“Digitally Mature” Companies Make More Money

Still looking for ways to convince your boss, clients or board of investors to invest money in realtime tools and strategies? How about this one:  according to a new study by Capgemini Consulting and the MIT Center for Digital Business, companies that are “digitally mature” generate more revenue, are more profitable and achieve higher market valuations.

Capgemini is basing these findings on two years of study covering more than 400 large firms. These companies are “using technologies like social media, mobile, analytics and embedded devices to change their customer engagement, internal operations and even their business models. But few firms have positioned themselves to capture the real business benefits. Our research points to a real “digital advantage” to those that do.”

Digital Intensity + Transformation Management Intensity = Digirati

The report measures companies along two dimensions:  1. digital intensity – investing in technology-enabled initiatives that  change how the company operates, and 2. transformation management intensity – creating the leadership capabilities needed to drive organizational transformation.

Companies that do well in one of these two dimensions out-perform their competitors. The “Digirati” are companies that are mature in both dimensions — and they have the highest financial performance by far, on multiple financial measures.

The chart below shows how the companies studied fall along the two dimensions. “Fashionistas” have high digital intensity but low transformation management intensity — they’ll try something new, but they’re not strategic about cultivating long-term organizational changes. “Conservatives” have  higher transformation management intensity but are taking it slow on digital innovation.

Cap Gemini - digital maturity varies dramatically among 184 publicly traded companies studied

And here’s how the four groups compare when it comes to profitability:

Companies who are more digital are more profitable

And when it comes to stock market performance:

Companies with stronger transformation management intensity achieve higher market valuations

As you can see, companies with a greater commitment to organizational change are more successful. But companies who combine this with a commitment to digital investments are even more successful, by far.

What Makes a Company Digitally Mature?

Both Digirati and Fashionistas have strong digital intensity, but Digirati distinguish themselves by excelling in one or more of these areas: customer experience, social media, mobile, customer analytics, process digitization and internal collaboration.  And they are very deliberate in how and where they invest in these domains; leveraging the synergies between, say, mobile and analytics to create a new customer experience.

What seems to be key is developing excellence in both customer-facing processes (social media, mobile, the customer experience) as well as the operational processes needed to support those (analytics, data integration, process digitization, internal collaboration).

Examples include companies like Caesars Entertainment, which is creating mobile apps that leverage its excellence in customer data to create SMS-based check-in services; Volvo, which created apps that allow drivers to unlock their cars from their smartphones; and Nike, which leveraged its strong commitment to social to crate Nike+,  which allows customers to monitor and share their workouts online.

Here’s the full Capgemini report: