‘Digitally mature’ companies are more profitable – study

Companies that have successfully managed the transformation of their business to make use of technologies such as social media, mobile and analytics are more profitable and more adept at generating revenue, according to an MIT study commissioned by Capgemini.

The Digital Advantage study identified a class of company who had not only adopted these 'digital technologies' but had also changed the way they work in order to benefit from them, dubbed the 'Digerati'. Examples include fashion brand Burberry and cosmetics company L'Oreal.

These companies were, on average, 26% more profitable, were valued 12% higher, and generated 9% more revenue "through their existing assets", the study found.

"The Digirati significantly invest in the 'how' of digital transformation," the study found. "They build and share a digital vision, engage the workforce at scale in understanding the vision, implement proper digital governance structures to ensure ownership and accountability of the transformation, invest in a competence upgrade, and build strong relationships between the business and IT/technology functions."

"Second, they make clear choices on what to transform, concentrating investment based on their own strengths and the dynamics of their competitors. For example, some excel in process digitization with a strong emphasis on analytics and internal collaboration, while others select customer experience excellence through channel integration."

"All leaders can use these practices to help their businesses gain the digital advantage."

The effect was found in all industries considered. Unsurprisingly, companies in the high tech sector were found to be the most 'digitally mature', while pharmaceuticals and manufacturing were found to be laggards.

The authors concede the study does not establish causality – higher performing companies may simply have the resources or ability to undertake this 'digital transformation'. Nevetheless, they say, it does reveal the best way to manage digital technologies.

"We say 'companies that manage this way are more profitable'. A purist might instead say, 'More profitable firms [i.e. better-managed] run digital this way'. Either way, it seems to say 'manage digital this way'," George Westerman, a research scientist at MIT's Centre for Digital Business, told Information Age.

Westerman underlined that the study does not claim that simply adopting digitial technology leads to improved performance. "It's not just how much you do digitally but how well you lead transformation," he said.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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