Digital Performance Index (DPI) Comprehensively Assesses the Digital Level of Enterprises
The transformation from the traditional economy into the digital economy that China is experiencing is bringing in new ideas and business models, such as mass customization of products, the sharing economy, crowdsourcing, and crowdfunding. These new growth drivers are opening up new opportunities for the traditional economy, which has long been plagued by sluggish demand and excess capacity.
The digital economy holds great promise for the future. Enterprises around the globe, large or small, are actively including digitalization into their growth agenda. Enterprises differ in their intentions to implement digitalization; however, the best practices of outstanding enterprises have proven that digitalization is never about merely improving internal technical expertise. Instead, it is to optimize and innovate enterprise operations with digital technologies. It is not something that only IT departments should pay attention to; it should involve all departments that are engaged in enterprise operations across the entire value chain.
Accenture has developed the Digital Performance Index, or DPI, to quantitatively assess the level of digital investment and progress of global enterprises across four business domains: Plan, Make, Sell, and Manage.
Accenture selected enterprises from six industries on the Forbes Global 2000 list, all leading enterprises in their countries, and used DPI to assess their digital levels. Of the selected enterprises, Chinese enterprises are compared with those in three developed countries (the US, Japan, and Germany) in terms of the above four functions (Plan, Make, Sell, and Manage).
The analysis shows that enterprises in the four countries are all exploring the road to digitalization. In terms of digital level, all the leading enterprises scored less than 3 out of 4, and they all suffer similar weaknesses in digitizing internal management.
It is also indicated that the digitalization of leading enterprises in China is as developed as in most of the developed countries. Overall, China is on a par with the US and even slightly outperforms Japan; however, compared to Germany, China still has much room for improvement, especially in the Plan and Make functions.
How to Drive Business Performance: The Ultimate Question to answer through Enterprise Digitalization
Enterprises make digital investments in order to improve their competitiveness and to secure a leading position in the digital age. But, in fact, there is still a lack of convincing proof as to whether digitalization can bring benefits to enterprises. Enterprises are now facing core questions about whether, when, and how digitalization can help them.
To answer these core questions, we have introduced another tool: Accenture’s High Performance Business (HPB) framework is used to thoroughly study the relationship between enterprise digitalization and business performance. Leveraging Accenture’s DPI and HPB, each enterprise surveyed gets two scores: One for its digital level and the other for its business performance. The comprehensive analysis on the two scores helps us peep into the relationship between an enterprise’s digital level and its business performance.
In China, Accenture joined forces with National Industrial Information Security Development Research Center and China Service Alliance for Integration of Informatization and Industrialization to survey 170 Chinese manufacturing enterprises. The results show that leaders in these enterprises are all aware of the huge power of digitalization to some extent, but most of them have not yet taken actions to make digital investments to improve business performance.
Only four percent of those enterprises studied are able to couple broad levels of digital investment with a broad level of business success — the enterprises we call the Digital High Performers. Their digital investment has brought tangible benefits. They have secured a leading position in terms of digital technologies and key financial KPIs.
These digital high performers strive to develop and execute business strategies based on digital technologies, which are the enablers and transformative drivers for legacy organizations. They can consolidate and reinvent core businesses and help enterprises tap into new business areas.
Business leaders lag far behind digital high performers in terms of their digital level, with a gap of up to 28%. Ignorance of the power of digital will cost a fortune. A comparison of business performance between business leaders and digital high performers shows that digital high performers have more sustainable and quality growth than business leaders, especially in the four HPB dimensions: Profitability, Longevity, Positioning for the Future, and Consistency.
The differences between digital high performers and other enterprises are quite visible. It is worth learning from their experiences in building advantages in terms of digital level and business performance.
Digital High Performers: Secret Sauce for Standing Out?
To figure out the secrets of how digital high performers achieve their success, we have thoroughly analyzed digital high performers by comparing them with others. First of all, we compared digital high performers with business leaders to explore the value of digitalization for business leaders. Then, we compared digital higher performers with digital leaders to analyze why digital higher performers can obtain higher financial returns from digital investment. Findings include the following:
Digital high performers have seized the megatrend of the digital economy and quickly adapted themselves to the market dynamics. They have achieved more healthy and sustainable growth by leveraging digital technologies. Investors firmly believe that digital high performers can continuously enhance their values, and their market-leading advantages can be constantly solidified and even taken to new levels.
Digital high performers are good at translating digital investments into financial returns. Their business performance is dramatically better than that of digital leaders, with a 94% higher performance score. When digital leaders are using digital technologies to optimize processes and improve efficiencies, digital high performers have already taken a step further by adding digitalization to their corporate strategies and paying continuous attention to creating more value with digital technologies.
Plan: Enterprise-Wide Transformation Rather Than Individual Process Fixes
How far can enterprise digitalization go? How many returns can enterprise digitalization yield? This heavily relies on a clear and appropriate digital strategy. Digital high performers focus on leveraging digital technologies to accelerate enterprise-wide transformation and stay ahead of the competition in the market.
Digitalization has already changed the entire value-creation chain. Enterprises should shift their focus from the individual organization to the entire ecosystem and try to leverage the power of digitalization to mine maximum value from the ecosystem. Digital high performers consider digitalization as the core of their strategies. They also constantly improve their irreplaceable position in the entire ecosystem by interacting and sharing information with other industry players and join forces with them to shape the future of the industry.
Make: Open Innovation to Build Digitized Operation Modes
In the new economic environment, customers and consumers have increasingly demanding requirements for products and service experiences. The ‘All by Me’internal innovation approach is not only costly but makes it impossible to quickly adapt to fast changing markets and to withstand fierce market competition. Digital high performers excel in identifying the best resources in the innovation ecosystem and consolidating a variety of resources, such as consumers, suppliers, partners, and experts, into their own innovation systems. In doing so, they can provide the optimal experiences in a more innovative way and at greater speed.
Sell: Enhance Value Proposition Based on Improved Customer Experience
In the digital era, customer experience is vital to the success of any enterprise. Customers today have increasingly higher expectations and requirements. Every customer in the B2B or B2C environment is expecting personalized experience. To meet their fast-changing demands, enterprises must develop a new customer-oriented service experience and maintain ongoing close contact with them. To be able to do this, enterprises need to continuously collect customer requirements while doing proof-of-concept, developing new products and services, and promoting them, in order to respond to customers’ changing needs and provide products and services that never let them down.
Digitalization allows enterprises to interact with customers continuously. Customer services do not stop at the completion of product sales. Based on Big Data analytics, enterprises can continuously deepen their insights into customers, laying a solid foundation for constant improvement of customer experience. This is exactly where the digital high performers outperform their peers. Statistics show that digital high performers still keep in touch with their consumers in the after-sales phase. They continuously collect consumer feedback using digital technologies and feed such feedback to the R&D operation phase.
Manage: Comprehensively Improve Enterprises’ Flexibility and Adaptability with Continuous Assessment and Improvement
Digital technologies have great potential, but unleashing this potential heavily depends on other capabilities of the enterprises. Using digital technologies to dramatically change an enterprise would be a pipe dream if the enterprise leaders still have an old-fashioned mindset, the management system is not optimized, and the corporate culture of embracing transformation is not there yet. In the past, many enterprises valued only advanced technologies but ignored other capabilities that can give full play to such technologies, leading to a disappointing return on their investment.
For digital enterprises to succeed, a flexible organizational structure, data-driven corporate culture, and a systematic digital talent development mechanism are needed. Digitalization cannot be completed overnight but requires continuous assessment, adjustment, and evolvement based on the enterprises’ status and capabilities. A high level of flexibility and strong adaptability will be two important features of a successful digital enterprise in the future.
Constant Investment and Long-term Accumulation are Pre-requisites for Enterprises to Make Business Performance Breakthroughs Using Digital Technologies
Digital technologies are driving business changes, and the digital economy has bright prospects; however, the digitalization of enterprises is more than a technical thing; it is about the whole enterprise’s transformation. Enterprises who turn a blind eye to digitalization will lose competitive advantages in the long run. Huge investments without truly understanding digitalization cannot ensure any competitive advantages or significant improvement of business performance.
Digital transformation is not ‘the icing on the cake’; instead, it should go beyond the IT department. It needs to be launched and promoted by enterprises’ top decision-makers, making it a development consensus. Besides, digital transformation needs to penetrate into the entire organization across all functions. Manufacturing enterprises can transform and ‘Lead in The New’ by promoting core business transformation and developing new businesses enabled by digital.
Digitalization is not a single project, a one-off task, or a project within a limited period of time. It is unrealistic if enterprises expect to produce an immediate effect with low investment. As shown in the figure above, after we group the sample enterprises by digital level and sort them in ascending order, the business performance of each group fluctuates around the average bar; however, when the digital level exceeds the upper threshold, business performances is improved significantly, 54 percent higher than the average. This shows that constant investment and long-term accumulation are required if enterprises expect to achieve excellent performance leveraging on digital. Enterprise can finally harvest benefits in business performance only when digitalization has penetrated into every aspect of their business practices.