Get to know your CEO’s technology transformation priorities

How would you like to help your CFO and CEO navigate the “defining business challenge of our time?”

This challenge consists of “navigating the technology world to achieve sustainable competitive advantage,” according to McKinsey’s rundown of 2024 CEO priorities. CEOs need all the help they can get to achieve this objective because, as the consulting firm also indicates, “most digital transformations fail to deliver the expected impact.” McKinsey’s report devotes a chapter (eight detailed pages) to discussing how organizations can capture more value from their technology transformations.

As a tax guy (and, more specifically, a tax technology guy), here’s what strikes me as the most notable aspects of the analysis:

• CEOs care deeply about technology transformation, for good reason: The report portrays “digital leaders” as organizations that have deeply integrated technology across core business processes, a strong a focus on attracting, retaining and developing digital skill sets (like those that tax technologists possess) and an overall technology capability that stimulates innovation throughout the business. McKinsey research shows that these digital leaders outperform other companies by significant margins based on price-to-earnings (P/E) ratios, total shareholder returns (TSR) and other metrics. For example, retail-banking digital leaders posted annual TSR growth rates 65% higher than other retail banks over a recent five-year period. If CEOs care deeply about technology transformation, so do boards of directors and CFOs.
• Transformation success requires attention to six enablers: The report details which capabilities are instrumental in propelling digital transformation success: a business-lead digital roadmap, talent (e.g., those tax technologists I mentioned), the right operating model, the right technology, sufficient and easily accessible data and a savvy approach to technology adoption and scaling (e.g., solutions that are sufficiently flexible to support an organization’s changing growth rate and geographic reach). When I look through my tax lens, I see similar foundational capabilities driving successful tax transformation initiatives.
• Specific links to business outcomes are important: McKinsey encourages organizations “to tie the transformation outcomes of each business domain to specific improvements in operational KPIs, such as reduction in customer churn or improvements in process yield. The team builds a road map where the digital solutions that underpin these KPI improvements are sequenced in a way to produce meaningful value in the short term (say, 12 to 18 months) and transformational value in the medium term (three to five years, for example).” Make those KPIs tax-specific and the same holds true for tax transformation projects (as well as the compelling business cases that get them off the ground in the first place).

As I mentioned, this guidance is teeming with digital transformation intelligence. I find it interesting that the report frequently pairs artificial intelligence (AI) with digital transformation (“digital and AI transformation”). This phrasing shows how much investment and interest AI is attracting throughout the organization, including inside tax groups. My colleague, Vertex Vice President of Technology Strategy Chris Zangrilli, has lots more to share on the role that AI and generative AI will play in tax technology transformations in 2024 and beyond.