There is a tremendous gap between the digital top performers and the laggards are wide. Digitisation is creating a divide between the laggards and the performers. While the top performers emphasise revenue-generating activities such as customer experience remodelling and next-generation sales, the laggards are playing catch up trying to ramp-up their digital initiatives.
Common traits if digital leaders
Three strategies that top performers have adopted yo deal with major challenges that companies face when transforming themselves into digital enterprises.
- They invest - Finance is always scarce and the biggest and the biggest obstacle to implementing its digital vision. Most of the top performers invest at least 5% of operating expenses into areas such as digital offerings, products and business models, digital customer engagement and digitally optimised processes.
- They recruit experts - While it may be difficult to recruit digital experts and companies should infuse digital talent throughout the company, dedicating a significant number of employees to digital functions, and engaging employees in the digital process.
- Embed digital in organisations - Changing corporate culture is the most challenging in the digitisation initiative. They have to manage the business digitally end-to-end to keep up with the speed and agility of digital functions. This can be achieved by integrating digital capabilities into existing functions and permit business units to manage digital initiatives.
In a survey conducted by BCG, it was observed that US companies have 20% more top performers than Europe, putting them on a faster track toward digital transformation. Much of this edge is due to stronger telco and technology sectors, which enable other sectors.
In the same survey, it was seen that a company's digital initiative is more industry-specific that region or country-specific. telecom and technology companies were at the forefront. Other industries are yet to learn the digital tactics that telcos use for years and that has become embedded into their value creation.
The Banking sector stood third among the digitisation due to their strong investment in IT (20% on an average) and long term experience using online and mobile channels for customer interactions and increasing competition. Banks still face challenges in transforming the tech function, simplifying IT landscape to cut complexity and free up resources to support digital transformation.
The manufacturing (electrical & mechanical) sector faces digital challenges largely because of its traditional focus on producing great physical products and limiting IT's role to support office and back-end systems.
Digitisation of the core processes or products has not been a priority for companies in this sector. However Digital represents an exciting new opportunity for predictive maintenance and maintenance as a service. There is an enormous opportunity for companies to enhance their physical products with digital products and services.
The 2020 perspective
The digital leaders - telco & technology companies are focusing on further on simplifying their IT o multiply the benefits gained by cutting complexity and freeing up resources. They also plan to digitise the manufacturing industry to make processes and technologies more efficient. They are also focusing on personalising digital products and services.
The laggards are working on setting up the right technological environment and making customer data available across the company to understand the customer needs. they also understand the importance of developing process digitisation to overcome legacy IT applications that require frequent intervention in the back office.
Steps to moving forward
For the leading performers, it is a question of how to accelerate their digital transformation, cashing in on their investments and maintaining an edge over the competition. For laggards, the challenge is to get the basics right to jump-start the digital transformation. Some more steps to consider to steer the digital journey
- Assess their industry position, and inquire how the digital attackers are disrupting the industry and what digital trends are emerging.
- Ensure leadership is strongly committed to digital strategy. It requires a strong commitment from top management, which must integrate the digital strategy into overall corporate strategy and incentivise change across organisations. Individual business units should be allowed to control their digital agendas as they know their customer needs best
- Continue to deepen the digital organisation by investing in acquiring digital talent and also modify the culture to suit the new digital recruits by adopting a new agile way of working.
- Measure success and build momentum by defining KPI to digital and profits from digital businesses. This helps build momentum within the organisation for other digital initiatives.
Digital edge would become more pronounced as top performers focus on revenue generation while the laggards play catch-up. However, they can still take clear steps to push themselves into the forefront as long as they are fully convinced and commit themselves to it totally.
By Michael Grebe, Michael RuBmann, and Michael Leyh
BCG 2017July
Comments
Post a Comment