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‘Digital laggards’ must harness data or get left behind

Clint Boulton | Sept. 22, 2016
Digital leaders post higher gross margins, revenues and profits than digital laggards, according to new research from a Harvard Business School professor. Data is a big reason why.

The difference, Iansiti says, lies in how companies put their data to use. Using their data platforms, leaders have implemented a comprehensive data acquisition strategy and differentiate themselves from competitors. That means they are more likely to have access to a consistent set of current metrics with which to make decisions and are able to generate predictions about their business. Digital leaders are two-and-a-half times more likely to harness real-time data and analytics to deliver tailored customer experiences and are also two-and-a-half times more likely to use analytics to prescribe business actions that limit customer turnover.

“Digitization is dramatically changing the nature, focus and speed of these decisions, as well as the technology, services and systems that enable effective and efficient operating performance,” Iansiti says.

Platform strategy is key to cultivating a network

To adequately capture value, digital transformations requires a strategic rethinking of business and operating models, emphasizing CRM and engagement, product creation and service delivery, and recruiting talent to work with new and emerging technologies.

Ideally, the business focus will shift toward a platform strategy that cultivates network effects in which value multiplies as the network expands. And that requires rich API sets that allow organizations to connect disparate applications that share data. For example, Walgreens has opened up its APIs to allow third-party developers to integrate with the drugstore retailer’s mobile application. And Pitney Bowes now counts on APIs to allow developers to leverage its logistics capabilities.

Although companies that lack data management, digital operating models and platform strategies are behind the digital leaders, Iansiti remains optimistic. He says technology, including mobile and cloud platforms, enables businesses to accelerate their time to market. Analytics has moved from its traditional back-of-the-house function to the forefront of business decision -making, with self-service capabilities that allow business analysts to generate insights without appealing to IT for help.

“It’s not as impossible or insurmountable as it used to be,” says Iansiti, of the likelihood of laggards catching rivals. “There are a lot of good platforms to bring in to drive change.”

Research methodology

Iansiti conducted his research, "The Digital Business Divide: Analyzing the operating impact of digital transformation," in collaboration with Keystone Strategy, funded in part by Microsoft. (Download the report here.) Researchers interviewed 344 senior business and technology leaders via phone, asking them 74 questions about the technologies they have deployed. The research focused on upper-midmarket and enterprise organizations, with a median company size of more than 6,000 employees and $3.4 billion in company revenue.

 

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