A significant majority of the companies surveyed by Léger Marketing believed that they should take greater advantage of digital technology in general (Figure 2). This is also true for one out of five companies, or 20%, for all aspects mentioned in the question.
Almost three-quarters (72%) of the companies surveyed felt that their employees could improve their adoption of existing technology. In general, the adoption rate was assessed as average (61%) or poor (11%).
Corporations typically have to deal with three main barriers to digital adoption (Figure 3), which survey respondents rated of almost equal importance. They are:
- Difficulty aligning it with the company’s business strategy and/or model;
- Difficulty setting KPIs;
- Skills gap or employee resistance.
To avoid putting their business at risk and/or being left behind, 79% of business leaders today realize that their company must increase the pace of digital transformation, since the industry in which it operates has already started to transform. Setting up a digital business model enables companies to develop in two different aspects: by partially or completely controlling their industry’s value chain, and by refining their understanding of end-customer needs, with the ultimate goal of participating in the value chain of the digital economy (see Zoom on the digital economy). An overview of the different aspects listed there yields four distinct business models with different capabilities: 1- the supplier ; 2- the omnichannel company ; 3- the modular producer ; 4- the ecosystem driver (Figure 4). The digital business model framework helps companies gain insight into their current situation in an increasingly digital business environment, and shows what they must do to move to a high value-added digital model.
The steps (Figure 5) are spread out over a roughly five-year period. The first step – taking place over one or two years – is to improve the company by laying a technological foundation and acquiring the necessary skills for the digital transformation. Then, three to four years out, the company must roll out a new business model that leverages an improved IT infrastructure and organization, so it can take advantage of the technology architecture's new components. Finally, at least five years from the start of the process, the company's digital business model will enable it to completely redefine itself and impact the ecosystem in which it operates, or even control it entirely, as GAFAM does today.
Given that digital technology has a huge impact on how a company’s internal and external parts interact, having managers reflect on their business model is the best way to help them understand the impact of the digital economy’s growth, even as value chains dematerialize. In fact, no less than 75% of managers are aware that digitally transforming their operations, production chain and customer experience are urgent, priority actions (Figure 6).
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Why you should care
Studies examining the impact of business investment on information and communications technology (ICT) typically find that a 10% increase in ICT investment raises output by around 0.5% to 0.6%. Most companies' digital transformation process seems to be well underway, with 59% of them having both a digital transformation investment plan and a digital transformation plan already in place. However, it should be pointed out that as many as 41% of companies could benefit from some support, as only 26% of them have implemented one of the two aforementioned plans, while 15% have neither (Figure 12). Data is the connection between a company’s daily operations and its growth in the digital economy; to participate in the digital economy, companies must make data an integral part of their digital transformation process.
Data is captured by tools and processes that, when seamlessly integrated, provide companies with undeniable competitive advantages. (This integration, which enables companies to understand and measure all possible points of contact, whether in its ecosystem or its entire value chain, is called a platform.) Companies organize the data using business applications and then mine it using algorithms.
The digital economy is based on data generated by our online personal, social and business activities, which organizations can and must convert into information (Figure 13). Then, they can leverage this information to create value. In almost every value chain, the ability to collect, store, analyze and convert data confers a considerable competitive advantage. Any company capable of transforming data into information has a strong strategic interest in mastering data.
Data-related activities no longer rank behind the production of goods and services but are now a key component of a company's operations, and the value of that data grows as its information and knowledge content increase. Once organized to generate useful information, data enables companies to move from a solution-driven focus to a data- and insight-driven focus. In other words, the company is no longer just “going digital”, it is digital.
Companies that produce data information – including acquiring data to provide new data sources, storage and warehousing, modeling, analysis, and visualization – have created an entirely new value chain.
In figure 14 :
- Data forms a series of random dots that could mean something – or nothing.
- For data to become information, you need to give meaning or create relationships between the dots.
- Knowledge is gained when the company is able to memorize the information. As it gains knowledge, it begins to make sense of things and draw connections between different pieces of information.
- When data starts to generate insights, that’s when it becomes seriously useful. Insight is the ability to synthesize knowledge in order to obtain a deep understanding of a problem.
- With insight comes the prospect of wisdom: the ability to use insight to facilitate informed decision-making.
Transforming data into information has become so important that companies that want to be competitive have only two choices: pay for the information that digital platform owners have extracted from the raw data given to them; or operate the digital platforms themselves.
The way companies leverage data is thus critical to their ability to understand and influence the value creationand capture process in the digital economy. Increasingly, across all sectors, data is becoming the foundation of economic and social activity. Corporate assets are now tied to certain skills, specifically the ability to control data, as these are generated by transforming data into financial resources.
Data becomes digital capital.
Data’s power to transform economic and social interactions is forcing companies and governments alike to adapt, to seize emerging opportunities and create new ones. Adopting a digital business model is a way to successfully achieve that transition.
The implications of data
Fifty-seven percent of IT managers are concerned that the amount of data is growing too quickly, leaving their organizations behind. Furthermore, as if things weren't complicated enough, 66% of them say that more than half of their organizations' data is dark, i.e., data that is not processed, structured, exploitable or even known to exist!
Digital platform models
The digital platform concept, or model, is based on creating links between the different groups of individuals that comprise a multi-component market. There are two types of platforms: transaction platforms and innovation platforms.
Because this platform’s complex infrastructure allows for multi-party transactions, it has become an essential part of their business model for tech giants Amazon, Alibaba, Facebook and eBay, as well as companies operating in sectors whose growth is driven by digital tech, such as Uber and Airbnb.
This type of platform gives content creators and developers the environment they need to develop applications and software. It can be an operating system, such as Android, or a wireless technology standard, such as Bluetooth.
Why you should care
Companies that have embraced digital platforms after first adopting a digital business model have two main characteristics:
1. they facilitate peer-to-peer exchanges;
2. they enhance the use of goods and services.
Companies with a digital platform business model have a significant advantage in the data economy. By acting as both intermediary and infrastructure, the platforms can record and extract data related to their users’ online actions, interactions and transactions (Figure 15).
Effects to the growth of companies that have embraced the digital platform model:
- the network effect, i.e., the advantages that new users create for current users;
- the lock-in effect, where users tend to stay on one platform rather than switch to a competitor, because the cost of switching is too high.
While data producers play a key role in value creation, they have only limited bargaining power compared to digital platforms, which are in a much better position to capture value. These days, a company's assets are less critical to its growth than its ability to collect direct and indirect contacts (i.e., its customers and the stock market, respectively). The new way for a company to generate value and stand out from its market competitors is to become a platform. Because value is created through interaction, it must think in terms of networks, and create its own ecosystem in order to capture data and turn it into information by understanding its context.
Are you on a burning platform?
Two-thirds of companies surveyed by Léger Marketing for Talsom admitted that digital transformation is both a critical and urgent step for their future growth. In 74% of cases, senior management is behind this transformation. In terms of employee adoption of current and future digital technologies, 72% of companies believe there is room for improvement. However, as shown in (Figure 16), digital adoption rates of 61% and 11% are considered average and low, respectively, which is a serious blind spot for companies wishing to transition toward a digital platform model. Companies need to prioritize initiatives (Figure 17) based on their transformative potential, focusing on the ones that will make changes in the following areas:
1. team organization;
2. business capabilities;
3. revenue sources;
4. customer experience.
The purpose of this roadmap is to create a formal schedule for milestones (see below) and also make note of the positive and negative impacts of this organizational transformation on company employees and culture.
After the company has focused on transforming its various components, it consolidates and sequences the various initiatives and their impact: products -> synergies -> culture (Figure 18). This enables the company to draw up a roadmap and provide context for the progress toward reaching its milestones. Note that IT systems are not the only components affected by digital transformation. Companies benefit from adding a stage of organizational culture change, as this creates synergies, increases revenue, reduces costs and enables the company to manage risk. In other words, the transformation is an event worth celebrating, and the celebration will give a sense of direction to the company for years to come.