Today, it is almost a cliché to mention the disruptive potential of digital for businesses. As per a MIT-CISR CIO digital disruption survey, digital leadership can result in 38 per cent better customer engagement, seven times more innovation, and three times greater profitability when compared with competitors. Digital not only promises to improve existing business performance but also holds the potential of opening new channels and, at times, new businesses. Hence, four out of five top-performing companies, globally and within India, have made substantial efforts to become more digitally mature.
To look beyond the popular digital rhetoric, Boston Consulting Group (BCG) conducted a survey covering over 2,000 companies in Europe, the US and India, cutting across 10 industries, assessing their digital maturity using its proprietary 37-dimension Digital Acceleration Index (DAI) across five levers (see chart).The DAI helped these organisations reveal their strengths and weaknesses with regard to digital, whether their capabilities are imbalanced, and how they perform against peers. The study further unravelled what being “good” in digital means, whether it has translated into a real business advantage, how leaders have created differentiation, and what lessons laggards can learn.
We found that there is a wide digital divide within every vertical. Digital leaders in India are certainly outperforming laggards across all five dimensions of the DAI. Leaders’ efforts across these dimensions have shown tangible movement in business metrics. As per our study, a much larger percentage of digital leaders (as compared to laggards) assess themselves as leading on business metrics like sales growth (20 percentage points higher), time to market (18 percentage points higher) and customer satisfaction (39 percentage points higher). In addition, digital leaders in manufacturing witnessed substantial differences in product quality (30 percentage points higher) when compared with digital laggards. With such tangible business outcomes as proof, the question is what these digital leaders are doing and what can laggards learn from them?
First, digital leaders realise that a different set of capabilities is required to derive value from digital and hence have a clear strategy to develop digital capabilities. For instance, a digital leader in the auto space created a 600-person digital centre within a span of 12 months. This hub is expected to drive 25-plus transformation projects.
Second, digital leaders have spent management time to convert their intended digital strategy into a time-bound, actionable road map with clear milestones, delivery dates, and accountability. For instance, a manufacturing major created a three-year road map detailing projects, expected outcomes and business cases to guide the set-up of the digital centre. The senior management invested their time heavily with the focus on organisational and operating model design, project identification and prioritisation, talent strategy, vendor engagement, project delivery and management tool kits.
Third, digital leaders have made enabling investments in digital and technology infrastructure with a futuristic outlook. For example, a leading private sector bank in India invested heavily in digital platforms and solutions. It moved from traditional enterprise data warehouse to a hybrid deployment of data lake, deployed intelligent automation across select process areas and established a micro services-based modular architecture. This enabled the bank to materially improve speed to market for new digital launches by 50 per cent. A non-banking finance company overhauled its lending architecture and built a smart loan underwriting algorithm that taps into external non-traditional data via a range of application programming interface integrations. This resulted in a completely digital lending experience to its customers, with loan-sanction decisions in a matter of minutes.
Fourth, digital leaders are getting closer to customers through deep personalisation. An automotive major improved the rate of customer win-back by a factor of 1.5, by improving the percentage of relevant customers targeted by a factor of two by applying advanced analytics algorithms on customer data, collated across the life-cycle of customer engagement. A leading Indian TV broadcaster deployed big data and advanced analytics capabilities to generate targeted customer insights by analysing audience behaviour, content consumption patterns, and churn propensity. The initiative resulted in top line improvement of 3-9 per cent across its three business units.
Finally, digital leaders are embedding digital in every aspect of their organisations — sales and customer engagement, marketing, pricing, supply chain, procurement, and even support functions. Our study finds 49 cases where robotic process automation, artificial intelligence, big data, and advanced analytics were adopted across processes to drive efficiency as well as accuracy. In nearly a quarter of the cases we examined, productivity improved by 40 per cent, and turnaround times were reduced by 70 per cent. A steel major was able to reduce defect rates by more than 50 per cent, using advanced analytics. At the same time, analytics helped in improving planning processes, leading to a 5 per cent improvement in customer service levels, with no capacity additions.
To conclude, leaders continue to build on their position of strength but there are important messages for laggards. While long-term measures are required to build a digital organisation and culture, steps can be taken immediately to not only prevent a widening of the gap but narrow it down. They must push the digital agenda by identifying quick wins that they can implement swiftly; incorporating digital into their overall business strategy; investing upfront in digital and data platforms; revisiting core processes to identify high-impact digital interventions; and gaining access to digital talent through capability-building and partnerships.
Rajiv Gupta is Partner & Managing Director, Boston Consulting Group, and leads its digital practice in India. Manuj Ohri is a Principal and Amit Bharti is a Project Leader. These views are personal