Companies worldwide spent US$1 trillion on digital technology in 2016, according to IDC Research.

That’s nearly the size of the Mexican economy, which is the 15th largest in the world. Unfortunately, for many businesses, this investment is not corresponding with financial returns.

While the companies might excel at adopting innovative digital technologies, many are, at best, achieving incremental business improvements.

The reality that digital commitments don’t themselves guarantee financial success can be perplexing to any organization.

Digital newcomers and digitally advanced businesses alike are making big bets on digital, but fail to use the new capabilities to spur both business growth and profitability.

The solution?

Organizations need to radically rethink their approaches and develop bold digital strategies to harness technologies and unlock new sources of growth.

TOO MUCH AND NOT ENOUGH: DIGITAL VERSUS FINANCIAL PERFORMANCE

IDC predicts that the digital technology market will double in size, reaching US$2.1 trillion by 2019. Without question, digital technologies have excited the imaginations of business leaders across many industries. Digital brings enormous opportunities to tap into new profit pools by fostering innovation, acquiring and retaining customers, radically improving operations, and gaining competitive advantage.

But recent research conducted by Accenture (see the appendix following the link) shows that these investments are not always paying off.

Sixty per cent of the 343 leading global companies we assessed have survived in the past without building up digital capabilities. Only 6 per cent of companies that invested in digital managed to translate those investments into sustained financial gains.

We identified these as Digital High Performers.

One group of companies particularly intrigued us. This group of 63 companies (18 per cent of our assessment group) showed strong development of digital capabilities but much weaker financial performance.

Indeed, their overall financial performance score was 43 per cent lower than that of the Digital High Performers.

We identified these companies as Digital Leaders and examined what was blocking their progress.

ETHOS OF DIGITAL LEADERSHIP

Digital Leaders get stuck on the fringe of high financial performance because they fail to focus their allocation of digital investments on both growth and transformation. They perform well on metrics related to efficiency and profitability and are proficient at using digital to streamline and transform their current businesses.

But this is only the price of entry for creating a solid position in the new economy.

To become high performers, Digital Leaders must master using digital to drive revenue growth and increase investor confidence.

Their overemphasis on efficiency and profitability indicates that Digital Leaders might be making trade-offs they cannot afford, putting their future growth potential at risk.

For instance, we estimate that the future value of Digital Leaders is already 48 per cent lower than the Digital High Performers, who are more adept at identifying new growth opportunities.

Read all: Boldly Going Digital | Ivey Business Journal

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