The Digital Advantage : how digital leaders outperform
MIT Sloan and Capgemini report on how firms that “get digital” are massively outperforming their peers. "The Digital Advantage: How digital leaders outperform their peers in every industry"
Report summary - “Digital maturity matters"
The report looks at 391 large firms across multiple industries to see where digital is having an impact.
Importantly, the report proves that there is a significant financial benefit from adopting digital strategies, technologies as well as re-engineering processes and people to take advantage of the digital shifts we are seeing as a result of social media driving social business.
Two types of digital transformation
1) Digital intensity: an investment in technology-enabled initiatives to change how the company operates (customer engagements, internal operations and business models)
2) Transformation management intensity: – while it is a mouthful to say, it describes the leadership capabilities required to drive digital transformation in the organisation. This is not about technology, instead the focus must be on future growth areas, governance and engagement to make the transition happen.
The report explains how some companies only operate with one of these types of digital maturity traits, but those who operate in both are not only well positioned for the future, they are actually outperforming their peers on a massive scale.
Transformation management works best with both a top-down leadership approach, coupled with bottom up innovation. The key here is to have a leader, and a board and management team who absolutely want the company to change and are prepared to drive this change through.
The challenge is that there are not many of these “digital CEOs” about, meaning that some of this change may be delayed until the next breed of digital savvy leaders are promoted. For some companies, this will be too late.
Four types of digital maturity
Beginners: These firms do very little with advanced digital capabilities, but may be using more traditional systems such as ERP or e-commerce. Probably have a twitter account and a facebook page but not much in the way of real social business. They are also unlikely to have a digital savvy leadership team in place so are not planning any type of transformation management.
Fashionistas: Companies in this quadrant have implemented or experimented with many “sexy” digital applications – some creating value and others not. They most likely have not implemented these digital initiatives with a real strategy linking them all together because most are experiments or pilots – or perhaps are just “ticking the boxes” that they are “doing social media”
Conservatives: Digital conservatives favour prudence over innovation. While they understand the need for a strong digital vision and a governance and culture to match, they are not there yet. While they spend wisely, they are missing the advantages that can be realised from digital.
Digerati: These companies are our digital stars! They understand not only how to drive value with digital transformation, they combine this with the right leadership, governance and culture to accelerate their work with digital technologies. In short, these companies have a strong digital culture that as the next section proves, actually drives real revenue.
Digital maturity varies widely
When each of the 391 companies position on the digital maturity quadrant was plotted, a wide spread emerges (click to enlarge).
In every one of the three areas below – revenue generation, profitability, and market valuation, Digerati companies are clear winners. (click to enlarge)
The research shows that Digerati are:
§ 26% more profitable than their competitors
§ Generate 9% more revenue through their employees & physical assets
§ Generate 12% higher market valuation rations
Simply put, digerati combine digital intensity and transformation intensity to achieve performance that is greater than either dimension can deliver on their own.