Accenture-Doubling-Down-Drive-Digital-Transformation-Stay-Ahead
Accenture-Doubling-Down-Drive-Digital-Transformation-Stay-Ahead
Accenture-Doubling-Down-Drive-Digital-Transformation-Stay-Ahead
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<strong>Digital</strong> Double-<strong>Down</strong>:How Far Will Leaders Leap <strong>Ahead</strong>?
ContentsAction this day 5Emphasizing growth as the catalyst for transformation 6Investing to shape the terms of digital competition 6Leveraging a wide range of digital technologies 6Investing in focused transformational spaces 6The catalysts of transformation8<strong>Digital</strong> as a linchpin of strategy10Questions to test your digital savvy 11Appendices12Some industry sectors have far to goin terms of digital transformation 12Large and small companies will createdisruption for those in the middle 13<strong>Digital</strong> transformation is a global expectation 14About the research / About the authors 15
<strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?3New <strong>Accenture</strong> research about digital transformationconfirms what anecdotal evidence has pointed to thusfar: some companies are doubling down to drive digitaltransformation and accelerate ahead of their peers.Their evolutionary advantage?Their top managers deeplyunderstand what digitaltechnologies can do for theirbusinesses, far beyond basicefficiency gains, and they areactively investing to create digitaldisruption in ways that requireeveryone to respond.It is easy to assume there is time to becomea digital business—to see the world as itwas in 1999, when e-commerce became areality, or even 2009, when mobile phonesbecame more walking computers than toolsfor talking. The intentions, investments andactions of those doubling down on digitalhave reached a point where it is no longerprudent to wait.In just the last few years, “digital” hasbecome more consequential than newrounds of IT efficiency and enablement.The latest research from <strong>Accenture</strong> revealsa sharp divide between those who continueto view digital technology as a tool forsteadily improving existing businessactivities—digital followers—and thosewho clearly see something much moreprofound—the digital transformers. 1<strong>Digital</strong> transformers see significant growthpotential with digital where the followersdon’t. 1 52 percent of executives expect digitalto “completely” or “significantly” transformtheir industries, with the remainder expectingmoderate or no transformation—this accordingto the <strong>Accenture</strong> survey of more than1,000 executives across 20 countries and12 industries (see About the research, page 15).The digital transformers understandall too clearly how the nature of entiremarkets has changed—how WealthfrontInc., Airbnb Inc., Alibaba.com Hong KongLimited and others are up-ending wholeindustry segments—and they know thatsimilar dynamics are at work in manyunexpected ways in their industries too.This is anything but the isolated approachof a few start-up companies. <strong>Digital</strong>transformers exist in every industry,geography and size; collectively, theyconstitute a powerful, broad-based trendthat demands effective responses fromcompanies everywhere. Their aspirationsand investment plans set the pace, andthe actions of these organizations shouldbecome a core assumption of any futurebusiness strategy.1 For the purposes of this point-of-view paper, “digital transformers” are defined as those organizations which expect complete or significant transformation of their industries.“<strong>Digital</strong> followers” are defined as those organizations which expect moderate or no transformation of their industries.
4 <strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?
<strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?5Action this dayBut what’s most meaningful is that these digital transformersintend to be the agents of their own opportunity.They are acting on their insightsat pace and with determination,effectively doubling down ontechnology aimed at driving growth,deepening digital leadership,and opening up space for futureinvestments in transformativetechnologies. Collectively, theirefforts are enabling them towiden the gap with their peers. 2At a minimum, executives will need akeen understanding of the new languageof digital—terms that are steadily becomingpart of the business discussion.(See Dictionary of digital.)Overall, as we’ll discuss later in this report,the digital transformers are well awareof the effects of what <strong>Accenture</strong> calls“Big Bang Disruption” 3 in today’s globallysynchronous markets.Dictionary of digital<strong>Digital</strong>Increasing information intensityand connectedness of customerand business resources. Any resourcecan become digital through theapplication of technology.DigitizeApplying technology to customerand business resources. Theresulting digital resources givenew abilities to people, devices,physical objects, etc. Thesenew abilities form the basis fordisruption and digital business.<strong>Digital</strong>disruptionCapabilities and strategies thatchange the terms of competitionand value via new technologyenabledsolutions.<strong>Digital</strong>transformationThe innovative re-assembly ofcustomer and company resources,products and services to growvalue, revenue and efficiencyvia digital technologies.<strong>Digital</strong>businessAn evolution of business that usesnew combinations of informationand connectivity to create new sourcesof customer value, company revenueand operational performance.2 M. McDonald, and R. McManus,“Growth Strategies for a <strong>Digital</strong> World,” March 2014. http://www.accenture.com/digitalstrategy3 L. <strong>Down</strong>es and P. Nunes, “Big Bang Disruption.” http://www.accenture.com/bigbangdisruption
6 <strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?Here are four ways in which they arepressing ahead with verve and intent:1. Emphasizing growth as thecatalyst for transformationThe digital transformers are not waitingto react to events; they are focusingon growth as the context for digitaltransformation. Specifically, they are twiceas likely as followers to focus their digitalinvestments on growth. Theirs is a balancedapproach: they are certainly investingin digital technologies to drive efficiencies,but unlike the followers, that is not theiroverwhelming focus. <strong>Digital</strong> followersare placing roughly three dollars towardefficiency for every dollar invested ingrowth opportunities. (See Figure 1.)2. Investing to shape theterms of digital competition<strong>Digital</strong> transformers realize that growthstrategies demand new approaches forattracting and retaining customers withnew and better product and serviceofferings. 4 So they are playing out thenew digital competitive dynamics chieflyon the customer-facing side of theirbusinesses—in sales, products, channels,and customer experiences. (See Figure 2.)3. Leveraging a wide rangeof digital technologiesThe digital transformers plan forsignificantly higher levels of total capitaland intangible investments in the nextfew years. They consider the full rangeof digital technologies to be veryimportant—certainly far more so thando the digital followers. (See Figure 3.)4. Investing in focusedtransformational spacesThe digital transformers have alreadyfigured out where digital can make thebiggest difference. They already plan toinvest more than their peers in the areasseen as important for digital success. Forinstance, they are more concerned aboutshortages of digital skills and about howthey can attract and retain top digitaltalent. (See Figure 4.)Equally important: They recognize thechange management challenges involvedin digital transformation, including thesignificance of whole-hearted, enduringexecutive support and the need for newoperating models. At the same time, theyremain concerned about funding levels,especially since earning a return ongrowth initiatives is more challengingthan taking cost out of existingprocesses and operations.<strong>Digital</strong> transformers in their own words<strong>Digital</strong>’s potential is enormous. It is changing how we conductour business, tell our stories and engage consumers. It’s arapidly changing landscape and a big part of our future.”Mark Parker, President and Chief Executive Officer of NIKE, Inc 54 M. McDonald and R. McManus, “Growth Strategies for a <strong>Digital</strong> World,” March 2014. http://www.accenture.com/digitalstrategy5 Mark Parker, President and Chief Executive Officer of NIKE, Inc, “Nike Inc. Letter to Shareholders“, July 25th, 2014,http://investors.nikeinc.com/files/doc_financials/AnnualReports/2014/index.html#mark_parker_letter
<strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?7Figure 1: <strong>Digital</strong> transformers focus far more on growth, while the digital followers concentrate on efficiency<strong>Digital</strong> Transformers40 % Growth23 %55 % Efficiency64 %<strong>Digital</strong> FollowersFigure 2: <strong>Digital</strong> transformers expect to excel in sales, channels, new products and services, and customer experiences<strong>Digital</strong> Transformers74 % Operational efficiency 65 %70 % Customer experience 53 %64 % Best talent 57 %58 % New products/services 34 %58 % Grow sales 31 %55 % New sales channels 30 %52 % Management control 35 %<strong>Digital</strong> FollowersFigure 3: <strong>Digital</strong> transformers place greater importance on digital technologies across the board<strong>Digital</strong> Transformers65 % E-commerce 43 %Machine to machine60 % communication 38 %65 % Data analytics 41 %59 % Mobile 34 %Cloud computing 30 %<strong>Digital</strong> Followers55 % Social media 28 %58 %Figure 4: Challenges with digital investments<strong>Digital</strong> Transformers61 % Skills shortage 39 %56 % Insufficient funding 44 %Difficulties managing57 % change 43 %55 % Poor cross-functionalcollaboration 45 %Lack of senior54 % executive support 47 %<strong>Digital</strong> Followers
8 <strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?The catalysts of transformationSo what is spurring the digital transformers onward withsuch urgency? And what should the digital followers bemost concerned about?Put simply, transformers areresponding to customer redefinitionof markets. A response requiresrethinking markets as long-timeindustry boundaries mean lessand less. Banks face challengesfrom payment services. Wealthmanagement incumbents competewith solutions based on analyticsand algorithms. Healthcareproviders face competition fromretailers. Car makers’ digital movesare reverberating throughout theinsurance sector.In a report shared at the 2014 WorldEconomic Forum meeting in Davos,Switzerland 6 , <strong>Accenture</strong> described andanalyzed the potential of digital technologyto create new industry boundaries viastrategies that call for generating growthfrom markets populated by players fromdifferent industries. The results are newmarket structures—digitally contestedmarkets—where digital technologyenables reshaping of traditionalindustries via new entrants and newpartner ecosystem configurations.The report points out that adopting acustomer or outside-in view of thesemarkets provides growth opportunitiesthat exceed their traditional industrydefinitions. The emergence of new industryconfigurations representsdigital transformation at its deepest level.In earlier times—before the pervasive reachof the Web—transformation initiatives werelargely driven from the inside out. Businessprocess re-engineering, Lean Six Sigma,zero-based budgeting, and other programsstarted deep inside corporations until theirsuccesses were obvious to all and copiedby competitors.But digital dynamics catapulttransformation into a different dimension.Transparency, connectivity, and sharingdrastically shrink market cycles, threateningto commoditize cherished and long-heldmarket positions. <strong>Digital</strong> businesses,by their nature, can serve every marketsimultaneously and individually. Newdigital capabilities create transformationthat is out in the open for all to see.<strong>Digital</strong> channels and social and marketingsolutions make decisions and actionsvisible to everyone.Gone are the days when companiescould more easily follow traditionalindustry cycles, benefiting from thelag time inherent in customer feedbackand competitors’ responses. Technologyhas destroyed latency; decisions arebeing made immediately and all at once.Customer feedback is torrential and nonstop.7 Competitors can react in lightningtime: the actions of so-called “overthe top” companies in transportation,retail, media, banking, and paymentsset competitive terms and responserequirements on a regular basis.<strong>Digital</strong> disruptors are making movesthat establish new terms of competitionand customer expectations that thenrequire rapid responses from the majority.The whole cycle spins faster, creatingfar greater potential for what <strong>Accenture</strong>terms “big bang” disruption, whererapid test-and-learn cycles are justone possible defense. 86 M. Spelman, T. Cooper and M. Robinson, “Remaking Customer Markets. Unlocking Growth with <strong>Digital</strong>,” January 2014. http://www.accenture.com/us-en/landing-pages/customermarkets/Pages/home.aspx7 R. Wollan, D. Palmer and N. Jain, “<strong>Digital</strong> Customer: It’s time to play to win and stop playing not to lose.” www.accenture.com/gcpr138 L. <strong>Down</strong>es and P. Nunes, “Big Bang Disruption.” http://www.accenture.com/bigbangdisruption9 BBVA Press Room, “Changes to BBVA’s Management Committee. BBVA changes its organization to accelerate the Group’s digital transformation,” March 21, 2014.http://press.bbva.com/latest-contents/press-releases/bbva-changes-its-organization-to-accelerate-the-group-8217-s-digital-transformation__9882-22-c-107570__.html
<strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?9<strong>Digital</strong> transformers in their own wordsThe new structure will be an important factor in converting an efficientand profitable analogue bank into a digital knowledge-services business.After setting up the platforms, which are the foundations of our digitalproject, we can now accelerate the creation of new products and servicesfor 21st Century customers.”Francisco Gonzalez, Chairman and CEO, BBVA 9
10 <strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?<strong>Digital</strong> as a linchpin of strategy<strong>Accenture</strong> argues that executives must embeddigital in their organization’s strategy.Indeed, there may soon come apoint where the terms “digital” and“strategy” are all but synonymous,as digital becomes the way in whichcompetition is redefined and go-tomarketmodels are reshaped.The digital transformers are already movingrapidly in this direction. Their broader focuson growth investments, digital technologyand executive leadership reflects theirexpectations for change.Together, the actions of these forwardfacingorganizations and the acceleratedpace of digital market competition makedigital transformation a core assumption ofany future business strategy.Just as the first factory owners toadopt electrical power saw it simply asan improvement on their steam enginesand water wheels, so many contemporarybusiness leaders have viewed digital asjust another iteration of IT.And just as those Victorian-era manufacturerswould soon come to see how many morepossibilities would come with transmissionof electricity—allowing them to rethink wherethey could locate demand for power—so today’s executives will one day see the fullscope of what digital technology can bring.Only the far-sighted few are in that numbertoday. The truly visionary among them have afirm grasp on the “force multiplier” effect ofdigital, and they are working hard to ensurethat their organizations are squarely on theroad to digital transformation. Many others—the fast followers—have a strong sense ofthe possibilities, and are working diligentlyto experiment, and in the process, touncover what they know they don’t know. 10This report is directed to all businessleaders—particularly to those in companieswhose sheer numbers may create a falsesense of security by mitigating the pressurefor digital transformation. (See Appendix,Figure 6.) Our research clearly signals thatmany companies in many industries arethinking that they have time to respond whileothers are winding up the pace of change.Companies caught in the middle, betweentransformation and improvement, seemunclear what to do or how to do it.Some may be paralyzed by indecision,or drowning in data. Although they areno strangers to the abundant stories aboutonce-mighty companies that have fallenfrom grace—felled by disintermediation orby nimbler upstarts that ran far and fastwith new technology—too many businessleaders are still locked into legacy thinkingabout digital and its consequences.To help jump-start the thinking of thoseexecutives, we offer a short set of urgentdiscussion questions. (Next page: Questionsto test your digital savvy.) Whether thequestions are asked in a formal, facilitatedforum or not, they must be addressedseriously. The answers must become theseedbed for digital projects and overarchingdigital initiatives. Ultimately, every company’sstrategy will need to incorporate someform of digital transformation, even iftransformation is not its explicit strategic goal.<strong>Digital</strong> change is coming fast, and it will notbe stopped. It will come from the outsidein—in the form of customer choices, newproducts, services and experiences. It willbe entirely agnostic in its impact, affectingevery company and every industry. 10How quickly will your leadershipteam be ready to run with it?<strong>Digital</strong> transformers in their own wordsWe are early in our ambitious plan to transform Argos into a digital retailleader. We are seeking to reposition our stores to support a digital future, inwhich digital channels are the primary interface for customers, but storescontinue to be critically important as a national network for product collectionand a local presence for local colleagues to provide customer service.”John Walden, Chief Executive Officer, Home Retail Group PLC 1110 M. McDonald and R. McManus, “Growth Strategies for a <strong>Digital</strong> World.” March 2014. http://www.accenture.com/us-en/Pages/insight-growth-strategies-digital-world.aspx11 Home Retail Group, News and media Argos, Argos Press Release, “Argos opens doors on first digital concept store”, November 26, 2013.https://www.homeretailgroup.com/news-and-media/news.aspx?smlbus=1519&article=5225
<strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?11Questions to testyour digital savvyExecutives responsible for digital strategyshould ask themselves the followingquestions to see how closely theirorganization’s views on digital are alignedwith those of the digital transformers:CompetitionHow do others view digital transformation?What threats does digital poseto our business? How could competitorsuse it against us?How could digital capabilities pullus ahead of our competitors?Which new competitors are usingdigital to go after our customers?Which of them are succeeding at this?How are they doing it?OrganizationWhat are the new business models,new trends and new digital technologiesthat we most need to watch out for—and exploit?What new commercial arrangementscould accelerate our digital investments?How do we organize for success, allocateresources, and assign responsibilities?With whom should we now partnerin a digital world?What new products and services shouldwe create with digital technologies?CustomersDo we explicitly focus our digitalstrategy on new growth opportunitiesor is digital just another marketingor efficiency program?How do we identify new marketsand value migration in our industry?LeadershipWhich of our senior leaders should beresponsible for our digital efforts? To whatextent must it be a shared responsibility?How do we communicate our digitalintent to the board of directors, customers,suppliers, employees and other partners?How should we organize, measure, recruit,and reward in a digital world?
12 <strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?AppendicesSome industry sectors have far togo in terms of digital transformationIt is plain to see that the high-tech sector, predictably, has no shortage of digitaltransformers in its ranks. But some companies in industries such as insurance and utilitiesclearly need to accelerate their efforts if they are not to be blindsided by competitors wholeverage digital far better than they can. (See Figure 5.)Figure 5: <strong>Digital</strong> transformers exist in every industry, with a significant portion of themfocused on transformation for growth.Others Followers Transformers51 %1 % 40 %47 % 53 % 42 % 2 % 43 %55 %Percentage of Transformers focused on growthTelecommunications2 % 47 %31 %Electronics & High TechIndustrial Equipment37 % 63 % 51 % 49 %57 %32 %BankingProfessional Services2 % 40 %58 % 53 %31 %Energy2 % 55 %47 % 54 %44 % 21 %Insurance59 %38 %Utilities57 %29 %RetailNo responsePharmaceuticals & Biotechnology3 % 41 % 57 % 34 %Consumer Goods1 % 43 % 56 % 54 %Automotive6 % 41 % 54 % 24 %5 % 39 % 49 %
<strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?13Large and small companies will createdisruption for those in the middleA regular objection from senior executives has been that digital transformation is entirelyappropriate for small companies but not for large ones. This opinion appears to associatecompany size with a desire to maintain the status quo and to view such transformationas a form of media or consultant hype. But those objections are fading rapidly. Executivesat both large and small organizations now anticipate greater digital transformation.(See Figure 6.)Figure 6: <strong>Digital</strong> transformers concentrate at the large and small ends of company size<strong>Digital</strong> Transformers52 %62 %55 %47 %53 %44 %61 %Annual revenues ($)Total48 %100m to 500m500m to 1bn1bn to 5bn5bn to 10bn10bn to 15bn15bn or more<strong>Digital</strong> Followers38 %46 %53 %47 %57 %39 %Small companies (defined here asthose with annual revenues less than$500 million), are naturally strongadvocates for transformation andgrowth. But “big” is the next big thing 12 :more and more large corporations nowevidence similar ideas. An early majorityof executives in companies with salesabove $15 billion believe in and expectto create digital transformation.Players at both ends of the revenuespectrum are markedly more growthfocused with their digital investments.It is the mid-sized companies that are thosemost likely to be disrupted by digital change.12 P. Daugherty, M. Biltz and P. Banerjee, “<strong>Accenture</strong> Technology Vision 2014.” http://www.accenture.com/Microsites/it-technology-trends-2014/Pages/digital-business.aspx
14 <strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?<strong>Digital</strong> transformation is a global expectation<strong>Digital</strong> markets are global markets because they are functions of the World Wide Web.The survey results show a real appetite for digital transformation across the majorgeographies. With the exception of Europe, a majority in all regions expect completeor significant transformation from digital technology. (See Figure 7.)Figure 7: <strong>Digital</strong> transformers are found in every geography13 %13 %Africa 50 %1 %14 %9 % 6 %North30 % America46 %24 %3 %14 % Europenon EU 29 %4823 %%MiddleEast1321 %%11 % % 11 %APAC42 % 37 %66 % % 10 %17 %LatinAmerica 41 %2 %14 %39 %EuropeanUnion42 %Complete transformationSignificant changeModerate changeIncremental changeNo changeDon’t know
<strong>Digital</strong> Double-<strong>Down</strong>: How Far Will Leaders Leap <strong>Ahead</strong>?15About the researchIn the fourth quarter of 2013, the Economist Intelligence Unit (EIU), an independentbusiness within The Economist Group, conducted a CEO briefing survey for <strong>Accenture</strong>.The full survey explores views of senior corporate leaders on prospects for the globaleconomy and on digital technologies within organizations. This research report presentsmajor findings of this extensive survey which are focused on digital transformation.The survey contained responses from 1,041 C-suite executives or board members in20 countries around the world representing 12 major industries. Eighty-five percent ofthe companies in the survey generate more than US$500 million in annual revenue.<strong>Accenture</strong>, “CEO Briefing 2014, The Global Agenda: Competing in a <strong>Digital</strong> World.”See: http://www.accenture.com/ceobriefing. Note: Data contained within this reportrelate to questions 14—20 (pages 38—43).About the authorsMark McDonald is a managing director and the <strong>Digital</strong> Business Strategy leadin <strong>Accenture</strong> Strategy. He is based in Chicago.mark.p.mcdonald@accenture.comRyan McManus is a <strong>Digital</strong> Business Strategy Director in <strong>Accenture</strong> Strategy.He is based in New York.ryan.mcmanus@accenture.comLaurie Henneborn is the global lead for <strong>Accenture</strong> Research’s <strong>Digital</strong> research team.She is based in New York.laurie.a.henneborn@accenture.comThe authors would like to thank Tchicaya Robertson, Kaizer Dhliwayo,Pranav Kudesia, Rofhiwa Netshivhambe, Veronica Filgueira, ArishaWilliams, and Narry Singh.
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