More digital adds 1.36 trillion to top 10 economies

30 March 2015

Improved use of digital technologies in the world’s top 10 economies could add a combined $1.36 trillion to their GDP in 2020, a new report by Accenture shows. The report is based on the consulting firm’s ‘Digital Density Index’, which measures the extent of digital penetration in countries as well as pinpoints how economies can improve based on the four indicators.

Professional services firm Accenture, in cooperation with Oxford Economics, recently released its ‘Digital Density Index* – Guiding digital transformation’ report, based on the Accenture Digital Density Index. This index measures the extent to which digital technologies penetrate a country’s businesses and economy, based on four indicators:

  • Making Markets: the recognition that existing markets are becoming increasingly digital, and new markets are being created through digital means,
  • Running Enterprises: the extent to which businesses are embracing digital technologies and activities to carry out business functions,
  • Sourcing Inputs: the extent to which production factors are sourced and used with digital technology, and the degree to which digital technologies change the lifecycle of sourcing these factors,
  • Fostering Enablers: the impact of digital enabled by the institutional and socio-economic environment.

Accenture, Digital Density Index - Guiding digital transformation

The index identifies ‘digital hotspots’ (countries with high digital density) and shows where and how to invest in digital technology to achieve results, and has been developed as a tool for businesses to help improve their competitiveness by siting their operations in ‘digitally optimal locations’. Bruno Berthon, Managing Director of Digital Strategy at Accenture Strategy, explains: “As companies become more digitally enabled, so digital density should rank alongside access to natural resources, a good transportation system, and skilled people in their list of location criteria.”

Accenture’s analysis shows that the Netherlands can be identified as such a ‘digital hotspot’ as it has the highest digital density, followed by the US, Sweden, South Korea, and the UK.

Digital Density scores for 17 leading economies

Looking forward, the report highlights a link between the increased use of digital technologies and greater productivity, with the researchers indicating that a significant boost in GDP of the world’s top 10 economies by 2020. According to them, a 10-point improvement in digital density (on a 100-point scale) could produce a combined boost of $1.36 trillion to the 10 countries’ GDP, which is an increase of 2.3% compared to the baseline forecasts. The biggest uplift in GDP is expected in China, where the increased use of digital technologies could result in an increase of $418 billion by 2020, followed by the US ($365 billion). The UK economy could expect a boost of $57 billion.

Impact of a ten point boost in Digital Density to GDP levels in 2020

To achieve this increased use of digital and GDP, the index also pinpoints specific areas for improvement and collaboration between businesses and governments that can help enable greater digital effectiveness for businesses, and enhance digital-driven growth at a national level. Looking at the four indicators, Accenture makes the following recommendations:

Making digital markets:
Governments need to focus on protecting consumers while collaborating with businesses to understand new business models and required skills, and identify ways to facilitate and govern the resulting new markets. 

Running enterprises digitally:
Companies and governments should transform the way they operate and increase their use of digital technologies to transform key business processes to boost efficiency and productivity. 

Making Markets - Running Enterprises

Sourcing inputs: 
Economies and businesses should use land, capital, talent, plant, and property more effectively. Making these key factors of production accessible via digital technology will improve productivity and reduce costs. The Industrial Internet of Things will further accelerate the digitalisation of supply chains. 

Fostering enablers:
Governments should look beyond the digital infrastructure, such as super-broadband and mobile broadband, and work together with businesses to create an environment in which digital can flourish. This includes making it easier for businesses to launch digital businesses, streamlining the regulatory environment, finding innovative ways to create the right skills in the workforce, and supporting trust and confidence in citizens and business.

Sourcing Inputs - Fostering Enablers

The report concludes that “Government and business leaders know they need to embrace digital technology as a source of growth and increased competitiveness. Our analysis confirms the benefit of doing so. But it also reveals the time it takes for increased penetration of digital technologies in economic activity to translate into productivity and growth. That’s why moving now, in a targeted way, to embrace digital technologies is more critical than ever.”

* A country’s ‘digital density’ is measured with a scorecard comprising over 50 indicators. These indicators include the volume of transactions conducted online, the use of cloud or other technologies to streamline processes, the pervasiveness of technology skills in a company, and an economy’s acceptance of new digitally driven business models.


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Four ways digitalisation is transforming car brands and dealers

16 April 2019

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”