Posts

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.

Workers: Optimists about the Future of Work

The BCG Henderson Institute and Harvard Business School presented Future Positive: How Companies Can Tap Into Employee Optimism to Navigate Tomorrow’s Workplace, a research project detailing a global forecast based on the perceptions of 6,500 business leaders and 11,000 middle-skill workers about the future of work. During times in which public debate about the future of work seems to be dominated by widespread fear of change, the BCG and HBS research has concluded that, in general, workers see opportunities in change and are optimistic about their future job prospects.

Of the 11 countries analyzed in the report, Spanish workers, after the French, give the greatest responsibility to the government in their preparation for the future. Even so, they still consider that they themselves are primarily responsible for their own training.

When facing the issue of transforming their organizations to adapt to the future of work, the findings reveal that business leaders underestimate the optimism of a workforce that claims to be happy in their jobs and eager to do the necessary future adjustments. To successfully face this challenge, business leaders have to put aside their preconceived notions and bridge the gap between their perceptions and the reality of their workers positivity.

“The workers who shape and will shape work environments in the coming years are diverse. What the findings of this report show is that business leaders are overlooking a key partner in their efforts to prepare for the future: their own workforce,” says Joseph Fuller, a professor at Harvard Business School and co-chair of the project Managing the Future of Work. “Rather than fearing the future of work, employees around the world are absolutely willing to accept change and take action. It is the responsibility of business leaders to recognize this opportunity and be proactive in supporting their employees and generating concrete action plans.”

“It might be surprising, but generally across all of the countries studied, employees do not consider technology to be the culprit of an uncertain future, but rather as an opportunity.” The workers who have participated in our research are optimistic and look to the future with confidence. They also believe that technology can be part of the solution,” says Judith Wallenstein, partner at Boston Consulting Group (BCG) and director of the BCG Henderson Institute in Europe. “Business leaders need to take advantage of their employees willingness to help create new organizations based on progress and learning that is fit for the future.

Researchers asked middle-skill workers and business leaders to describe their point of view on the trends and forces that can influence their work in the coming years. These topics included: new technologies, teleworking, government responsibility, and regulatory changes.

The report includes concrete recommendations for companies, highlighting a series of innovative businesses that have already begun the preparation of their workers and the adaptation of their companies for the future. Some examples of initiatives that these companies have undertaken include: the use of artificial intelligence tools to determine if a candidate has the cognitive ability to be a high-performance worker, the commitment to train workers to learn new skills through disruptive standards, and the use of technology to provide a completely service-oriented business model.

Data from the Report

Managers have a misconception about the outlook of their employees on the future of work:

  • 39% of business leaders believe that the lack of employees with new skills is already having an impact on their organizations. In addition, they frequently cite (29%) that their workers fear of change as the reason preventing them from preparing for the future.
  • Almost half of the workers worldwide (46%) consider themselves personally responsible for preparing for changes and 45% believe that changes in the working environment will result in better wages. 75% say that they will probably or definitely need to prepare to adapt to the future trends in work.

Middle-skill workers (without university training) are happy in their current positions:

  • 52% of workers without university training are happy in their current jobs.
  • Swedish workers are the happiest with their current employment situation (66%), ahead of Americans (64%).
  • Additionally, 45% of workers around the world indicate that their employment situation has improved over the last 5 years.

While business leaders try to find out which trends will be key to the future of companies, the most common significant issues have been:

  • Development and training of the workforce (30%)
  • Sudden changes in customer needs (27%)
  • Expectations of employees in relation to labor flexibility (27%)

Business leaders point to several reasons as to why their organizations are not preparing for the future:

  • Half of business leaders (50%) believe that their organizations have other strategic priorities.
  • 39% believe that the impact of change in their organization is still far away.
  • More than a third (34%) of business leaders claim that their organization lacks visibility about future trends and their specific impacts.

Workers believe that changes and technology will have a positive effect:

  • Almost half of the workers (45%) believe that changes in the workplace will result in better wages.
  • In general, 61% of workers are optimistic about the impact that technology will have on their work in the future.

Workers and business leaders agree that they do not perceive the impact of technology as a priority issue.

 

Future Positive: How Companies Can Tap Into Employee Optimism to Navigate Tomorrow’s Workplace

Full report

Methodology

In order to understand the readiness of companies and workers to adapt to the broad array of forces affecting the workplace – beyond technology- Harvard Business School’s Project on Managing the Future of Work and Boston Consulting Group’s Henderson Institute conducted two global surveys. The first canvassed 11,000 middle-skills workers from 11 countries to learn how those with education levels less than a four-year bachelor’s degree perceive the effect of 15 forces of change (see Table I) on their future prospects. The second polled 6,500 C-suite and senior leaders in 8 countries to understand how to prepare companies and their workforces were to tackle the 17 tectonic shifts (see Table 2) underway.

Artificial Intelligence, A Key Element among the 50 Most Innovative Companies

For innovative companies, the current landscape is still marked by the growing importance of digital technology. In particular, a new BCG report entitled The Most Innovative Companies 2019: The Rise of AI, Platforms, and Ecosystems, reveals that companies that excel in innovation increasingly implement more AI tools to develop new products and services, and improve internal innovation. In addition, they create technological platforms and ecosystems that allow them to take advantage of external innovation sources.

“Digital technology and external innovation have become key factors,” says Ramón Baeza, BCG’s Senior Partner and co-author of the report. “The main challenge for companies will not be to identify and access cutting-edge technological development, which will have to be sought outside of organizations, but to implement that technology within the company itself, integrating it with existing processes.”

As the main conclusion of the report, companies agree that the application of artificial intelligence in their processes is gaining ground. 90% of respondents (2,500 senior managers in the innovation area) stated that their companies are investing in AI, more than 30% expect AI to be one of the innovation areas with the greatest impact on their business during the next three or five years and another 30% give AI a leading role in their respective innovation programs.

The report shows that there is a big difference in the skills that companies have in terms of AI. More than 65% of the so-called “strong” innovators claim to be above the average in this area, compared to the mere 2% of “weak” innovators. Nearly 20% of respondents consider their companies to be “strong” innovators and exceed the average in terms of AI (a group that the report calls “leaders” in IA). Among these leaders, 94% believe that AI is important for the future growth of their companies, compared to 56% of “laggards” (respondents who consider that the capacities of their companies in AI are below the average).

AI will have a substantial impact on business processes, but its greatest potential lies in its ability to develop new products and services that provide large revenue streams over time,” says Michael Ringel, BCG Senior Partner and co-author Of the report. He also affirms that “the ‘leaders’ in AI are already making their way,” noting that, in these companies, the products and services based on AI solutions introduced in the last three years had meant a much higher percentage of sales.

Some 46% of “leaders” in AI declare that products and services based on AI tools represented 16% or more of their sales, compared to a mere 10% among “laggards”. Both agree that AI will gain ground in the future: 54% of “leaders” and 22% of “laggards” expect that AI enhanced products and services will contribute more than 16% of sales in the next five years.

Great Innovators Take Advantage of External Resources

The increasing use of AI is one of the factors that have fueled interest in platforms and ecosystems. The “leaders” in AI claim that they are more likely to turn to external providers for their AI projects. Moreover, some 36% depend entirely on external suppliers and another 48% mainly uses external services or a combination of internal and external capacities. This approach may be helping “leaders” to travel quickly through the AI learning experience curve, since knowledge is still scarce at present.

This year’s report shows that companies increasingly look abroad in search of new ideas. Collaboration models are booming: between 2015 and 2018 the number of great innovators using incubators grew (from 59% to 75%), as well as collaboration in the academic realm (from 60% to 81%) and in business (from 65% to 83%).

“Digital technologies facilitate collaboration platforms and these in turn enable ecosystems that bring together a group of organizations to develop new capacities or offer new products or services, even to promote a new field of science or technology,” says Florian Grassl , BCG Partner and co-author of the report. “However, not all ecosystems are the same. Participants are united by different types of incentives/interests. Of course, one of them is financial, but the knowledge, data, skills and community can be equally important.”

Some ecosystems are mere extensions of traditional ways of organizing and doing business. They tend to revolve around an orchestrator with whom all other participants interact and have established hierarchies and structures. Other ecosystems, including many of those involved in the first phase of R&D, tend to be more dynamic. They depend less on a central orchestrator and more on versatile interactions among the participants.

Since 2004, the Boston Consulting Group has surveyed the top managers of the innovation area from a wide range of sectors and countries on 13 occasions in order to better understand the role and status of innovation in companies.

With the ranking of the 50 most innovative companies, for the first time there have been notable movements in the first five positions on the list. Following the global survey, Apple, which led the ranking in all previous editions, descended to third place, while Google (or its parent, Alphabet) and Amazon rose to first and second place respectively. At the remainder of the top 5 table were Microsoft and Samsung.

Although technology companies occupy nine of the top ten, conventional companies account for more than half the list. Adidas (10th), BASF (12th), Johnson & Johnson (14th) and DowDuPont (15th) are among the top 15 and there are newcomers such as T-Mobile (13th), DowDuPont, Stryker (35th) and Rio Tinto (49th).

Why should Netflix Worry about Apple TV Plus?

It is, at the very least, ironic that only a few weeks after we concluded the Steven Spielberg vs. Netflix conflict, that just a few days later, the director would spearhead something that will represents his greatest competition. That the face in the very first close-up of Spielberg initiates the new era of Apple TV plus is, without a doubt, a nuanced declaration of his intentions. “Want me to help you find your opening? ” he asks in his first speech, both revealing and overwhelming. That the king of roller coasters – as far as plot development is concerned – would actually start this phase could not be more meaningful. The first peak of a roller coaster designed by the leading company in market value. “… And then, like the Big Bang, it explodes.”

Apple wanted to announce that a new player has entered the world of streaming and video on demand. But not just any old player, and not just at any period in time. Just when Disney was preparing its own platform – after breaking off all of its relations with Netflix – and just when Warner was starting to rearm itself, the ‘apple’ arrives with Spielberg. Amidst the consolidated platforms of Netflix, Amazon, Hulu, and those in the works from Warner and Disney, Apple breaks in. When everyone demanded from Apple an innovation capable of driving them back to technological, creative and even social leadership, Tim Cook is placed his bets on the same thing as the leading companies of the audiovisual market. The same? Maybe not. From the outset, they have an advantage in terms of devices, estimated at more than 1 billion worldwide. With 15% of subscribers also having Apple TV Plus, Netflix would be knocked down. In addition, the platform will be available in this year’s final quarter for Smart TVs from Samsung, Sony and LG, among other brands.

The Statistics for On-Demand Video

To explain the context through figures, it’s worth noting that Netflix expected to end March with 150 million subscribers globally, while Amazon Prime exceeded 100 million in 2018 and Hulu, popular mainly in the US, has a level of about 25 million users. In addition, after the recent acquisition of Fox by Disney, the company of Mickey, Pixar, Marvel, Star Wars and other totems now owns 60% of Hulu (adds to its 30% to the percentage of Fox). After these three platforms, two players will barge through with force. On one hand, we have the aforementioned case of Disney and, on the other, Warner. The recently approved merger between AT&T and Time Warner (owner of Warnes Bros, HBO, CNN and TNT, among others) and the incorporation of Bob Greenblatt demonstrate the commitment to the development of a leading platform. Thus, an exciting dispute is looming.

But, as we can see from the presentation of Apple TV Plus, Netflix should not only fear the figures, but also the potential content. Tim Cook wanted to differentiate himself from the start, from the strategic first spot. What if the innovation is not in the device? What if the innovation is in its content? It’s as absurd as it is shortsighted to think that in audiovisual communication, specifically in cinematographic art, that everything has already invented. An art with little more than a century of history has an immeasurable journey. Hamlet and Don Quixote were written 24 centuries after The Iliad, how many more innovations in narrative or content are left to be discovered in the seventh art?

It’s undeniable that Apple, as an innovative company, has fallen in terms of its periods of greatest success. The Boston Consulting Group report The most innovative companies of 2019 shows this by placing the company in third place after leading the ranking in all previous editions.

Innovation gives way to vision, gives way to a foreground, gives way to light, gives way to a new era of video on demand with more players commited to reign decisively in all possible fields. But, the most significant of all is that it gives way to an audiovisual era yet to be exploited … “and then, like the Big Bang, it explodes.”



Álvaro Ramos Izquierdo
Senior Communications Consultant, aficionado of the eminently artistic essence of film and, nonetheless, a mythomaniac of the Oscars.

Rafael Villaseca, former CEO of Gas Natural, will participate in the next PROA Comunicación Observatory

Rafael Villaseca, President of the Naturgy Foundation and former CEO of Gas Natural, will participate in a new edition of the PROA Communication Observatory titled ‘What Happens in the Spanish Electricity Sector‘. The Observatory will be held on Wednesday, April 10, 2019 at 09:00 AM at the Boston Consulting Group offices in Madrid (c / Alcalá 95).

Rafael Villaseca is an industrial engineer from the Polytechnic University of Catalonia (UPC) and has an MBA IESE. He was the CEO of Gas Natural Fenosa for thirteen years. He currently chairs the Naturgy Foundation (formerly Gas Natural Fenosa), serves as a director of Cementos Molins and VidaCaixa and is also a member of the Consultative Council of Foment del Treball Nacional and also member of the Spanish Chapter of the Club of Rome.

Among his recognitions, he received the 2010 Best CEO of the Year award by Platts Global Energy Awards, one of the most prestigious awards in the energy sector, which was awarded to him in New York. This award, which recognizes the professional career and the most recent achievements of its recipient, puts value on strategic vision, decision making and leadership, as well as the demonstration of clear vision, judgment and sufficient motivation by managers to pioneer transformation within their respective organizations.

The Observatory PROA Communication is conceived as a forum to welcome distinguished personalities of Spanish public life: politicians, businessmen, social leaders and respected intellectuals, among relevant figures in the entire country

The Observatory was born as an open meeting space, in which genuine, original and intellectual dialogue and discourse are fostered, a place to go to share ideas, not as a platform for scripted talking points and arguments akin to clichés.