Companies with a high degree of digital maturity exhibit higher profitability, according to recent research.
The MIT study, commissioned by Capgemini and titled 'The Digital Advantage', has shed light on a group of companies that are reaping the benefits of digital transformation. Dubbed the 'Digerati', these companies include fashion brand Burberry and cosmetics company L'Oreal, as well as industry giants like Amazon, Netflix, and Tesla.
The study found that these companies, by adopting digital technologies such as social media, mobile, and analytics, are not only prospering but also generating more revenue. However, it's essential to note that the study does not claim that adopting digital technology is the sole factor for improved performance. Effective leadership of transformation is also crucial.
George Westerman, a research scientist at MIT's Centre for Digital Business, stated that managing digital technologies in the way outlined in the study leads to improved performance. Westerman suggests a more accurate way to phrase the study's findings might be 'More profitable firms run digital this way'.
The study's findings suggest that managing digital technologies in a specific way, combined with effective leadership of transformation, can lead to improved performance. This involves making clear choices on what to transform, concentrating investment based on a company's own strengths and the dynamics of their competitors. Some Digerati excel in process digitization with a strong emphasis on analytics and internal collaboration, while others select customer experience excellence through channel integration.
The Digerati significantly invest in the 'how' of digital transformation. They build and share a digital vision, engage the workforce at scale, implement proper digital governance structures, invest in a competence upgrade, and build strong relationships between the business and IT/technology functions.
Interestingly, the study found that companies in the high tech sector are the most 'digitally mature', while pharmaceuticals and manufacturing are laggards. However, the study does not establish causality but reveals the best way to manage digital technologies for improved performance.
On average, Digerati companies are 26% more profitable, have a 12% higher valuation, and generate 9% more revenue 'through their existing assets', according to the study. Westerman emphasized that simply adopting digital technology does not necessarily lead to improved performance; effective leadership of transformation is key.
In conclusion, the MIT study provides valuable insights into the strategies that successful digital transformers employ. It underscores the importance of effective leadership in driving digital transformation and achieving improved business performance.
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