The high-tech industry should be a leader in understanding the needs for, and deriving benefits from, a complete digital transformation. However, 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 platforms to drive greater efficiencies to become more comprehensively digital. In reality, the opportunities transitioning to digital center on higher profit margins and new forms of revenue generation. Capitalizing on these opportunities requires that enterprises re-invent business models, change the way people work, invest differently, and use new hiring strategies.
To understand the rate and breadth of digital business transformation, Accenture analyzed digital and financial performance of 55 of the largest high-tech companies, such as manufacturers of smartphones, software, data storage and communications equipment based in the United States, Japan, China, Korea, The Netherlands, Germany, Sweden, and Finland.
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, as well as integrate digital strategies. The companies that performed the best were labeled "Digital High Performers."
Four pillars of performance
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 driver of supply chain efficiency.
Selling examines how well they engage customers through digital means such as integrated channels, post-sales communications, and subscription services. 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% of the 55 companies are "Digital High Performers," according to the criteria of the study. Consistent with this, only 16% scored high in the digital arena. A mere 15% excelled by financial measurements.
Management challenges exist
The research reveals that how these companies manage their businesses through digital transformation is more challenging for these companies 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 changing the familiar system they rely on to run their business. If they fail, negative business outcomes can be severe.
Finding the big five
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;
- Citrix created invaluable online customer communities;
- 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.
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 becoming digital enterprises. A growing number recognize the importance of a digital strategy and approach 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.