Getting your company to go digital pays off, in hard cash

Authors of new book on how businesses use technology say an inflection point has arrived

Transforming a company into a truly digital organisation is challenging, but it pays off - in cash, according to Didier Bonnet, senior vice-president and global practice leader at Capgemini Consulting.

Bonnet, one of the co-authors of an upcoming book, Leading Digital: Turning Technology into Digital Transformation, said in a keynote at Oracle's OpenWorld annual conference here in San Francisco that companies which effectively integrate digital technologies - termed "digital masters" - were 26 per cent more profitable, according to the authors' research.

“Digital masters drive greater revenue,” Bonnet said.

“We really fundamentally believe we are at an inflection point in the way business and technology work together. We really believe technology is the biggest thing in business. It is becoming much more difficult for a company that cannot integrate technology to compete.”

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But he noted that digital masters, “companies that have really integrated technology in a seamless way, exist but are far few and far between.”

On the other hand, he said that they looked at what such companies do well, they found they could “codify it and put it into frameworks”.

And, companies across all sectors, all across the world, have the ability to become digital masters, although the IT sector had the highest percentage (38 per cent) of the industries they examined.

The list of leading digital masters might surprise. It includes companies such as Codelco, a Chilean government-owned mining company, Starbucks, Burberry, Caesars Entertainment, Nike, and Asian paints (the largest publicly quoted company in Asia that "basically makes white paint".

Those companies do two key things right. The first is the most obvious: they invest in, and use, technology well.

The second is less tangible: the leadership capability it takes to use that technology to transform the business.

“It’s really about envisioning your transformation and making it happen. That’s just as important as the technology, if not more.”

In the book, the authors divide companies into a quadrant, with the vertical axis representing digital capability and the horizontal axis, leadership capability. They classified companies into “beginners’’ in the lower left, “conservatives” in the lower right, “fashionistas” in the upper left, and “digital masters” in the upper right.

“Of course, there are differences by industry sectors, but our key finding was that in every single industry we looked at, there were digital masters.”

Plotted on to the same matrix, digital masters were 9 per cent better at “revenue generation efficiency” and 26 per cent better at generating profit.

“It gets really interesting when you look at profitability. It’s really driven by leadership,” Bonnet said, noting that even “conservatives” were 9 per cent better at creating revenue, whereas “fashionistas”, who have good technology but weak leadership, were at minus-11 per cent.

He said that even when they looked at other possible factors behind the differences, “we feel pretty comfortable than the digital masters do perform much better than the others.”

Why do digital masters do well?

“They really do four things,” said Bonnet. He noted that such companies design the customer experience from the outside in, increase reach and engagement with digital investment, put customer data at heart of the experience, and seamlessly mesh the digital and physical experience.

Starbucks, with its wifi environment, loyalty schemes, digital downloads and other features was a good example of a company increasing reach and engagement with digital investment. Caesars Entertainment, which runs several casinos in Las Vegas and other cities, uses customer data from a loyalty scheme to offer personal attention. Burberry, which enables customers to enjoy an online service, to, say, digitally view handbags in various colours, and also an in-store experience, were an example of a good mesh of the digital and physical.

On the operations side, digital masters “use digital capabilities to to move beyond constraints placed upon the organisation.”

But he dismissed the commonly held notion that cutting edge companies have transformed their business model.

“We only found about 15 per cent of businesses have really changed their business model to change their business.” Why? “Because it’s really hard.”

So, his message, he said, was that disrupting a company’s business model was really not that important, though it was essential to constantly challenge the company’s business model.

Real success “was entirely driven by digital leadership. If you want to transform your company, it has to be driven from top down leadership.”

He also dismissed empty corporate vision statements. Companies should evolve their vision over time, and create a transformative vision (not “we will delight our customers”).

“You need to find a clear intent,” he said. “And the vision has to be sufficiently exciting to get your people involved.”

Companies need to start thinking about these issues because it takes time to implement change.

“The best way we see to do that is to start doing those things now. The companies that are still hostile to technology are going to have a really hard time doing business in the next five to 10 years.”

Karlin Lillington

Karlin Lillington

Karlin Lillington, a contributor to The Irish Times, writes about technology