UK companies are missing out on revenue and profit opportunities by being slow to adopt digital transformation initiatives. That is the conclusive finding from a global study, Exploting the Software Advantage: Lessons from Digital Disrupters, sponsored by CA Technologies and conducted by Freeform Dynamics.
The study reveals that 56% of UK organisations are executing some digital transformation initiatives as a coordinated strategic program, with most popular ongoing projects in workforce efficiency (cited by 48% of respondents), product and service development (43%) and operations and delivery (43%). However, 18% of UK organisations still undertake digital initiatives via separate, not always coordinated routes, and 16% use digital more to enhance rather than transform their business.
Despite some appetite for digital transformation, UK companies are not embracing the innovations needed to deliver that transformation fast enough. When asked about technologies critical to customer engagement and market development, only 33% believed that web-based applications and services are essential, 27% saw mobile technology as critical and just 14% thought the same of wearable technology. Additionally, 9% of UK companies do not believe the Internet of Things will be applicable to their customer engagement.
“To stay ahead in the application economy, companies need to disrupt across their traditional organisation structures, processes and systems. Mainstream businesses simply cannot continue with the status quo—they must undergo significant change to fully integrate digital and new technologies into all aspects of their business if they want to deliver a superior customer experience and close the gap on competitors,” says Ritu Mahandru, VP Solution Sales at CA Technologies.
The research shows that companies that achieve high levels of digital transformation are reaping the benefits. As a result of digital initiatives, 86% of UK respondents have seen or anticipate seeing growth in revenue, 85% have seen or are expecting to see increased customer retention, while 69% are now able to act more quickly on business opportunities.
The results of the study also allowed for the development of the Digital Effectiveness Index (DEI), a measurement tool developed from responses relating to market competitiveness and business scorecard metrics. These were translated into numeric scores and combined to form the DEI, and survey participants were then segmented according to their index scores.
Using this measure, an elite group of ‘Digital Disrupters’ has emerged: companies achieving high returns from digital investments and driving market and organisational disruption. In the UK, they represent the top 14% of respondents, more than in Germany (13% of respondents), France (8%) and Italy (4%), but significantly fewer than in the U.S. (26%) and India (25%). Revenue growth among these Digital Disrupters, the study shows, is twice as high as among mainstream organisations (those who are only making an average investment in digital transformation) and profit growth is 2.5 times higher.
The study also highlights the central role that software plays in digital transformation. 53% of Digital Disrupters globally strongly agree that in addition to their core business they are now also a software company – compared to 20% of all UK respondents. And 60% of Digital Disrupters globally strongly agree that they still need to become more of an app-centric, software driven business, compared to only 30% of all UK companies.
“The effective use of software is closely linked with digital transformation – it becomes a key enabler of efficiency, competitiveness and ultimate success” says Ritu Mahandru. “This study provides conclusive proof that companies that integrate software at the core of their business are forging ahead with digital transformation and can compete more effectively in the application economy.”
Digital Disrupters worldwide currently allocate 36% of their IT budget to digital investments, growing to 48% within three years. By contrast, the UK companies surveyed now devote a relatively low 20% of their IT budget to digital, increasing to 32% in the next three years.