Trade Resources Industry Views Digital Strategies More Profitable Than Their Competitors

Digital Strategies More Profitable Than Their Competitors

Firms that have clearly defined digital strategies, and that invest in technologies such as mobile applications, social media and analytics, are more profitable than their competitors, according to a new study from consulting firm Capgemini and the Massachusetts Institute of Technology (MIT).

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The three-year research programme on digital transformation was undertaken at the MIT Center for Digital Business in Boston, and its objectives were to understand the impact digital technologies have in large organisations, the link between digital leadership and financial performance, and how digital transformation is managed in practice.

At a press event at the Center for Digital Business, Didier Bonnet, senior vice president and global practice leader for digital transformation at Capgemini, said that it wasn't always the technical aspects that were crucial for businesses to flourish in using digital technologies.

"What made the real difference was the vision, the governance, trying to leverage the investment across the whole business and the engagement of the employees," he said.

He added that many of the firms that were examined under the study completed their digital transformation without IT, and many vendors  promote their products to the businesses without involving IT at all.

"We heard from many companies about the usual stories of the IT [department] being too late, too expensive, taking too long to deliver, and many of the marketing teams decided to go forward with technologies without having to talk to IT," Bonnet said.

The survey involved 391 companies, 184 of which were publicly-traded. The overall study is part of a new book dubbed "The New Digital Masters" - and is based on 160 in-depth interviews, factoring-in survey results from over 2,500 global organisations.

MIT and Capgemini divided the companies into different categories depending on their maturity in both digital technologies and leadership capabilities. Those that were found to be mature in both departments were referred to as "digital masters".

Then, taking the sample of 184 publicly-traded companies, it found that "digital masters" had significantly better financial performance than the average performance of all large firms in the same industry, both in terms of revenue generation efficiency (nine per cent higher), and profitability (26 per cent higher).

It found that those firms who were fashionistas (advanced in their use of digital technologies but lacking leadership capabilities) had a six per cent better performance in revenue generation efficiency than their peers, but were 11 per cent less profitable. In contrast, those firms labelled conservatives were down 11 per cent in revenue generation efficiency to their competitors, but were more than nine per cent more profitable than their peers.

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Digital Firms Have 'Significantly Better Financial Performance Than Competitors' - Mit and Capgemini Study