Digital laggards face a point of no return as leaders accelerate away

As digital leaders generate increased revenues and a growing competitive advantage, new research paints a stark picture for those businesses that are less advanced. With customer experience, sustainability and competitive gains driving the adoption of new initiatives, the message is clear: digital laggards are at a point of no return if they do not invest today.

Digital transformation may have been on the corporate agenda for years, but slower adopters could be reaching a point of no return. “Some companies are miles ahead, while others struggle to adopt new technologies and adapt their businesses accordingly,” said Jeremy Kingsley, European Lead for Technology and Society at Economist Impact. The result is “a gap between the two, between the leaders and laggards, that is getting bigger and bigger.”

He was speaking as part of a panel discussing Accelerating digital, a new report from Economist Impact and Orange Business Services. The report surveyed 500 businesses and found that 80% had some form of digital transformation contributing to more than half their profits today.

The data barrier to digital success

Yet despite this level of digitalization and the fact that 95% had adopted more than one digital business model, barriers remain. Chief among those is data.

Unsurprisingly, companies that are well advanced in their transformation agendas are more likely to use data effectively. But even those that have deployed new digital business models are struggling to realize the full potential of their data.

“One of the biggest roadblocks we see is the quality of data,” said another panelist, Chetan Gupta, AI Hitachi America R&D, Hitachi America. “Many companies still have legacy data collection mechanisms that are primarily used for regulatory purposes. So, having access to the right data is a challenge for their digitalization, especially if they’re looking to deploy analytics, machine learning or artificial intelligence solutions.”

These thoughts reflect the findings of the survey. Legacy technology and data interoperability were two of the main challenges businesses faced; the third was cybersecurity, an issue for 37% of companies.

“Companies are well aware of the cyber threats they face and the value criminals place on accessing mission-critical data,” said Alliette Mousnier-Lompré, Orange Business Services Chief Executive and another participant in the panel. “This can create an atmosphere of caution, where businesses do not innovate as much as they could because they fear it could lead to data being exposed.”

However, according to Kingsley, accelerating digital maturity efforts can help organizations combat risk. “More advanced businesses are creating new revenue streams from data service-based business models, subscriptions and servitization. Firms can diversify, reducing their exposure to more volatile sectors without cutting them off from potential opportunities. They achieve greater agility and resilience to some of the recent disruptions we’ve been exposed to.”

Customers, ESG and competitive gains driving digital transformation

But how do companies overcome these challenges? To answer that, it is worth looking at today’s drivers for digital transformation.

Businesses are going digital to do three things: better serve customers, improve environmental, social, and governance (ESG) outcomes, and see competitive gains over time.

More than half the respondents to the Economist Impact survey indicated that improving customer experience is the primary motivation for adopting digital initiatives. From more personalized services and offerings to bringing down the cost to serve, businesses are trying to use data to meet customers’ needs. The goalposts are constantly shifting, and what was once a stand-out service is now considered a minimum, as expectations are elevated.

It’s an issue that utility leader Enel is addressing. Elisabetta Ripa is the Chief Executive of Enel X Way, the company’s sustainable mobility arm. Commenting on customer expectations during the panel, she pointed out that, “we need to deliver a straightforward and user-friendly service for the customer. Operating in electric vehicles, we’re in an innovative sector with forward-thinking and pioneering customers, so now they will accept a certain degree of complexity. However, as we become more mass market, we need to make things much easier, otherwise, we won’t be able to scale.”

To that end, Enel X Way is looking at different industries for best practices that deliver simplicity. One example includes developing an app that helps customers check local charging infrastructure, similar to how telecom operators allow users to view network coverage.

Digitally-enabled sustainability

Electric vehicles are one element of the energy transition, itself a significant priority for companies like Enel and something only achievable through increased digital transformation. “Digitalization and artificial intelligence are at the core of industry efforts to decarbonize and improve energy sustainability,” said the final panelist Micheline Casey, Chief Data Officer at Siemens Energy AG. “To accommodate the increase in renewables being used as part of national grids, we need to build the next generation of systems. They have to be digital.”

Sustainability isn’t just a focus for those involved in energy delivery; as highlighted before, ESG benefits are major drivers for digital initiatives. This is partly being influenced by both internal and external stakeholders. A PwC study found that 80% of consumers are more likely to buy from environmentally and socially conscious companies. In addition, 86% of employees want to work for employers that care about the same issues that they do.

But there are also significant operational benefits to be realized from more sustainable approaches. That might be reducing costs by controlling energy usage and improving efficiency. This could mean using technology to reduce the need for expensive interventions, such as switching from calendarized to predictive maintenance.

Improving effectiveness and efficiency

Improving operational efficiency is a key factor in Siemens Energy AG’s digital initiatives. “Digitalization is supporting three areas for us,” says Casey, “improving our effectiveness and ability to execute, ensuring we capture data in a way that provides intelligence to our customers, and creating new services and models that enable customers to deliver their own transformation.”

This sort of focus allows digitally-transformed businesses to see competitive gains over time. Cost reductions, combined with revenue growth from greater competitive advantage, increase profits in the longer term. All of it is enabled by access to the right data at the right time.

“We’ve seen this digital acceleration, and it means that lots of companies are now collecting huge amounts of data they didn’t previously have access to. Their challenge is making sense of it all,” said Mousnier-Lompré. “Using AI, using cloud computing, gives organizations a way of rapidly processing and analyzing data outside of the constraints of legacy technology. With these insights, they can identify where problems are, where opportunities are, and act accordingly.”

And the result is the more effective delivery of services to meet the needs of both the organization and its customers. Digital leaders are already capitalizing on these capabilities. The research and panelists have demonstrated that the laggards need to tackle their data issues if they are to have any chance of catching up.

For additional information, read the full Accelerating digital report from Economist Impact and Orange Business Services, or watch the webinar replay: Accelerating digital: a win-win-win for customer experience, the environment and business growth.

Josh Turner
Josh Turner

I am a technology writer with a decade of experience in business, technology and logistics. From starting off my career writing questions for a TV quiz show, I’m now spending my time looking at how the world of business is going digital and transforming a variety of sectors and industries.