A recent study of 1,311 global firms found only 22% are “future-ready,” having gone through digital business transformation and developed the capabilities that enable them to innovate, engage, and satisfy customers while reducing costs. 

While transformation is not easy, these companies have significantly higher financial performance with average revenue growth 17.3 percentage points and net margins of 14.0 percentage points above industry average – a rewarding premium. 

Of the 22%, more than half (12% of total firms), said they were well coordinated and made the most progress: their transformations were on average 59% complete. In contrast, the firms that pursued multiple uncoordinated pathways made the least progress at 30%.

In their years of working with senior executives and board members globally, MIT CISR Research ScientistsStephanie Woerner, Peter Weill, and Ina Sebastian discovered that these leaders knew they needed to transform their businesses, but many started without a good sense of where they were going, or a clear idea of how they will create and capture value from their digital initiatives.

Therefore, the authors listed four pathways to becoming what they call “future ready”:

Pathway 1: “Industrialize (25% of firms)—Firms choose this pathway when their customer experience (CX) is good enough to hold competitors at bay, the threat of digital disruption is not too high, and the most pressing strategic goal is to improve operational efficiency. They estimate 26% of their revenues will be lost if they don’t change.”

Pathway 2: “Delight Customers First (18% of firms)—Firms choose this pathway if their CX is significantly worse than average and they can’t wait to improve it, or there are daunting new competitors. These firms estimate 39% of their revenues will be lost in 5 years if they don’t change.”

Pathway 3: “Alternate the Focus, like Stair Steps (26% of firms)—Firms that need to improve both their CX and operational efficiency at the same time take this path. This need is driven, in part, by a perception that their revenues are under a high level of threat from digital disruption in the next five years. These firms estimate 37% of their revenue will be lost in 5 years if they don’t change.”

Pathway 4: “Create a New Unit (7% of firms)— Senior leaders choose this pathway when it is likely to be an uphill battle to transform the existing firm, they have a compelling opportunity where success depends on the unit being future ready from the get-go, or they must defend against a serious digital threat. These firms estimate 43% of revenues would be lost in 5 years if they don’t change.”

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Source: MIT Sloan