10 ways how digital leaders outperform their competition

10 December 2015 Consultancy.uk

Investment in digital innovation remains a key priority for many businesses. Recent PwC research shows that revenue growth, improving customer experience and increasing profits are the biggest motivators for companies to invest in digital. Investing is not enough, however, to book stronger financial results. As part of the research, PwC identified 10 key areas in which top performers outperformed laggards, finding that solid CEO leadership and vision on digital integration, coupled with strong implementation through the C-suite, management and awareness within the wider organisation are correlated with an improved bottom line.

PwC’s seventh edition of the ‘Digital IQ’ survey continues to explore what actions leaders can take to confirm that their digital investments deliver and sustain value. The survey involved 1,988 respondents, evenly divided between business and IT leaders, from 51 countries, aggregated into ten industries. 21% of respondents work in $1 billion plus organisations and 52% have revenues between $500 million and $1 billion.

Investing in digital
The need for investment in digital technology to stay competitive seems to be taking hold at a considerable number of businesses. The survey highlights that 31% of companies are investing more than 15% of their revenues into digital technology. The returns expected on their investment, as reflected in the answers to the question ‘What value do you expect from your digital enterprise investments?’, vary. The largest proportion of respondents (45%) selects revenue growth first, followed by improvements to their customers’ experience (25%). Increasing profits is the motivation for 12% of those surveyed, while 5% sees it as a means to innovate products. The results highlight that digitalisation is predominantly aimed at growing today’s business, rather than creating new disruptive models – which only 1% indicate. Interestingly, improving decision-making through big data and analytics also falls out near the bottom of this survey, at 2%.

Return on digital investment

Top 10 Digital IQ
The research considers 25 factors related to digitalisation – spanning strategy, innovation, and execution – and identifies 10 that are the most highly correlated with improved financial performance of the surveyed companies. These 10 contribute to the overall ‘Digital IQ’ score of companies. The consulting firm finds that those companies in the top quartile are twice as likely to achieve rapid revenue growth and profit growth as the laggards in the study.

1. CEO Champion
One of the most important features in the study is the role of the CEO in championing the need for digitalisation, which has been correlated with improved financial performance. The CEO is also the natural leader in shifting company focus from operational efficiency to growth. When asked ‘What value do you expect from your digital enterprise investments?’, the role of CEOs in prioritising disruptive development is the highest among the surveyed groups at 16%, with the CIO as the next closest at 8%. The CEO too believes that the introduction of digital features into the enterprise will create financial returns, at 54%, although the CDO is the most positive at 67%. 

CEOs have disruption and financial value in mind

2. Digital leaders set strategy
While CEOs are the tone and vision setters, the operationalization of digital strategies is handed down to the CIO or CDO, which are instrumental in setting high-level business strategy. Effectiveness in setting the strategy, especially in companies where digital leaders are responsible for a significant share of the business, is best achieved in many organisations through digital councils that bring together the company’s CIOs and CMOs. True effectiveness, according to the analysis, is born from being collaborative and cross-functional, made up of those in both IT and business roles.

3. Executive team engaged
Engaging the whole C-suite within the strategy, in terms of both strategy and buy-in, is another important factor in successful organisations. Working from the ‘proverbial same-page’ means that there is greater likelihood that cross-disciplinary issues are identified and unexpected surprises are avoided. Having a harmonised executive team has been identified as essential for strong performance, particularly the CIO and CMO relationship need attention in many organisations. This relationship is rated as strong by 54%, in comparison: a strong CIO-CEO relationship comes in at 70%.

4. Strategy-sharing across the organisation
The final aspect of strategy is to have organisation-wide engagement. However, the uptake of the strategy and digital tools within organisations is not always occurring seamlessly. ‘Only’ 69% say that their digital strategy is shared within the wider enterprise, which, while up from 55% last year, still reflects that there is some way to go at many organisations. High performers tend to use technology to get the word out within the employment base, from creating short clips, to social media, to leveraging smartphones, leaders create a dialogue about how it affects their employees.

Tech advances most influential

5. Outside-in approach
Top performing companies tend to invest in an ‘outside-in’ approach when it comes to being innovative, using the knowledge base of other innovators, such as vendors or customers, to uncover and apply new ideas for using technology. High performers also tend to evaluate emerging technologies more often, with adoption characterised as technology-driven by 69% vs. 50% for other companies. In addition, they are more likely to be innovative in terms of business models and to be among the 8% of companies looking to disrupt their own or other industries.

6. Driven by competitive advantage
High performers are more interested in learning from outside sources from which to create opportunities for market differentiation. According to PwC, the top emerging technologies on company shortlists listed as ‘strategically important’ over the coming decade are cyber security, data mining and analysis, data visualisation, digital delivery, and private cloud.

Digital roadmap

7. Effective use of business data
Using data to make strategic decisions is considered a higher priority for high performing companies, although it is seen as a difficult task by executives across the board. Issues range from poor data quality to the skills required to leverage it for actionable insights. Top-performing companies see more potential in making use of their data than lower-performing ones. They see the most promise in third-party data (78%), cloud application data (70%), social media data (69%), and location-aware data (64%).

8. Proactive cyber security
Cyber security remains an on-going concern among organisations. Proactivity is the course of action seen at top-performing companies, with most having policies in place to evaluate and plan for security and privacy in digital enterprise projects. They also feel more prepared to manage these risks (80%), compared with lower performers (64%).

Skills gap

9. Digital roadmap
Creating a long-term digital road-map is a means of holding together the strategic development of digital capabilities, while balancing them against the year-to-year priorities that always arise in the annual planning and budgeting process. Although the long term benefits of such plans have been shown, today 53% of companies have a comprehensive roadmap that includes business capabilities and processes, as well as digital and IT components. Four years ago that figure was at 63%. The highest percentage of companies with such a plan is in Asia (59%), followed by the US (57%) and Latin America (54%). The skills piece of the roadmap is a serious challenge for many companies. Just 55% of executives said their organisation has all the technology skills needed to deliver on their enterprise vision.

10. Consistent measurement
Seeing the return of investment within the numbers is also a key priority for successful companies. The demonstration of success requires a combination of traditional metrics (like ROI) to track against growth goals, as well as newer ones for measuring more disruptive investments.

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Four ways digitalisation is transforming car brands and dealers

16 April 2019 Consultancy.uk

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.”