Digital Transformation: Leaders and Laggards

20th Jul 2017

Nokia, Blockbuster, Kodak, Blackberry — each of these is a neat little demonstration of how digital disruption spares no one. The age of these empires is over.

We’re living through a period in which technology has advanced to the point where nothing seems to be impossible anymore. It’s fair to say — if you can imagine it, it can be done. The current wave of digital disruption — that is just the beginning. If businesses want to succeed, they have to reinvent themselves quickly and creatively. Because mobile, social, analytics and IoT are affecting just about everything — pricing, production, processes and people.

In this race to digitize, there are some industries which surge ahead while the others are just beginning to open their eyes to the new digital reality, often ignoring the consequences of moving slow. While some outliers exist in every industry, we can present the following list of technology haves and have-nots, roughly organized by how thoroughly they’ve embraced digital transformation.

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The Frontrunners: Knowledge-Critical Sectors

It’s not surprising that according to McKinsey’s Digitization Index, the technology sector itself is perhaps the most digitally transformed. Due to their business models and infrastructure requirements, entertainment services and telecom can be lumped together with internet-based businesses and those that serve them. This group is closely followed by those industries in which information, and the time value of information, is essential to business success.

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The financial services sector has long been a major investor in digital communication, aiming not only to make their internal processes as efficient and secure as possible, but also using mobile channels and the internet to reach out to their customers. Investment and insurance are examples of industries where having access to the best quality of data in a timely manner can have great benefits, as is the case with a wide variety of professional services.

Digital Paupers: Localized and Labour-Intensive

The events and sports industry, hospitality, agriculture and construction are the least digitally developed industries. These tend to be fairly traditional in their outlook – bits and bytes do not make maize grow faster on their own, obviously, and the human touch will always form a major part of customer service – but another possible reason for their low levels of IT investment is that many of these companies simply aren’t aware of the benefits increased spending on technology may enable.

In construction, for instance, rapid design and erection technologies supported by virtual reality and modular construction will soon make huge manpower savings possible, but architects and engineers using the latest software have sometimes found that the people supposed to carry out the actual work can’t read their schematics. In terms of the hospitality sector and facilities management, using the smartphones of visitors as location beacons can improve service and provide a mass of data on how customers actually tend to behave, yet many of those that can benefit from this form of business intelligence are either ignorant or skeptical of its possibilities.

Somewhere in the Middle: Global Communicators

The manufacturing sector, oil and gas, retailers and other companies that interact with suppliers, customers and partners from all over the world have realized that rapid, accurate communication can both improve market share and keep costs down. It is still possible to conduct business using faxes and phone calls, but customers and suppliers simply prefer to engage over e-commerce platforms and social media.

On the operational side, dedicated IoT devices, improved inventory planning and prediction software and big data are all helping to make non-customer facing operations run more smoothly. One of the biggest determinants of successful IT implementations in these in-between sectors and companies is the level of organizational penetration. The healthcare sector, for instance, collects huge quantities of data that have to be shared with different stakeholders. While there are some truly impressive high-end solutions being used in this sector, a large amount of administration continues to be done through pen and paper techniques.

Government, for a variety of reasons, lags well behind the private sector when it comes to digital transformation. This is despite the fact that they deal with very large volumes of data, engage in complex long-term planning and many of their activities require interaction with other parties.

The Benefits and Pitfalls of Digital Transformation

Between different industries but also among otherwise similar companies, there are noticeable differences between those who make use of business intelligence, those who’ve streamlined their supply chain to the greatest extent possible and who’ve successfully implemented game-changing emerging technologies, from drones to online reputation management, and their competitors who don’t quite seem to get it. Most managers in everything from operations to marketing will agree that investment in IT resources will play a critical role in success over the next 3 to 5 years – the problem comes in when deciding how exactly to best spend an available budget.

Experience has shown that paying more for the latest software or network infrastructure can be an essential component to the kind of digital transformation that actually leads to increased efficiency and profitability, but that alone is usually not enough. The skill sets of workers, reorganizing business processes in order to take advantage of what technology makes possible, and partnering with service providers who possess not only technical skills but know how to integrate a system and a company all make the difference between success and failure.


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