Study: Too few companies invest in a holistic digitization strategy

Whether it's the Internet of Things (IoT), advanced analytics or artificial intelligence, there are many approaches to digitalization. But so far, only around 5 percent of all companies worldwide are actually achieving their goals. The slow implementation of digitalization projects is just one reason for this. Individual lighthouse projects often take place in companies. A systematic, holistic digital strategy is missing. These are the findings of the study "From vision to transformation: digitalization is a matter for the boss" by management consultants Bain & Company.

"Industrial companies should invest 2 to 5 percent of their turnover in digitalization," advises Jörg Gnamm, Bain Partner and co-author of the study. And he adds: "The investments pay off. Digital pioneers not only grow around 50 percent faster than the competition, but are also up to 30 percent more profitable." Even in IT, which is becoming even more important as a result of digitalization, complexity costs are falling by an average of 20 percent.

Digitization affects the entire company

The business models of industrial companies are currently being shaken up at all levels. Digital direct marketing and social media are giving rise to new contact options and forms of offer, as well as service alternatives. This not only makes customer contact simpler and more cost-effective, but also more individual and more valuable. Products themselves are also becoming increasingly digital, while current main sources of income are coming under pressure.

There is no shortage of digital initiatives in most companies. However, activities are often fragmented into many individual projects.

Last but not least, advanced analytics are opening up new opportunities. For example, the manufacturer of a networked refrigerator receives a wealth of information about the household in which the appliance is installed after the buyer has given their consent. These insights can be used to improve products, develop intelligent electricity usage concepts or analyze the data together with food retailers. "There is no shortage of digital initiatives in most companies," says Bain Partner and co-author Michael Schertler. "However, activities are often fragmented into many individual projects. There is no coherent overall strategy."

Digitalization is the use of digital technologies and tools in all of the company's processes. The following measures are therefore essential for a digital transformation:

- Optimize internal value creation processes in terms of throughput times, quality and costs - Redesign customer interaction processes and interfaces through the seamless integration of all communication channels (omni-channel approach),

- Expanding the product and service offering with data-based applications that offer clear added value for the customer and thus open up new sources of revenue,

- Develop new business models, such as IoT platforms, which open up new growth opportunities through software-based applications.

"Companies must face up to the challenge of digitalization as a whole," says Schertler. "This means that the entire top management team around the CEO has central responsibility for the digital transformation." The Chief Digital Officer (CDO) is responsible for the digital strategy and its communication, for concrete planning and budgeting as well as for methodology and resources. "In many companies, however, the CDO and his team are at risk of failing due to silo thinking within the organization," emphasizes Schertler. "This is because many companies are still trying to make digital innovations a success using traditional corporate methods."

In many companies, the CDO and his team are at risk of failing due to silo thinking within the organization.

Time to act

If the digital transformation is to succeed, all stakeholders must know and understand the strategy. This involves clearly formulating both the future of the industry and the company's goals, then prioritizing the measures and investments and convincing employees, suppliers, customers and investors. All of this should ultimately lead to a digital roadmap with specific project goals and milestones, a digital operating model and a program for developing a digital corporate culture. The backbone for the implementation of the digital strategy is formed by "sponsors" in all areas of the company, who explain the changes in detail to their colleagues in personal meetings.

"All companies should tackle their digital transformation now," appeals Bain expert Gnamm. "Because in the digital age, the winner-takes-it-all logic applies. If you don't get your transformation underway today, you will be left behind by the competition in just a few years."