Capitalizing on digital opportunities requires enterprises to re-invent business models

 

Huawei has invested heavily in its innovation research program

It’s reasonable to assume that the high-tech would be an industry leader in understanding the need for, and accelerating toward, a complete digital transformation.

But the new evidence suggests that few in this industry are generating financial success from their extensive digital investments.

Many high-tech companies are embracing cloud, analytics or mobile to drive greater efficiencies to become more comprehensively digital. But the real opportunities actually transitioning the digital center initiatives into higher profit margins and ensuring new forms of revenue generation are few. In fact capitalizing on these opportunities requires companies’ management to re-invent their business models, change the way people work, invest differently, and use the new hiring strategies.

To understand the rate and breadth of the digital business transformation, Accenture analyzed digital and financial performance of 55 large high-tech companies, spread across the globe coming from countries such as the United States, Japan, China, Korea, The Netherlands, Germany, Sweden and Finland. These companies are active in various fields such as smartphones’ manufacturing, software development, data storage and communications equipments making.

The research categorizes companies according to the degree to which they apply digital technologies and translate digital investments into better financial performance and new business growth, and how they are integrating digital strategies into overall company’s processes. The companies that performed the best  in our research were labeled “Digital High Performers.”

Close examination

As part of this research, Accenture examined the 55 companies from four perspectives: planning, product and service development, selling, and organizational management.

Planning explores whether the firm embeds digital expectations in their business plans and strategies. Product and service development evaluates how well companies use digital technologies across the product and service life-cycle as a design stage tool; a natural component to enhance and expand offerings and a crucial driver in ensuring supply chain efficiency.

However, selling examines how well they engage customers through digital means such as integrated channels, post-sales communications, and subscription services. While the organizational management assesses how effectively companies capitalize on their digital cultures as well as cyber infrastructures and capabilities; improve operations through digital deployments and renew resources powered by digital technology. The research yielded three major findings:

Only 9% are Digital High Performers

The report shows the majority of companies surveyed have not invested enough in their transition to becoming digital enterprises – nor are they well-equipped to do so.

Only 9 percent of the 55 companies are “Digital High Performers,” according to the criteria of the study. Consistent with this, only 16 percent scored high in the digital arena. A mere 15 percent excelled by financial measurements.

Management challenges

The research reveals that how these companies manage their businesses through digital transformation is more challenging than manufacturing and selling. The management function disrupts companies because it forces them to rethink traditional functions such as finance, accounting, talent and organizational structures. It requires executives to take risks while changing the familiar system they rely on to run their business. If they fail, negative business outcomes could be very severe.

Five Digital High Performers

Apple, Citrix, Huawei, Microsoft, and Salesforce.com earned Accenture’s “Digital High Performer” rating. The study highlighted accomplishments for each of these high performers: Apple pioneered use of its products as a platform for others to build upon and remains a model for creating a massive and profitable ecosystem.

While Citrix created invaluable online customer communities and Huawei invested heavily in its innovation research program. Microsoft showed full commitment to an “as a service” business model; and Salesforce.com led in driving an “as a service” concept.

A new Accenture report, Accelerating Digital Performance in High-Tech, explores these research finding in more detail and offers more analysis and insights.

Final thoughts

Many high-tech companies recognize the need to transform but struggle to implement change effectively. Too many continue to make incremental, low-risk moves. Others forget to invest in their core business as they turn attention to new, separate digital business units. Investing in core business processes that allow the entire organization to rotate to new digital markets with agility will be paramount to success.

High-tech companies are on an inevitable path to become digital. A growing number recognize the importance of a digital strategy and have started developing digital offerings that can be delivered as a service. The speed with which companies progress to do so will determine the high performers of tomorrow.

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