cases can come through at this point in time. IoT is another area that continues to see growth.

Challenges in executing the digital transformation journey?

I am a big believer in the fact that unless business and technology are working in blocks, their transformations do not see the actual impact that one should see, now what does that mean? When you break it down the one big thing is that there are many different smaller investments that are happening across the organization. Everybody wants to do something interesting in their own space and put some sort of investment behind their digital agenda, and this only ends up in your resources being scattered. Though there are incremental improvements happening, much money is expended and the transformation is not evident. There are no visible big unlocks happening. So organizations that have not galvanized around three to four large initiatives and focus only on incremental initiatives, the impact has not been delivered to the extent one would have thought. The second piece is around skills and this is actually a very important piece. Do we have the talent internally in the organization to actually support this transformation? Partners and vendors coming in, giving you a step jump concept, and it is done. It does not work like that. Unless things are landing, unless things are adopted, only then you can build something new. But if it is not adopted with a core business, it's meaningless. And that can only happen when the talent inside the organization also takes it along with them and makes it a part of their everyday life -- that only happens when they're actually engaging in building this transformation. So having that kind of talent with that kind of culture to start engaging, is the other big sort of unlock that many organizations haven't fully seen yet. Another challenge is viewing the transformation as a short-term program for a specific duration. It's an ongoing process, it does not stop, unfortunately, organizations do not fully recognize that you have to be in a constant mode of getting into the next big hack. Somebody out there is always innovating and getting ahead of you, there is no room for stagnation. These are some of the challenges encountered by organizations resulting in not-so-impactful digital transformation.

Any use case that stands out? A silver lining – An unexpected unlock?

As we generally hear about failures there was this large BFSI customer that just stood out to us, for the kind of unlock it actually got. This is a use case of a big transformation at a leading bank. Big boxes, high energy spending, inefficient resource utilization, etc. They went for a transformation and the agenda was co-designed by the business and technology – as desired and they actually saw a big drop in their cost-to-income ratio (CIR). Over a year and a half, there was a 6-7% drop in the CIR. These are the use cases that showcase that transformations are real, they're delivering actual business impact. And we are very confident with the system. When the report says 70% have failed, clearly there are reasons behind the failures and we are optimistic about plugging those gaps. For the longest time, we've been talking about digital transformation and now there is clear evidence in terms of what actually delivers. At BCG and BCGX we believe we are bringing that as a unique offering in the market. This tech gap that we've been talking about is on its way to getting plugged with these unique cases. We are very optimistic and are witnessing a lot of momentum in the industry. 2023 is looking like a very busy year.

In conclusion, sharing his thoughts on security Nipun articulated that investing in security capabilities is still maturing for Indian clients. It still has to come to a point where it becomes security first thinking and not an afterthought. We are gradually getting there.

Minu Sirsalewala