30% of S&P Global 1200 Companies are successfully executing digital rransformations, report
A new cadre of companies—traditional businesses that are successfully executing digital transformations—are outperforming their peers and shaping up to compete with digital natives. These digital incumbents make up about 30% of the S&P Global 1200 Index and outperformed the index by about 50% over the three years ending December 31, 2021. Meanwhile, legacy incumbents—traditional companies that have yet to deliver a successful digital transformation—struggled to drive growth and improve productivity using predominantly traditional levers. They make up about two-thirds of the S&P 1200, underperformed the index, and risk becoming uncompetitive.
These are among the findings of a new article published by Boston Consulting Group (BCG), titled “The Rise of the Digital Incumbent.” The article describes a new hierarchy for business and highlights the different digital dynamics in four types of companies: legacy incumbents, digital incumbents, digital natives (companies founded in the digital era), and “hyperscalers,” the top dozen or so digital natives whose platforms, infrastructure, and data scale with enormous breadth and depth, thus conferring major structural advantages.
“The paradigm is no longer simply, ‘digital natives will destroy incumbents’,” says Romain de Laubier, a BCG managing director and partner and a coauthor of the article. “Digital incumbents in traditional industries are joining digital natives and digital hyperscalers in the congregation of companies that have the capabilities to disrupt existing business models and deliver innovation and revenue growth.”
The article asserts that the successful companies of the future will build the necessary digital capabilities—both human and technological—to become what BCG calls bionic. Along the way, they will deliver superior innovation and performance.
Leveraging global survey data from more than 950 senior leaders from all types of companies who were asked to describe where they are on their digital or bionic journeys, and to self-score their digital capabilities, the authors detail the five attributes that best define any company’s progress toward the bionic target state: Leadership with a purposeful digital strategy, a culture that promotes innovation, an agile operating model, the ability to attract, retain, and develop world-class digital talent and open-architecture technology and data platforms.
According to Katie Hill ,Expert Partner Boston Consulting Group,”Digital incumbents enjoy multiple advantages. They outperform their less digital competitors, delivering more value to shareholders, customers, employees, and partners. Digital capabilities build resilience—the ability to adapt to adversity and changing market conditions. Achieving true bionic capacity—the point where human and technological capabilities combine to perform at a level that neither can achieve independently—requires a strong foundation of digital proficiency. But there’s also a flip side: incumbents that can’t transform will find themselves under expanding attack, and growth will be increasingly elusive.”
The authors note that legacy incumbents are being left behind and need to act with urgency to reapply themselves, implementing the digital reengineering that will give them the digital capabilities they need to compete for growth.
A copy of the report can be downloaded here.
