The performance gap is widening between companies digitizing their operations and those struggling to do so. That is the clear takeaway from the article, "Digital Maturity Is Paying Off," by The Boston Consulting Group (BCG), which is based on a survey of 1,900 companies in the US and EU. According to this study, 23% of the companies surveyed are digital champions, while around one-third (32%) are lagging behind. Compared with a similar study a year earlier, the number of laggards has increased while the number of digital champions and those in the middle have declined.
"The middle ground of companies that still have a real chance of getting digitally connected is eroding," says Jay Venkat, senior partner at BCG. Ganga Kannan, BCG partner, adds that: "For the laggards and the companies in the middle ground, it is now important that they increase the pace of digitization in order to survive in competition in the long term.”
The "Digital Acceleration Index" measures the degree of digital maturity
The study is based on BCG's Digital Acceleration Index (DAI). We asked managers and executives to estimate their companies’ digital maturities on a scale of 1 to 4 in 37 categories. We then aggregated those raw scores and calculated resulting values to their responses on a scale from 0 to 100. Companies with a DAI of 67 to 100 qualify as champions, while those with a DAI of 43 or less are categorized as laggards.
Digital maturity gives a competitive advantage
The study shows that increased levels of digital maturity significantly improved competitive advantage in multiple areas, such as time-to-market, cost efficiency, product quality, and customer satisfaction. For example, 78% of champions that invest in digital business models and corporate venturing see a significant lead over their competitors. At the same time, 62% of the champions who rely heavily on digital marketing and personalization are able to take new products to market faster and are more successful than competitors.
Digital leaders grab additional market share
The performance gap could widen further in the coming years: "Companies that are not champions are under double pressure: from more innovative competitors from their own industry and from new digital players who are forcing their way into the market with disruptive business models," says Venkat.
Digital champions are already using their advantage to gain market share. An analysis of 80 telecommunications companies worldwide for the period between 2012 and 2017 found that champions increased their market share by an average of 7%, while laggards lost 11%.
Telecommunications, technology, and finance sectors lead
The digital maturity of companies varies greatly from sector to sector. The technology, telecommunications, and banking sectors lead the way with the highest percentages of digital champions. These companies lead because their main products and services are already mostly digitized. At the other end of the scale are the energy sector and public administration, which have few champions and a very high proportion of laggards.
The US outperforms Europe across industries
In line with previous results, the US outperformed Europe with more champions (25% versus 22%) and fewer laggards (31% versus 33%). The US had more champions in nine of the ten sectors studied. Much of this edge in US performance is due to stronger US technology and telco sectors, which support other industries’ digitization efforts through partnerships and close collaboration. Among US telcos, 46% score as digital champions, compared with only 27% of European telcos.
Invest more quickly in people and technology
Digital champions are particularly good at digitizing fast—something the laggards must look to emulate. Specifically, more than half of the champions invest more than 5% of operational expenditures on digital initiatives (a key threshold). They are also good at attracting talent. About half have at least 10% of employees in digital roles. Last but not least, champions have firmly anchored digital issues in their corporate culture.
"Digital laggards must not miss the boat and must create the necessary IT and technology structures more quickly," says Kannan. "Only then can companies strengthen their long-term competitiveness through data analytics, the development of digital platforms, and artificial intelligence.”
Sourced from BCG