Reinventing with a Digital Core

Chapter 1: How to accelerate growth through change

Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change 2

Contents

Page 04-08 Page 09-15 Page 16-28 Page 29-34

Executive summary The technology bedrock What does it take to Path toward
your business needs become reinvention ready? reinvention readiness

What is a digital core? Tenet 1: Build an industry-leading New ways of working

digital core tailored for your
Capturing the gen AI industry and company Assessing, architecting
opportunity and activating a digital core
Tenet 2: Boost investments in for reinvention
innovation, including re-engineering
systems for machine (AI) operations

Tenet 3: Balance technical debt

liabilities with investments for
the future

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change 3

Authors

Karthik Narain Paul Daugherty Koenraad Schelfaut

Group Chief Executive - Chief Technology & Lead - Technology
Technology Innovation Officer Strategy & Advisory

David Wood H. James Wilson Prashant P. Shukla, PhD

Lead - Global Technology Global Managing Director Principal Director -
Consulting of Thought Leadership & Accenture Research
Technology Research –
Accenture Research

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change Executive summary 4

Executive summary

We have entered an era of radical disruption,

where generative AI presents businesses
with an unparalleled opportunity to
accelerate their reinvention efforts and set
new performance frontiers, enabling them
to deliver products, services and value that
surpass what has been achieved in the past.

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In 2022, we predicted leading Later that year, generative AI—specifically This strategic shift toward continuous reinvention,
ChatGPT—burst onto the scene. In 2023, our underpinned by the generative AI juggernaut,
organizations must transform research found that 8% of companies, the is fueling an urgent need for a digital core that
Reinventors, were transforming every part of their amplifies machines, humans and the interaction
to drive a step change in business by increasing investments in technology of the two in significant new ways. Simply put,

performance with technology, capabilities, which we called their digital core . companies are trying to figure out how generative
2

The enormous power of generative AI to reinvent AI changes their business, and consequently, how
data, artificial intelligence and every facet of business is not lost on companies. to embed this transformative technology deep
Today, our research shows that 83% of them are within their digital core to accelerate real change—
new ways of working1. speeding up their reinvention efforts. igniting, creating and nurturing reinvention.

But expectations for generative AI are exceeding The term “digital core" was coined by Accenture
their digital core capabilities. Our latest research in 2022 when we discovered and tested the set of
shows 50% of executives believe they can scale critical technologies needed to drive a reinvention
generative AI enterprise-wide in six to 12 months. strategy. This discovery was based on our global
Yet only 13% are “extremely confident” that surveys and experience with thousands of clients
they have the right data strategies and the core as they strove to break away from the pack and set
digital capabilities in place to effectively leverage new performance frontiers.
generative AI4.

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We found three groups of distinct but constantly to ones that are interoperable and constantly
interacting technologies comprise the digital interacting with each other, in a programmatic
core: digital platforms, data and AI and the fashion with minimal human involvement.
digital foundation, which includes composable
integration, cloud-first infrastructure, a continuum We call this state of development "reinvention
control plane and security. readiness"—a continuous state of supporting
the current business drive toward efficiency
Today, without a digital core developed for both and effectiveness, while also being flexible to
machines and humans, companies will struggle respond to the new needs of the organization as
to realize the value that generative AI at scale well as quickly adopting the latest technology
promises to unlock across an organization5. innovations. This is not limited to generative
Generative AI requires new capabilities from the AI readiness—it adapts to new technologies
digital core. Everything needs to be centrally coming down the pipe. Such a digital core is
accessible, classified by purpose and secured. a prerequisite for a high-growth organization,
AI agents are already working with each other, just like a healthy heart is necessary for an agile
creating new workflows and processes6. But human body.
companies will need to go beyond and ensure that
all systems—not just AI agents—are interlinked, Does rebuilding such a digital core mean
and data maintenance automated. Think of new companies should abandon everything else and
data environments that can automatically leverage start from scratch to achieve this continuous
unstructured and synthetic data, or cloud that can state? The answer is no. Our research of 1,500
power generative AI-led, self-servicing functions companies globally shows that businesses can
and operations. Generative AI also changes how achieve reinvention readiness with three distinct
the digital core must be built, leveraging the tenets to build a digital core that enables the
technology itself: from systems working in silos benefits of continuous reinvention.

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Compared to the sample baseline, our research found leading companies who followed all
three tenets experienced a 60% higher revenue growth rate and 40% higher profitability.
We call this the 60:40 effect.

01 02
Build an industry-leading digital ambitions. For example, cloud isn't simply Boost strategic investments in ahead, companies can use these resulting
core tailored specifically to your about migrating to the public cloud but innovation by 6% or more each year, savings to redesign business processes,
industry and company. rather embracing cloud-first principles including to re-engineering systems launch new products and services and
such as automation, self-service and for machine (AI) operations. enter new markets. Their focus should be
Your tech capability determines the limit policies regardless of where the tech "lives." squarely on innovation KPIs (key performance
of attainable business value. The more Being consistent with these practices—in a Companies expect information technology indicators) that tie to business outcomes,
brittle your tech base, the lower your ability hybrid context—is a crucial step to improve (IT) to drive value, yet most of IT spend is such as shorter drug discovery periods, as
to leverage new waves of technologies the brittle tech foundations. Similarly, a on existing operations and maintenance. opposed to IT KPIs like mean time to detect or
and support reinvention. Not surprisingly, small regional bank hoping to increase Today, the rapid pace at which generative repair systems. To do so, companies need a
advancing to an "industry-leading" digital customers digitally will have different AI is enabling business outcomes mandates digital core that is designed for both humans
core (defined as the top quartile of our Digital requirements of their digital core compared that companies keep pace. Specifically, our and machines. Both can interact seamlessly
Core Index) by building new and advanced to an insurance company aiming to better analysis finds that they should increase the with each other and create value through
capabilities that are composable and fully understand their customers. proportion of their IT budgets dedicated to intention—not instruction—driven workflows
integrated is a non-negotiable step. Your strategic innovation such as generative AI, for business processes such as drug
digital core is also specific to your company by at least 6% year-over-year by reducing discovery. Current design methodologies
run costs and applying those savings have sufficiently advanced the design for
to innovation. We see many companies humans, with continual improvements being
consolidating vendors, optimizing cloud made daily, but the more immediate focus
costs and operationalizing wholesale should be to re-engineer systems for machine
automation to accelerate this shift. To stay (AI) operations.

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03
Balance technical debt liabilities amount of about 15% of their IT budgets In this report series, we explain why and
with investments for the future, to remediate technical debt, especially how companies can fulfill these tenets to
targeting 15% of budgets to for new IT projects. This is a balancing
empower reinvention and turn continual
remediation using programmatic act because funds used to manage
and autonomous methods. technical debt take away discretionary
change into a competitive advantage.
investments in strategic innovation. In
While legacy technical debt in IT systems has fact, we observe that leading companies This chapter focuses on CEO imperatives.
been building for decades, our research finds not only follow a disciplined approach Our second chapter delves into CIO
that AI is now a top contributor to technical to technical debt, never letting it get to
imperatives, illustrating how to best build,
debt. Because new debt created from AI can a point where it impedes innovation, but
grow rapidly, companies must proactively also a programmatic approach to building design and operate a digital core that is not
manage technical debt—the cost in terms of a digital core. For example, programmatic only capable of leveraging generative AI,
money and effort required for a company to version control systems can be used
but also attuned to absorb and scale new
keep its IT systems up to date and capable to update configuration settings for
of meeting business needs—to maintain infrastructure following changes to the
technologies as they arrive.
evergreen IT capabilities. Based on our data, code, reducing future technical debt.
companies must allocate the “just right”

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change The technology bedrock your business needs 9

The technology bedrock

your business needs

Can companies grow through continual

change? This question is on the minds
of chief executives as they face radical
disruption in their business environment.

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"We don't talk any more about the relationship between the technology
department and the business. It's one. Technology is a part of the
business. There's no technology group that would consider themselves
not part of the business." – A multinational chemical company
88%
The annual Accenture Pulse of Change Index business value, macroeconomic headwinds largely followed in an era of low-velocity of business leaders
found that 88% of business leaders anticipate such as inflation and geopolitical unrest IT environments. Today, speed, agility and
anticipate an even faster
an even faster rate of change in 2024 on continue unabated. security are the primary characteristics
top of the 183% jump in rate seen between of a tech stack that can better enable the rate of change in 2024
2019 and 20237. Technology ranks as the To get ahead of these relentless shifts and execution of a continuous reinvention on top of the 183% jump
most disruptive force for companies in 2023, challenges, companies need a different strategy. A digital core with these critical in rate seen between
up from the No. 6 position a few years ago, kind of change model for their technology, traits will empower organizations to pursue
largely due to the rapid spread of generative one that breaks away from the three-phase new corporate ambitions and set new
2019 and 20237.
AI (gen AI) applications8. Even as gen AI is model—unfreeze, move and freeze9 — performance frontiers.
heating up competition for productivity and introduced by Kurt Lewin decades ago and

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What is Digital core definition

a digital core? A digital core is a new way to think about and work with technology.

Accenture defines a digital Accenture defines a digital core as the critical technological capability that can create and empower
core as the critical technology an organization's unique reinvention ambitions. Building this tailored digital core requires integrating
capability that can create and
empower reinvention. The digital
advanced digital platforms, a seamless data and AI backbone and a secure foundation using radical
core varies across industries new engineering principles.
and companies. It enables
organizations to think about and This fit-for-purpose digital core enables an organization to accelerate ahead of competition and
work with technology in new
achieve their ambitions in the most efficient fashion using the right mix of cloud practices for agility
ways (see inset).
and innovation; data and AI for differentiation; applications and platforms to accelerate growth,
next-generation experiences and optimized operations—with security by design at every level.

Many large companies utilize technologies like cloud services, data management, AI, security or
SAP S/4 HANA so they have the “building blocks” of a digital core. But without proper integration and
activation of these components for reinvention, they do not have a digital core. The acid test?
They lack the digital threads necessary to integrate the building blocks to accelerate holistic
reinvention. In fact, sometimes, their IT stack is a deterrent to reinvention.

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change The technology bedrock your
Executive
business
summary
needs 12

Figure 1: Demystifying the digital core

A digital core fit for continuous reinvention includes three distinct

C-Suite executives must understand the Our analysis of 1,500 companies across groups of technologies that constantly interact with each other.
digital core of their company because of 10 countries and 19 industries shows that
its significant impact on business results. a digital core that addresses these needs
A brittle legacy technology foundation that must have specific capabilities, with each
remains siloed will hold a company back, component built in a certain way to keep it in
impairing its business performance. By a continuous state of change. Based on our Digital Platforms
contrast, a seamless digital core positions extensive surveys, interactions with clients
an organization to rapidly seize new and executive interviews, we established
opportunities to unlock greater value. three groups of distinct but constantly
interacting technologies which comprise
Gen AI's advent has imposed new the digital core: digital platforms, data Data & AI Backbone
requirements such as new types of data, and AI, and the digital foundation, which
model selection and increased compute includes composable integration, cloud-first Data AI
costs on the digital core. Simultaneously, infrastructure, a continuum control plane and
gen AI is also changing how each security (see Figure 1).
component of the digital core must be built,
leveraging the technology itself.
Digital Foundation
Cloud-first Infrastructure Security
Continuum Control Plane Composable Integration

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“We're in technology, we scale new opportunities and grow. It also

understand it's constantly requires a shift in thinking from legacy

IT systems being static, standalone parts
shifting. Why set an end-goal to a mindset where composability, agility
when we can continuously and interoperability across the entire
innovate to drive more technology landscape (and externally
with partners) are foundational principles.
efficiency, drive costs down or
increase revenue? That's why we A digital core enables the deployment of
call it a continuous evolution.” transformative technologies such as gen AI
to deliver their full potential. However, the
- A data infrastructure company
digital core must be customized to achieve
But it doesn’t stop at technology. A strong business objectives, which can vary for
digital core goes hand-in-hand with new industries and companies. Selecting the
“ways of working” across engineering "right" digital core depends on a company's
and operations to reinvent products and industry needs and corporate goals.
services. This means a company must Differing ambitions require companies
adopt new operating models, methods, to follow different journeys in developing
processes and skills to operationalize and their digital core.

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Capturing the gen AI opportunity

Gen AI has become an extraordinary force Partnering with Microsoft and Accenture, it is
in enabling continuous reinvention and developing new gen AI-powered integrations
accelerating organizations' progress toward for its Cytric Easy platform within Microsoft
new performance frontiers. With 98% of 365 to streamline and enhance every aspect
companies reporting technology as the of business travel. A gen AI travel assistant
top lever for reinvention, gen AI is now that integrates with the platform will align
seen as one of the main drivers for 82% of traveler preferences with corporate policies.
those companies10. Gen AI is changing the Utilizing Microsoft technologies, including
game for how organizations operate and GPT models, Microsoft Copilot 365 and
compete. Those that can harness gen AI's Teams, the assistant will support corporate
potential at speed are poised to supercharge travelers through all stages of their journey—
their reinvention outcomes, leaving their from planning and booking to the trip itself
competitors far behind. and post-trip activities.

Take the travel industry. With new and The gen AI solution will move beyond
rapid advancements in human-centric traditional booking interfaces to offer a
technologies, it is more important than dynamic, conversational interaction focus
ever for this industry to innovate in this on collaboration. Further, this shift promises
changing landscape. That is why Amadeus is to simplify the booking process significantly,
reinventing the corporate travel experience. saving time for business travelers. The
partnership is poised to deliver highly
personalized and efficient travel experiences,
reflecting a broader vision to transform
business travel and ensure the responsible
scaling of generative AI solutions globally.

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change The technology bedrock your business needs 15

Figure 2: Industry-leading digital core means more

experimentation and more value from gen AI

Companies with industry-leading digital cores (top quartile) will reinvent

Companies that want to capture gen Furthermore, experimentation with gen AI twice as many functions with gen AI compared to others and are expected to
AI opportunities must embrace cloud- seems to have benefits for all, both in terms create twice as much value.
native paradigms, establish a modern data of scope and scale. I.e., early adopters of gen
foundation capable of processing structured, AI are planning on reinventing more functions Top quartile
unstructured and synthetic data that leverage with gen AI and expect more functions to (5.3, 10%)
12

Average expected performance impact (%)

the most appropriate large language model scale in terms of performance improvement.
(LLM) for their objective. Building industry-
10
leading capabilities in the digital core Gen AI is today’s disruptive technology. What
is a critical step to realizing value. "Our
analyses show that over the next three years,
will the next one be? Humanoid robotics,
large-action models, hybrid models that
8 2x impact
companies with industry-leading digital cores combine symbolic AI with deep learning or
6
will reinvent twice as many functions with innovative and sustainable chip designs?

2 more functions
gen AI compared to others and are expecting How will companies be able to quickly Bottom quartile
4 (3.2, 5%)
to create twice as much value (see Figure 2). adopt new technologies to tap first-mover
advantages? Whether it is gen AI or the next
2
new technology, the answer is the same—
a digital core that enables a company to
become reinvention ready. 0
0 1 2 3 4 5 6

Average no. of functions planned to reinvent with gen AI

Digital core survey (Nov 2023): Final results (N= 1,500)​

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What does it
take to become
reinvention ready?
Our research has identified three
tenets that companies must follow
to achieve a digital core with
reinvention readiness.

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03
Balance technical debt
liabilities with investments Taken together, these steps will enable a company
for the future, targeting to rapidly adopt new technologies and benefit from
01 15% of IT budgets using first-mover and fast-follower advantages. Today,
02 programmatic and only a small number of leading companies (3%)
Build an industry-leading have cracked this code.
autonomous methods.
digital core tailored Boost investments in
specifically to your innovation by 6% or more Finally, companies need to Our research found that compared to the sample
industry and company. each year, including re- proactively manage technical baseline, leading companies who did all three
engineering systems for debt to maintain evergreen IT experienced a 60% higher revenue
The first step to reinvention growth rate (from 7.1% to 11.1% on average)
machine (AI) operations. capabilities by setting aside
readiness is to achieve an and 40% higher profitability (from 14.2 to
15% of their IT budgets to
“industry-leading” level of digital Companies must also increase 19.4 percentage points on average). We call this
remediate technical debt.
core capability—defined as the the proportion of their IT budgets the 60:40 effect.
top quartile in our Digital Core dedicated to strategic innovation,
Index (see Figure 3). as opposed to operations and Furthermore, these companies are well-prepared
maintenance, by at least to adopt the next new wave of technology quickly
6% year-over-year. The aim is and effectively, maintaining or growing their
to dedicate as much budget competitive advantage. Many companies are
toward innovation as they can, accelerating initiatives to follow the three tenets.
without starving important
maintenance projects.

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Tenet 01
Build an industry-leading digital core
tailored for your industry and company
Building a digital core capable of supporting continuous reinvention is an urgent imperative.
Our research shows that companies need to achieve an "industry-leading" level of
digital core capability—defined as the top quartile in our Digital Core Index—to empower
continuous reinvention.

We reached this conclusion after assessing companies' enterprise technology stacks across
each of the seven components of the digital core, using 39 subcomponents to develop
our Digital Core Index (normalized to a scale of 100). Companies can have the seven
components of the digital core, but without proper integration and activation of these
components for reinvention they do not have what we call a digital core. The acid test? They
lack the digital threads necessary to integrate the building blocks to accelerate holistic
reinvention. Data from our survey supports this thesis. When we look at the capabilities
at the pillar level, integration and control plane are the two components with the highest
differentials between the bottom and top quartiles (see Figure 3).

The index represents the aggregate strength of their digital core as the average of each
component's capability. Capability points represent the relative sophistication of a given
technology. Gaps represent technology modernization activities needed to achieve the next
level of capability. The greater the gap, the more time and investment required to achieve a
target level of capability and unlock the associated value.

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Figure 3: The Digital Core Index

The Digital Core Index represents the aggregate strength of a company’s digital core as the
average of each of its seven components' capabilities—their digital platforms, data, cloud-first
High
86
infrastructure, composable integration, AI, security and continuum control plane. 84
82
80 80
Avg.= 81
Mid 79 78

+13 points

69 69 69
68 68
67 66
Avg.= 68

Low

+20 points
52 53
50
49

Avg.= 48
45
42 42

Bottom 25 Mid 50 Top 25

Digital core survey (Nov 2023): Final results (N=1,500) Digital Platforms Data Cloud-first Infrastructure Composable Integration AI Security Continuum Control Plane

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Compared to the sample baseline,

companies in the top quartile of
our index who achieved an
Consider banking multinational Standard
Chartered, which set itself the goal of
becoming “fit for growth”. The bank
innovative digital offerings and business
models such as BaaS (Banking as a Service)
through Audax14.
54%
“industry-leading” condition wants to enhance shareholder return
experienced 20% higher revenue and revitalize the stock11. This corporate It built MOX and Trust Bank, which are of the companies in
growth rate and a 30% increase in strategy is underpinned substantially by new cloud banks with a core tech stack the top quartile of the
their profitability. the transformation of their technology. enabling composable API integration. Using
This begins with a value-led approach to AI and machine learning, it has automated
Digital Core Index
They reap other benefits as well. For example, technology adoption. The bank is focused on processes to improve efficiency, enhance strongly agreed that
54% of them strongly agreed that their carefully maintaining their legacy systems customer experience, reduce biases and their enterprise systems
enterprise systems helped them diversify into while making incremental changes. To that ensure self-healing IT automation in its
helped them diversify
other geographies and industries. end, not only the bulk of applications are systems. Additionally, it has made significant
cloud-based but it has also reduced the total investments in cybersecurity to protect its into other geographies
The data highlights that superior integration number of applications12. It expects savings systems and customer data. and industries.
and end-to-end engineering and operations of $1.5 billion over the next five years under
visibility contribute considerably to digital the fit for growth program13.
core capability and are critical to developing
an advanced level of capability. Those in the Furthermore, even as modernization of
top quartile are scoring 2X more in these parts of its tech stack continues, Standard
areas than companies in the bottom quartile. Chartered is venturing out with new

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Table 1: Sample no-regret moves in the digital core

The journey to an industry-leading digital

core is made by committing to the no-regret Digital Core Pillar Sample no-regret moves
moves (to be explored in greater depth in
Chapter 2) that build capabilities and deliver Digital Platforms • Include modern modular microservices apps, like S/4 HANA
efficiencies that can then be reinvested from SAP ECC.
• Experiment with gen AI apps in AI-optimized development platforms.
into the next step of the journey. These can
address any part of the digital core and Integration • Invest to ensure that data residing in systems built in legacy technologies
include actions as shown in Table 1. are easily accessible through APIs to feed AI models.
• Standardize, document and catalog APIs to ensure consistent and
seamless integration of AI applications with enterprise systems.
What’s promising is there are strong
correlations between components of the AI • Set up AI architecture to access prebuilt gen AI models.
digital core that create halo effects in other • Turn on "built-in” gen AI products in enterprise software.
parts of the core. This also applies to the • Put AI governance in place.
digital core holistically and gen AI. Higher • Operationalize multiple types of AI (classical and gen AI).

digital core capability enables greater

Data Foundation • Establish governance for ensuring efficient, safe and secure data for use.
AI assimilation, which reciprocally can • Extend data pipelines from structured to also cover unstructured,
be used to fortify and accelerate further streaming and synthetic data.
development of the digital core, creating a
Cloud-first Infrastructure • Get to multi-cloud and incorporate cloud native practices at scale.
virtuous circle of progress.
• Integrate HPC, like GPU clouds.

Continuum Control Plane (CCP) • Add observability extensively across domains—the ability
to track outcomes and tie them to systems/models.

Security • Modernize GRC solutions to add LLM risks, explainability.

• Modernize the security posture to allow intelligence-led
cyber assessment and attack simulations.

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Tenet 02
Boost investments in innovation,
including re-engineering systems
for machine (AI) operations

While higher capabilities in the digital core are necessary for becoming
reinvention ready, they are insufficient. Leading companies continuously
increase the proportion of their IT budgets dedicated toward strategic
innovation, such as gen AI, as opposed to operations and maintenance.
We found that they must shift these investments by at least 6% year-over-
year by reducing run costs and reinvesting the savings into innovation.

Typically, companies allocate 70% of their IT budgets for operations and

maintenance and 30% for innovation and discretionary spending. Since
2017, we've tracked and used the indicator called Flip Size—the rate at
which companies increase the proportion of IT spend on innovation as
opposed to operations—to capture the shift in the remit of enterprise
technology. During the pandemic, a high Flip Size was a key indicator of
performance. This prescription still holds.

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How are they doing this? We see many For example, let’s think of the future supply and building capabilities to deploy new
companies cutting inefficiencies by chain management process built with technologies. However, IT decision-makers
rationalizing vendors, optimizing cloud costs frictionless machine-to-machine interactions are taking notice of the potential of gen AI
and operationalizing wholesale automation in mind. Such a system ensures that all the and often moving funds toward strategic
to accelerate this shift. Companies can use core sub-processes such as data collection, investments in gen AI, even if it means
these freed-up funds to redesign business trend analysis, pre-ordering and even cutting the budget elsewhere15.
processes, launch new products and services optimization of the overall system, can be
and enter new markets. Their focus should accomplished end-to-end by machines— Unilever, a global consumer goods company
be squarely on innovation key performance with the option for humans to supervise and with over 400 brands used by 3.4 billion
indicators (KPIs) that tie to business intervene at any step. Humans are still in the people daily, has undergone a remarkable
outcomes such as shorter drug discovery loop but we have a system that costs less and digital transformation, becoming a digital-
periods, as opposed to IT KPIs like mean time increases overall efficiency. first and cloud-only enterprise. This shift in
to detect or repair systems. Our research focus from operations to innovation has been
shows that 80% of companies are likely to In some cases, a shift to strategic achieved through a collaborative effort with
grow their innovation budgets beyond 2023 investments in areas of potential growth can Accenture, Microsoft and Avanade. In just
at twice the intensity than they have before occur organically when organizations migrate 18 months, Unilever successfully migrated
(see Figure 4). their IT estate to the cloud and free up capital 100% of its workloads into the cloud,
to invest in innovation activities, such as revolutionizing its functions and setting a
automating software development cycles new standard for technology transformation
in the consumer goods industry.

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Figure 4: An Innovation-oriented IT budget

Companies are moving into higher performance brackets by shifting their IT budgets from operations to innovation. Innovation is deeply ingrained in Unilever's
Those with reinvention ready digital cores are shifting 6% or more from maintenance to strategic innovation. DNA. The company's Research and
Development (R&D) division comprises a
team of over 5,000 professionals worldwide,
dedicated to building brands through
groundbreaking innovations. Examples
include the development of plastic-free

6%
80% packaging for Persil and the introduction
80% of companies will increase their of new flavor variants for Hellmann's.
innovation spend 2023 onwards.
Unilever's commitment to innovation is
reflected in its substantial investment of
Companies with a approximately $1.08 billion in R&D each

reinvention-ready digital core year. This investment has resulted in a vast

portfolio of over 20,000 patents and patent
are increasing the proportion
19% of their IT budgets dedicated
applications worldwide. In 2023, Unilever
attributed its impressive sales growth of 10.5%

2% to strategic innovation, in the first quarter to its focus on innovation

and brand investment. During this period, the
such as gen AI, by at least company achieved a group turnover of $16.05
6% year-over-year. billion, marking a 7% increase compared to
Decelerate No change Accelerate
the first quarter of 2022.

Note: Accelerate here refers to a further increase in innovation spend growth 2023 onwards, with respect to the innovation
spend change that the company reported for 2020-2022. Digital core survey (Nov 2023): Final results (N= 1,500)

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change What does it take to become reinvention ready? 25

Tenet 03
Balance technical debt liabilities
with investments for the future
Companies relied on a “move-as-fast-as-you- actively control this debt to manageable
can” strategy during the pandemic that
16
levels. Our analysis reveals that leading
created significant tech debt—worsening a companies allocate an average of 15% of the
long-standing problem. Current conditions IT budget toward tech debt remediation. This
demand a more balanced approach, where "sweet spot" balances debt reduction with
companies must try to have an “evergreen investments for the future.
IT” by using gen AI and other technologies
to help manage technical debt and keep the What is technical debt? Simply put, it is the
enterprise tech stack up to date. cost in terms of money and effort, required
for a company to keep its IT systems up to
This requires a commitment to continuous date and capable of meeting business needs.
updates, upgrades and management of Debt can be accumulated through a variety
end-user software, hardware and associated of sources and traditionally includes legacy
services to mitigate the technical debt that and buggy code, outdated programming
resides in these systems. languages, a lack of documentation and
outdated technologies and infrastructure.
As recently reported, the tech debt burden Individually and together, these compromise
on U.S. enterprises alone is estimated to system performance and require remediation
exceed $1.5 trillion17. Companies must to reduce its compounding effects.

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change What does it take to become reinvention ready? 26

Figure 5: Contributing to tech debt

AI ties as the highest contributor to tech debt along with applications.

Enterprise Applications 41%

In addition to these ‘classical’ types of
technical debt, other debt is incurred
through the adoption of new technologies. AI 41%
For example, companies have been incurring
AI-specific technical debt since the rise of
Enterprise Architecture 40%
machine learning methods in early 2010,
and it shows. Our research discovered Security 34%
that AI is a top contributor to tech debt,
tying with applications (see Figure 5). As
such, any initiatives looking to rapidly
Data Foundation 34%
scale gen AI capabilities must invest in
tech debt remediation activities to counter Integration 31%
the potentially debilitating aspects of
inadequately blueprinted scaling efforts.
Failure to address these issues now may Business & IT Processes 30%
result in short-term benefits, followed by a
collapse of performance resulting from a Governance, Management, Part of the technology stack with
weak foundation. & Engineering of IT Estate
27% the most tech debt – Ranked top
3 by respondents
Hardware and Network
Infrastructure (Inc. Cloud)
23%
Digital core survey (Nov 2023): Final results (N= 1,500)

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change What does it take to become reinvention ready? 27

In the era of gen AI, the cost of technical debt may be compounded if not
managed intentionally. Why?

Accelerated innovation enabled by AI and Maintaining evergreen IT isn’t easy. Financial

gen AI empowers citizen developers with and time constraints, the break-neck pace
coding copilots to create apps quickly, but of change in the tech landscape and,
without proper oversight they may ignore consequently, rapidly evolving product
comprehensive testing or interoperability requirements and talent shortages can
concerns18. For instance, an AI-driven all cause technical debt to balloon. If this
customer service chatbot deployed quickly challenge is not addressed at the beginning
might later reveal issues in understanding of every project, companies can end up
complex user queries, potentially offering with more technical debt in the system
inaccurate responses that erode customer than when they started their “innovative”
satisfaction. This may then require significant project—accumulating debilitating drag on
updates or redesign—leading to a negative the system.
return on investment in the longer term.
Clearly AI can be a double-edged sword. On Based on our research, we recommend
the one hand, it promises productivity and companies allocate about 15% of their IT
helps us manage technical debt; on the other budget for technical debt remediation,
hand, it is itself a cause of technical debt. balancing “paying down debt” with strategic
investments. Failing this, a company’s IT
posture will never shift to innovation.

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change What does it take to become reinvention ready? 28

Consider our work with one of the world’s largest media Today, Globo is a D2C organization offering innovative We see more programmatic
conglomerates. As the largest media company in Latin digital products. It can reach audiences and markets in a approaches being used to
America, Globo had captive audiences across its TV channels more targeted way with its advertising business. Thanks
contain technical debt at code,
and digital properties. Its digital streaming service was to streamlined costs and top-line growth initiatives, Globo
growing but lacked the investment and agility to compete is accelerating advertising revenues and deploying digital infrastructure and other parts
at scale. The company was working with a labor-intensive capabilities through its 1,500-person innovation hub. And with of the system. In the future,
legacy tech stack. It had an outmoded operating model its mindset of “learning to learn,” the mediatech giant has a we will see more companies
with fragmented processes and tools, a lack of ecosystem legacy it will never lose.
partnerships and few metrics to monitor its engineering and
adopting programmatic
business performance across its various units. And its siloed Another example is the banking industry that’s increasing approaches not only to
operations kept functions such as IT, human resources and ad technology budgets to enhance customer experience through automate code refactoring,
sales from effectively collaborating. cloud, automation and new platforms. Banks consistently
allocate an innovation budget for transformative technologies,
testing and documentation
Globo teamed up with Accenture to implement its with a focus on efficiency. On the other hand, Standard but also for infrastructure.
transformation journey, UmaSóGlobo (“Only One Globo”). Chartered has a decision-making process for IT budget
Globo pursued a new direct-to-consumer (D2C) strategy with allocation, with the innovation team proposing solutions
an integrated suite of products that broke down silos and aligned with business requirements. Budget allocation
consolidated its technology systems. The team reinvented involves collaboration between teams and stakeholders,
Globo’s operating model, setting it up as a mediatech including the CTO, CFO, CEO and CISO, ensuring tech debt is
company with an innovation hub that aims to be the “factory” appropriately evaluated before embarking on projects.
from which all digital products originate. To support the new
model, the company crafted an environment to “test and
learn” from new products in the marketplace.

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change Path toward reinvention readiness 29

Path toward
reinvention readiness

While only a small proportion of companies

today are practicing the three tenets, all
organizations can significantly improve
performance by building out advanced
capabilities in their digital core (see Figure 6).

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change Path toward reinvention readiness 30

Figure 6: Illustrating the 60:40 effect

Consider two companies with $1B in revenue. The company with a reinvention-ready digital Profitability
core will grow 60% faster (to $1.38B) one-and-a-half years earlier than the company without it.
19 p.p.
In addition, this company will do so with 40% greater profitability.

11 p.p. growth rate 40% increase

Rate of revenue growth

14 p.p.

7 p.p. growth rate

60 %
higher growth rate

1.5 years

2020 2021 2022 2023 2024 2025

Baseline Reinvention-ready
digital core
Baseline Reinvention-ready digital core

Note: 7p.p. (percentage point) is the Revenue Growth (2020-2023 CAGR) for the baseline group in our digital core survey, whereas 11p.p. is the Revenue Growth (2020-2023 CAGR) for the group that meets all three conditions
for having a reinvention-readydigital core. And EBITDA margin is calculated as an estimated average over three years (2020-2023). 14p.p. is for the baseline group and 19p.p. is for the group that meets all three conditions for
having a reinvention-ready digital core.
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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change Path toward reinvention readiness 31

The benefits grow when companies not only address their present digital core but also
simultaneously keep an eye on the future with strategic investments while proactively
remediating tech debt to relieve burdens of the past.

Creating such a digital core simplifies the assimilation of new technologies such as gen
AI to drive their reinvention ambitions. Our research shows companies that follow these
tenets also break other performance barriers compared to peers that don’t. When asked
about their digital core, companies adhering to all three tenets are:

1.3x 1.4x
more likely to say that their more likely to say that their
digital core enabled them to digital core enabled their non-
identify and mitigate risks IT employees to create their
(cyber, regulatory, Responsible own customized solutions
AI) across multiple technologies, using low code/no code tools
applications and ecosystem than those not adhering to any
partners than those not adhering of the three tenets.
to any of the three tenets.

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change Path toward reinvention readiness 32

New ways of working

To achieve reinvention readiness, a company must also continuously

adopt new ways of working, including new operating models, methods
and processes for their workforce. This starts at the team structure
level. 68% of business executives report building strong capabilities
around dynamic teams, where team members can rotate on and
off based on project needs, while 67% are developing strong multi-
disciplinary teams that are cross-functional and integrate technology
and other skills. Furthermore, at companies in the top quartile of our
Digital Core Index, some of these practices are even more pronounced.
For example:

60%
design talent capabilities and technology
solutions to enable continuous change,
compared to 49% of others.

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change Path toward reinvention readiness 33

Assessing, architecting and activating

a digital core for reinvention

In this chapter, we establish that a digital core is critical for a

company to carry out continuous reinvention. To do so, companies
should focus on three tenets: advancing their digital core to an But where should companies start?
industry-leading capability, accelerating IT investments in strategic
innovation and proactively managing technical debt. Our next chapter strives to answer this question. We will share
how to build your digital core strength, illustrate the new
engineering principles you should leverage on your journey and
provide a roadmap to reinventing with a digital core. Together,
these approaches will position you to tap the potential of new
technologies and seize opportunities to create value and grow.

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#ExploreTheCore
Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change Path toward reinvention readiness 34

How Accenture can help

We help companies transform and Our integrated technology solutions We can then work with you to create a
target every facet of the digital core: from blueprint and define how to prioritize and
reinvent every aspect of their enterprise cloud migration to data modernization to build a reinvention-ready digital core. By

with digital core services that span generative AI implementation to building

platform businesses and more—with security
understanding the gaps in your digital core
capabilities, we can work together to bring
strategy and roadmapping, building and embedded at every step. Accenture’s your capabilities to an industry-leading level.
Continuum Control Plane offers a holistic
modernizing, managing and optimizing. approach to instilling transparency, Based on your assessment, we can
orchestrating change and driving innovation recommend the set of “no-regret moves” you
that is critical to cultivating reinvention- can make across priority pillars, which target
readiness across technology and business. your company’s specific business needs
and vision for the future. Across each pillar,
But where do you start? Taking our robust we offer dedicated assets, solutions and
Digital Core Diagnostic will provide you ecosystem partnerships to accelerate and
with a complete picture of the current state sustain your progress.
of your business and your technology.

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change 35

References

10. Reinvention in the age of generative AI | Accenture

1. 2022 Investor and Analyst Conference -
Transcript | Accenture 11. Standard Chartered Announces $1B Buyback
As Profit Beats Estimates (msn.com)
2. Total Enterprise Reinvention:
Setting a New Performance Frontier | Accenture 12. Innovation | Standard Chartered (sc.com)

3. Reinvention in the age of generative AI | Accenture 13. Earnings call: Standard Chartered reports robust
Full Year 2023 results By Investing.com
4. Pulse of Change | Accenture
14. Standard Chartered Offers Banking As A Service (BaaS)
5. Reinvention in the age of generative AI
Through audax (forbes.com)
(executive summary) | Accenture
15. 2024 IT spending outlook shows cautious start with
6. Technology Vision 2024 | Accenture
optimistic finish - SiliconANGLE
7. Pulse of Change | Accenture
16. Scaling Enterprise Digital Transformation | Accenture
8. Pulse of Change | Accenture
17. The Invisible $1.52 Trillion Problem:
9. Frontiers in Group Dynamics: Concept, Method and Clunky Old Software - WSJ
Reality in Social Science; Social Equilibria and Social
18. Coding on Copilot: 2023 Data Suggests Downward Pressure
Change - Kurt Lewin, 1947
on Code Quality (incl 2024 projections) - GitClear

accenture.com/digital-core
Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change 36

About the research The graphics below summarize the survey firmographics:

Quantitative 1,500 executives global Company Size

Executives Survey
52% completed Less than $5Bn
6%
7%
The survey of 1,500 global C-Level IT tech transformation
$5Bn – $9.9Bn
executives was completed in November 30%
2023. The aim was to collect data on: 19 industries $10Bn – $29.9Bn 25%
$30Bn – $49.9Bn
32%
1. State of their tech stack and maturity C-Level only More than $50Bn
of key components of the digital
core: digital platforms, data and AI
backbone, and digital foundation
(cloud-first infrastructure, continuum
19 Industries 10 Countries
control plane, security, and
composable integration). Financial Services Resources Products Australia (50) India (80)
Banking (83) Utilities (83) Retail (115) Canada (70) Italy (50)
2. Business landscape, including Capital Markets (45) Energy Consumer goods & services (113) China (80) Japan (100)
business structure and transformation; Insurance (86) (Oil & Gas included) (83) Airline, Travel, Transport (80) Germany (130) United Kingdom (130)
reinvention strategy; and business Chemicals (84) Aerospace & Defense (41) France (90) United States (720)
Communications,
functions transformation. Natural Resources (81) Industrial Equipment (80)
Media & Technology
Life Sciences & Pharmaceuticals (79)
Media & Communications (80) Health & Public Service
3. Financial and operational performance Automotive (81)
High Tech (82) Healthcare (78)
via multiple measures.
Software & Platforms (86) Public Services (40)

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change 37

Digital Core Index The 60:40 effect estimation

We built a composite indicator (an index) to We estimated the 60:40 effect by combining the survey data Our research showed that companies that apply the three
measure the strength of a company’s digital (including Digital Core Index) input and financial performance tenets of a reinvention-ready digital core experience a
core capability based on 39 assessment metrics of companies in our survey sample. Leveraging 60-40 effect.
questions. We applied a two-step aggregation econometric modelling, we estimated the relation between:
process corresponding to the digital core During the period of 2020-2023, the estimated CAGR
component definitions and normalized the 1. Companies’ revenue growth revenue growth rate (3 year-end growth reading: 2020-21,
overall score on a 0-100 scale, where (CAGR 2020-2023; 3 year-end readings) 2021-22, 2022-23) of companies with reinvention-ready
0 means lack of digital core strength across digital core (i.e., that adhered to all three tenets) was 11.1%.
the components and 100 means maximal 2. Companies EBITDA margin For the companies that did not satisfy any of the three
strength across all components. (Average 2021-2023; 3 year-end readings) tenets, it was 7.1%. The outperformance in revenue growth
rate = (11.1% - 7.1%) / 7.1% × 100% = 56.34% rounded to 60%.
As a next step, we created three groups of 3. The three tenets needed to achieve
companies based on overall Digital Core a reinvention-ready digital core: Similarly, during that same period (2021-2023; again 3 year-
Index score distribution. The top group • Build industry leading digital core end readings), the estimated average profitability (measured
corresponds to the top quartile of the • Boost investments in strategic innovation with EBITDA margin) of companies with a reinvention-ready
Digital Core Index, the bottom group to the • Balance growing technical debt. digital core was 19.4%. For companies that did not follow
bottom quartile of the index. The mid group any of the three tenets, it was 14.2%. The outperformance
is the rest of the index. Next, we analyzed As the top-rated companies constitute only a small percent in profitability = (19.4% -14.2%) / 14.2% × 100% = 36.62%
characteristics of the groups. of analyzed sample (-3%), we tested the relation with the use rounded to 40%.
of continuous variable (with scoring across the sample). The
model controls for companies’ size, HQ country, industry and
selected operational characteristics.

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Reinventing with a Digital Core | Chapter 1: How to accelerate growth through change 38

Logistic regressions Interviews and Case Studies Acknowledgements

We also analyzed the relation between satisfying We triangulated our findings from the large-scale Project lead
the three tenets needed for a reinvention-ready primary data from the survey with qualitative Shachi Jain
digital core with probability that: research, specifically 20 in-depth interviews
(10 Business executives and 10 IT) and 26 case Research team
• Company’s enterprise systems enable them studies. Overall, we collected 46 case studies Surya Mukherjee, Gargi Chakrabarty,
to identify and mitigate risks (cyber, through secondary research and interviews, Emily Thornton, Katarzyna Furdzik,
regulatory, Responsible AI, etc.) across focusing on issues organizations are facing Krish Jhaveri, Juan Pablo Romero, Ajay Garg,
multiple technologies, applications, and with respect to the rapidly evolving business Devraj Patil, Jakub Wiatrak, Amal Sebastian,
ecosystem partners environment as well as technology landscape. Toms Bernhards Callahan, Megan Bernardi,
To analyze the qualitative data, we used Chiara Addis, Avimany Basu, Balu Mahendran,
• Company’s existing IT estate helped Accenture research gen AI tools to identify Abhishek Mishra
diversification into other geographies significant patterns in maturity of various
and industries components of the digital core. Marketing team
Mark Klinge
• Company’s existing IT estate enabled Laurence Mackin
their non-IT employees to create their Janine Stankus
own customized solutions using Micaela Soto Acebal
low code/no code tools
The authors would like to extend a special
For these analyses we leveraged logistic thanks to Andrew Long, Emily Miller
regression approach controlling for companies’ and Madhav Shenvi for the insights and
size, HQ country and industry. contributions to this research.

accenture.com/digital-core
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