Future built firms generate shareholder returns almost three times higher than those of S&P the 1200 , with two-thirds of the value created coming from revenue growth, said Boston Consulting Group (BCG) recently.
However, only 6% of companies are currently future built, BCG pointed out.
BCG said it surveyed 725 C-suite members to understand how their companies are building — or have built — more than 50 different capabilities in five areas that previous research has shown are fundamental to success: senior management commitment, strategy and approach, governance, people, and technology.
The authors then analysed which of these capabilities contribute most to an organisation’s future readiness, according to the firm, adding that BCG can link future readiness to financial and nonfinancial metrics that investors and other shareholders value, such as shareholder returns, growth in earnings before interest and taxes, customer satisfaction, and talent attraction.
The authors scored each surveyed company on its position along the journey toward becoming future built and identified four groups of companies on the basis of their progress: stagnating, emerging, scaling, and future built.
According to BCG, the fundamental drivers of superior performance and sustainable competitive advantage are changing.
Growth opportunities are moving to new markets, including those created by technology disruption, and are expanding in areas related to generative AI, the energy transition and low-emission technology as well as in gene therapy, the metaverse, and quantum computing, the firm added.
Many incumbents struggle to justify investments in these disruptive new opportunities or find themselves tied up in wasteful IT spending programs while some 70% of CEOs say that their firms don’t prioritise investments well in executing digital transformation programs, BCG observed.
Since they lack the capabilities required to access the new markets and gain advantage with AI and other technologies, their futures look bleak, the firm predicted.
The six attributes of future built firms
Based on the study, BCG said it has found a common set of six attributes future built firms share, regardless of sector, that enable them to exhibit superior performance, be more resilient to shocks and disruptions, and exploit innovation faster for value-creating growth.
The six attributes include:
- Leadership that is aligned around a corporate purpose that integrates sustainability and social impact goals, building trust and transparency among stakeholders
- A clear people advantage to attract, retain, and develop world-class talent
- An operating model that enables agility and resilience to combat exogenous risks
- An innovation-driven culture
- A data platform and flexible, scalable technology platforms and applications to facilitate data access and support business needs easily and flexibly
- Fully embedded AI that can create value for the organisation
“A small number of companies have built winning capabilities and broken away from the pack,” said Amanda Luther, a managing director and partner at BCG and a coauthor of the article. “They have avoided the trap of overfunded, underdelivered IT projects. Instead, they have made smart investments in people, processes, and culture, underpinned by strategic technology builds that have delivered outsized value.”
Four types of companies
In addition, the study has identified four types of firms and plotted where they are on the journey to becoming a future built firms, BCG said.
Stagnating companies make up 30% of the sample. They are still at the starting gate and still deciding how to move forward.
Emerging companies make up 45% of the sample. They have created value from a digital transformation, but they continue to face challenges in effectively scaling solutions, and they haven’t evolved much beyond fixing the basics in their core value chain.
Scaling companies make up 19% of the sample. They have delivered a successful wave or waves of digital and AI transformations and created sustainable change in the organisation.
They are focusing on embedding these solutions across the enterprise and pivoting towards growth from innovation. These companies are delivering results.
Future-built companies make up 6% of the sample. They exhibit all six attributes at scale.
They are on the leading edge of disruption in their sectors, they demonstrate resilience in the face of uncertainty, and they are best placed to benefit from technology disruption.
The more advanced companies — scalers and future-built firms — are opening big chasms with the stagnating and emerging companies in critical capabilities that cement advantage.
According to BCG, some of the big chasms are as follows:
- Five times as many advanced companies are scaling AI solutions as opposed to running pilots at subscale (72% versus 14%).
- Advanced companies invest twice as much in AI solutions and realise 3.5 times greater return on investment.
- Three times as many advanced companies have stronger capabilities in the operational value chain, for example, intelligent asset management, smart factory, automated maintenance, and Industry 4.0.
- More than twice as many have stronger capabilities in sales and marketing, and twice as many have stronger capabilities in customer experience and journeys, for example, personalisation, consumer-centric services, and customer support and services.
- Twice as many have stronger capabilities in digital ecosystems, such as leveraging platforms and partnerships to drive sustainable revenue growth beyond core.
- Advanced companies launch 1.6 more ventures or new companies with a greater proclivity for earlier-stage innovation.