Digitally Mature Firms Found to be 26 Percent More Profitable

Despite all of the talk about how social media, mobile and analytics are transforming our lives, the majority of big companies still have a long way to go in their digital transformation, according to researchers at MIT’s Center for Digital Business (CDB).


A recent CDB report showed that while the majority of large companies are investing in digital innovations, more than three-quarters of them are investing without leadership oversight or have governance structures that overly restrict investment. However, those that are digitally mature were found to be 26% more profitable than their industry competitors.


The CDB’s year-one report, “Digital Transformation: A Roadmap for Billion-Dollar Organizations,” coauthored with project sponsor Capgemini Consulting, summarizes the findings from interviews with senior executives in 50 companies in 15 countries to understand how social media, mobile, analytics and embedded devices are changing the business of running large firms.


“This study has generated fascinating insights into how executives in large companies approach the use of fast-emerging new technologies,” says MIT Sloan research scientist and project lead George Westerman. “Senior executives are paying attention, and many are investing, but relatively few have positioned themselves for success.”


The report highlights how these companies are experiencing pressures to change from customers, employees and competitors, and are taking broad, similar actions to improve customer experience, operational processes and even business models. Yet, they are getting vastly different results, which is in large part attributed to the majority’s lack of leadership oversight and coordination or restrictive governance structures.


Less than one-quarter of the firms are classified as “the digirati,” which means companies that are not only investing in digital initiatives, but also building the leadership capabilities to drive extra value from their digital investments.


The study also found that the digirati are 26% more profitable, gain 9% more revenue from their physical assets, and earn 12% higher market valuation than their industry competitors. 


The year-two study also identified a set of patterns or “digital DNA” through which digitally mature firms build their capabilities.


Westerman points out that while some industries are more digitally mature than others, every industry has at least one digirati competitor.


“Since digital maturity takes several years to develop, executives should start to consider what it will take to get there. The approaches used by digitally mature companies are available to any company that has the leadership drive to do so,” says Westerman.

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