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Digitally mature are more profitable
5 November 2012
Capgemini Consulting, the global strategy and transformation consulting arm of the Capgemini Group, in partnership with the MIT Center for Digital Business, has announced the findings of a global research survey, examining how companies are managing and benefiting from ‘digital transformation’ - the use of digital technologies such as social media, mobile, analytics, and embedded devices to improve business performance or reach.
The study, The Digital Advantage: How digital leaders outperform their peers in every industry, reveals that those companies that have succeeded in delivering a fundamental transformation of their business through technology benefit from a considerable ‘Digital Advantage’ and demonstrate significantly better financial performance than their peers. However, the research also reveals that despite the transformative potential of technology in everything from delivering enhanced efficiency, productivity and collaboration to improving customer experience, few firms are truly capturing the benefits of digital transformation, with the majority at serious risk of falling significantly behind their competitors.
The two-year research, surveying over 400 major global companies worldwide, has found that digital maturity consists of two dimensions: Digital Intensity and Transformation Management Intensity. In other words, what the firm is doing with digital technologies and how the firm is managing the process of transformation. It is those organisations that are mature in both dimensions that are driving the most powerful digital advantage.
Our research program has identified a class of companies – the Digirati – who outperform all others to a considerable degree.
Capgemini Consulting The study reveals a significant and measurable performance advantage for those organisations that have a highly developed or mature approach to digital transformation. These high-performing companies – the ‘Digerati’- outperform their industry competitors on multiple financial metrics. They generate, on average, nine per cent more revenues through their existing assets; outperform their peers by 26 per cent in terms of profitability; and achieve significantly higher (12 per cent) market valuations.
The study also found that while there are different maturity levels by sector, there are digital leaders in all of them who are currently outperforming their peers. The study found the highest percentage of Digirati in the high-technology (38 per cent), banking (35 per cent), travel and hospitality (31 per cent), insurance (33 per cent) and telecoms (30 per cent) industries, but Digirati also exist within packaged goods (24 per cent), utilities (20 per cent), retail (26 per cent), manufacturing (12 per cent), and pharmaceuticals (7 per cent), although these sectors are less advanced.
Didier Bonnet, who led the research for Capgemini Consulting, said: “Our research program has identified a class of companies – the Digirati – who outperform all others to a considerable degree. These companies are outperforming their peers in every industry that we have studied. These are not necessarily companies that have traditionally been technology leaders but are companies in which the senior leadership team has woken up to the opportunities of digital transformation and made it happen.”
Capgemini Consulting interviewed digital pioneers including Burberry, Prisa, Asian Paints and L’Oréal. According to Angela Ahrendts, Burberry’s CEO, “Digital has been a catalyst for everything in the company and, when we got everyone on board with this concept, they were clamoring to become even more connected.”
The research has identified common patterns for how the leading companies build their digital advantage - a ‘Digital DNA’. First, the Digirati significantly invest in the “how” of digital transformation. They build and share a digital vision, engage the workforce at scale in understanding the vision, implement proper digital governance structures to ensure ownership and accountability of the transformation, invest in a competence upgrade, and build strong relationships between the business and IT/technology functions. Second, they make clear choices on what to transform, concentrating investment based on their own strengths and the dynamics of their competitors.
George Westerman, the Research Scientist who led the research for the MIT, said: “Digital transformation is as much about leadership and organizational change as it is about implementing new technologies. It is therefore a top-down exercise requiring skills and influence that only senior leaders possess. Although there is no ‘one size fits all’ for digital transformation, we have identified common patterns for how successful companies have built their digital advantage. All leaders can use this Digital DNA to help their businesses gain a digital advantage.”