The Investment Priorities that Differentiate Digital Leaders

Companies that bet on expanding the capabilities of their staff and invest more in technology tend to show a higher degree of digital development than those that devote less resources to these priorities. This has been demonstrated by a study from the Boston Consulting Group (BCG), that surveyed 1,800 companies from Asia, the EU and the USA. Among the companies surveyed, financial institutions and telecommunications companies are more digitally developed, more than 25% can be considered digital leaders. The entities of the public sector and energy companies are behind, since more than 40% of them belong to the group of ‘digital stragglers’.

“Financial institutions are pioneers in digital maturity. Beyond digitizing their operations and undertaking new digital initiatives to improve the customer experience, they understand perfectly that the digitization of their organizations must be a priority,” stresses Jorge Colado, Partner & Managing Director of BCG in Spain.

“It is clear that prioritizing investments correctly is one of the surest ways to develop digitally,” says Michael Grebe, Senior Partner and technology expert at BCG. “If they want to remain competitive and not lose ground, the stragglers should look very closely at how industry leaders are distributing their investments,” says Michael Ruessmann, Senior Partner and digital transformation expert at BCG.

The digital acceleration index measures the degree of digital development

The study is based on BCG’s digital acceleration index (DAI). Managers and directors evaluated the degree of  their companies’ digital development based on a series of criteria using a scale of one to four in 35 categories. Then, those raw scores were added and values from 0 to 100 were assigned to each of the companies. Companies with a DAI between 67 and 100 were considered leaders, while those with an DAI of 43 or less were labeled as stragglers.

Where are the digital leaders?

The study was conducted across nine sectors and three regions of the world: Asia, Europe and the USA. The sector that obtained the best results was financial services in Asia, with a digital acceleration index (DAI) of approximately 60. Both in Europe and in the US, the telecommunications sector led the rankings. It should be noted that while some sectors showed excellent results in Asia, others lagged far behind. For example, consumer companies in Asia consider their level of digital development to be higher than that of their US and European counterparts. “This was the first year that we included Asia in the study and the Asian companies achieved very good results. Its degree of digital development in all sectors is high compared to similar companies in the rest of the world, “says Michael Ruessmann.

Digital leaders achieve magnificent results by activating three levers.

The study identified three levers that leaders use to develop digitally. First, they invest more than 5% of their OPEX in digital projects. In particular, the percentage of US leaders that allocate this amount (90%) is much higher than those of Asia (75%) and Europe (65%). Likewise, leaders around the world tend to assign more than 10% of their staff to digital positions and projects. In this case, Asian leaders (54%) are slightly ahead of their American counterparts (51%) and clearly ahead of those in Europe (44%). Focusing on their staff allows Asian companies to reach the highest scores in “new ways of working”. Finally, leaders also implement digital solutions on a larger scale than stragglers and are less likely to stall solutions relegating them to a single case. “After conducting the study for three years, we can say that these digital levers remain in force and allow us to distinguish the digital leaders,” says Michael Grebe.

Digital leaders are very clear about their investment priorities

The digital leaders increase their digital profiles and invest more than the stragglers in developing their staff. The study revealed that three out of four leaders plan to expand their digital workforce by more than 20%. By region, more than 90% of Asia’s leaders plan to increase their workforce at this rate, while those in the US and Europe are less ambitious and contemplate increases of 70% and 65% respectively.

However, digital leaders do not only look outside, but worry about what they already have within their companies. Half of them plan to develop the digital capabilities of more than 20% of their staff, something that less than a third of the stragglers are doing. It should be noted that the leaders spend 22% of their total digital investment on technology, unlike the stragglers, who invest 16%. However, by increasing investments, the digital acceleration index (DAI) in technology is much higher among the leaders than among the stragglers (78 vs. 29) and, it indicates that the difference between the two groups is likely to grow.

Asian leaders are at the forefront of artificial intelligence (AI)

Approximately 50% of leaders around the world devote more than 10% of their digital profiles to AI projects, while only 29% of the stragglers are betting on this policy. Asian companies are the ones with the most people working on AI solutions. The study revealed that the number of Asian companies that dedicate more than 10% of their digital workforce to AI projects is double what was recorded in the EU and US. Asian companies are also ahead in the adoption of AI: 87% compared to 78% in Europe and 74% in the US.