Sorry for the delay in this week’s post – been busy working. Time for something a little different; I’ve attempted to reverse engineer the research by MIT and my former employer Capgemini on digital leadership. Essentially they found that digital leaders enjoy greater revenue efficiency and profitability.
So here’s a scatter chart of FTSE companies ranked by revenue efficiency and profitability (click for a full size graphic) to see if I can find potential digital leaders – top right is good, bottom left isn’t:
The observant will have noticed that Apple and Facebook have found their way on to a scatter chart that is allegedly full of FTSE companies. I did this to see how potential international digital leaders compare. I’ve also filtered out some of the big investment companies and industrials to give an easier to view breakdown of the selected companies.
The model to find digital leaders
MIT and Capgemini’s research ranked companies based on their ability to transform (change management) and the digital intensity of those businesses. From this research they then identified four segments; the Digirati, Fashionistas, Conservatives and Beginners.
Each segment’s revenue efficiency and profitability was then compared to the overall averages to provide some benefits to being good at both digital and transformation.
Reversing this equation it should be possible to identify companies that fall into these digital transformation segments based on their comparative revenue efficiency and profitability. Thus creating this new model:
This new model can then essentially be used as a stock screener to discover whether companies are Digirati, Fashionistas, Conservatives or Beginners.
Summary and recommended actions:
The top right quadrant or the Digirati shows those who could possibly be digital leaders. They have great revenue efficiency (measured based on Revenue Per Employee and Return on Assets) and profitability (based on net profit margin). I was pleased to see Apple and Facebook fall into this group as well as digital darling Burberry.
Companies in this quadrant are either reaping the rewards of digital transformation or are simply very good at their traditional non-digital business.
Those in the bottom right quadrant or Conservatives represent profitable businesses who aren’t particularly efficient at generating revenue. I’d suggest these businesses look for opportunities to utilise digital to improve employee efficiency and improve asset usage.
Top left or Fashionista companies are good at revenue generation but are not efficient at turning that revenue into profit. For this group of companies the business case is whether digitisation can help strip out cost from the business (e.g. channel shift to lower cost, self serve digital channels) to achieve greater profitability.
For the original MIT/Capgemini research you can look at this research:
Alternatively I recommend Leading Digital which follows on from the original research.
The UK’s (potential) Digital Leaders:
- Reckitt Benckiser
- British American Tobacco
- Provident Financial
- InterContinental Hotel Group
- PZ Cussons
- Tate & Lyle
Anyway I think this needs some further research into whether each of these companies are truly good at digital and change management (the two measures that MIT originally used). If you work for or with these companies I’d like to hear from you. Alternatively if you have a view on whether this is interesting or a complete load of rubbish wade in on the comments…
The data for this research was taken from Stockopedia. I highly recommend them if you do a lot of stock market research. Employee numbers were pulled from the FT. The data is as accurate as I could source it and if you’re unhappy with your company’s placing on the chart there’s not a lot I can do about it … unless of course you want to employ me to help define and drive forward digital transformation in your business.
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