BIZTECH: Let’s answer those questions in turn. First, how extensive is the adoption of digital transformation technologies right now?
In 2010, only 4 percent of non-tech companies in the U.S. were talking about these kinds of transformative technologies. That’s up to 22 percent today. So, roughly a fourth to a fifth of companies are at a point where they’re publicly talking about it, and I’ll bet there are a lot of other companies that are in earlier stages of it where they’re starting to adopt but not yet talking about it. The trend is a sharp upward trajectory of companies that are adopting these technologies. So, it’s here and here to stay. And the question is no longer “Should I?” but “How should I?”
The other question is who are these companies that are adopting digital transformation? They are somewhat younger companies, they typically actually spend less than their peers on capital expenditures, and many actually have had weaker financial performance. They’re going digital sooner, perhaps, as a response to competitive pressure, as a way of mitigating the weaker performance.
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BIZTECH: How are companies benefiting from digital transformation?
The basic finding is that investors love it. The extent of the valuation benefit that comes from talking about and doing digital transformation is greater than most other things companies can do. We’ve found that the valuation of firms is on the order of 7 percent to 21 percent higher than peers for companies that go digital.
So, what that suggests is that investors see digital transformation as a sustainable source of advantage. They think that as you improve your performance, you’re going to sustain it for a long time in the future. And just as a benchmark, it’s very hard to make these kinds of dramatic improvements to your valuation typically. Digital transformation seems to be one place where it works.Another way of thinking about this is that in the immediate term, companies that adopt these technologies do see performance benefits in very specific ways. One is that there’s an improvement in the efficient use of assets. And that’s somewhat intuitive: You would expect that if you have a factory or a plant or a fleet of trucks, any asset you’re using, if you deploy digital technology into that, it’s going to make those assets more efficient. We see an increase of almost 9 percent in the productivity of assets.