How digital is revolutionizing the entire business landscape
What do a Chilean copper mine and a high-end luxury goods organization have in common? Digital. Or, to put it more precisely, they are leaders of digital transformation in their industries -- what we call the ‘Digirati’.
When the MIT CDB and Capgemini Consulting began a long-term research effort into the impact of digital on business last year, two findings emerged that resonated strongly. First, that ‘Digiratis’ -- those who were delivering a fundamental transformation of their business -- were few and far between. Second, that digital was driving change in all industries, from the obvious suspects in the media sector to the less familiar bricks-and-mortar giants of manufacturing. These are the findings that we see so strongly in practice at Codelco, a Chilean copper mining organization and Burberry, the luxury goods firm.
Codelco, the main copper producer in the world, has its roots back in the 1800s. At the beginning of the millennium -- facing increasing challenges around workers’ security, environment and productivity -- Codelco took a hard strategic look at what the future of mining could be. An important goal was to automate mining operations, shifting from the traditional “Codelco 1.0” model (little automation, mechanized equipment) to “Codelco 2.0,” a real-time mining model with highly automated processes and remotely-controlled machines. Today, four mines are operated automatically. In the firm’s digital transformation roadmap, there is already a vision for “Codelco 3.0”: an intelligent mining model relying on integrated information networks and fully-automated processes.
Far from the mining industry is Burberry, an iconic British luxury brand established in 1856. When CEO Angela Ahrendts took over the company in 2006, it was significantly underperforming against its peers. Ahrendts launched a significant transformation programme covering multiple business areas, from customer experience to operational excellence, and largely driven by digital technologies. As with Codelco, achieving this transformation was much more than new technology implementation. This was a closely managed change programme to achieve cross-channel consistency, engage employees, secure the right skills, and develop strong IT-business relationships. Specific governance was put in place, new roles were created, and missing skills were developed or acquired. While this transformation is now bearing fruit, Ahrendts already has one eye on the future possibilities: “Consumer data will be the biggest differentiator in the next two to three years. Whoever unlocks the reams of data and uses it strategically will win” she said.
We define Codelco and Burberry as ‘Digirati’ because they demonstrate a high degree of digital maturity, which is a product of two factors. First, your digital practices: what does the firm do with digital technologies such as new customer experiences, changes in operational processes, and new products and services. Second, your transformation management practices: how you drive this transformation, encompassing factors such as vision, governance, engagement, and IT–business relationships.
The maturity of the Digirati is in contrast to digital “Fashionistas” (companies that implement many initiatives but few transformation management practices); “Conservatives” (companies that implement strong management practices but few digital initiatives); or “Beginners” (companies that implement little of either). So why exactly is it so important to be a Digirati as opposed to these other groupings? The answer is crystal clear: it matters because the Digrati deliver a measurably better financial performance than their peers. This is the ‘Digital Advantage’ that has emerged from our research (see: http://www.capgemini-consulting.com/ebook/The-Digital-Advantage/index.html)
- The Digirati derive more revenue from their physical assets. On average, Digirati outperform their peers by 9% on revenue generation indicators.
- The Digirati are more profitable. On average, Digirati outperform their peers by 26% on profitability indicators.
- The Digirati achieve higher market valuations. On average, Digirati outperform their peers by 12% on market valuation indicators.
And why does this matter to you? It matters because all industries have their Digirati. To us, the message is clear. Whether you are in the business of dog food or silicon chips, digital matters. It is clearly and measurably separating winners from losers and it is forcing change across sectors, whether they are obvious candidates for a new digital future or not.
It will undoubtedly be a long and challenging road ahead, but whether you are extracting copper from the ground or designing and selling luxury products, digital transformation is a huge business opportunity to get ahead of competition.
See http://www.capgemini-consulting.com/ebook/The-Digital-Advantage/index.html for more details.