Companies that are identified as leaders in digital transformation – and who are using technology to drive and enable growth – share common habits that are leading to improved financial performance, said EY recently.
The firm lately released a report titled Tech Horizon: Leadership perspectives on technology and transformation based on a survey of 500 large corporations and 70 startups in nine sectors: consumer products and retail; education; energy; financial services; health and life sciences; hospitality; industrial; technology, media and entertainment and telecoms; and transportation and logistics.
The goal of the survey was to determine where companies are on their transformation journey and how they use technology to enable it, EY said.
According to the survey, the leading companies revealed they share common practices that help them respond to disruption to their advantage and achieve better financial performance. These are:
• focusing on customers, first and foremost
• accelerating AI to drive growth
• driving innovation through ecosystems and partnerships
• nurturing talent with new incentives and strategies
• activating governance plans for emerging tech
• powering innovation by leveraging data and being agile
Survey respondents identified as leaders are advanced on their journey toward transformation, are generating significant financial value from technology innovations and are making efforts to build a transformative culture, EY pointed out.
Those identified as lagging behind in transformation are not advanced on their digital journeys, are not bringing tech innovations to market and are not trying hard to build a transformative culture, the firm added.
According to EY, the report examined three financial metrics – revenue, gross profit and EBITDA2 – on a five-year CAGR3 basis and revealed that leaders are:
• 50% more likely than those not deemed as leaders to annually see EBITDA increase by more than 15%
• 45% more likely than those not deemed as leaders to unlock annual revenue growth of more than 10%
• 26% more likely than those not deemed as leaders to enjoy annual gross profit increase by more than 10%
“We hypothesized that we would be able to correlate some common approaches and characteristics to outperformers,” said Dan Higgins, EY Global Advisory Technology Consulting Leader. “As it turned out, while there are many factors impacting companies’ top and bottom lines, the research shows that there is a strong link between companies who embrace six core practices and their achievements in improved financial performance.”
- 44% of large corporations say they are making good progress in their transformation or it is fully embedded and optimised across their business.
- 83% of startups – companies five years old or younger, which are typically agile and born in the cloud – currently plan to transform their businesses during the next two years, as they launch initiatives to keep pace with an ever-changing market landscape.
- Among the large corporate respondents, Europe leads the way in transformation, with 53% of corporates in the region stating they are making good progress on transformation plans, followed by Asia-Pacific (47%) and the Americas (35%).
- Among all the large companies surveyed, those in the consumer products and retail (52%); industrial (50%); and technology, media and entertainment and telecoms (49%) industries are making progress in their transformation initiatives, followed by energy (45%) and financial services (44%).
- Transformation leaders are prioritising a wider range of technology for the next two years, with the cloud and AI as the top investments (both at 53%), followed by the Internet of Things (IoT) at 49%.
- When deploying new digital technologies and governance related to them, 43% of leaders review selected technology under a governance model, but only 15% say their governance function for emerging technologies is well established and active.
- When asked about their peoples’ skills to help enable successful transformation, more than half of leaders (58%) in a technology role believe there is an industry-wide shortage in the type of skills that would help accelerate their transformation efforts; 59% of those in a non-technology role believe this.