How Digital Masters Outperform Their Peers

You can learn from Digital Masters how to drive digital transformation a better way.

And it’s worth it.  By a lot.

Digital Masters are companies that are leading both in digital capabilities and leadership capabilities to execute their vision and transform their business.

That combo of capabilities is really the key.

In the book, Leading Digital, by George Westerman, Didier Bonnet, and Andrew McAfee share how Digital Masters are more profitable and generate more revenue than their peers.

Digital Masters are 26% More Profitable and Generate 9% More Revenue

Digital Masters build better digital capabilities by rethinking and improving their business processes, their customer experience, and their business models.  And they build better leadership capabilities to envision and drive their business transformation.

This powerful combination of capabilities helps Digital Masters outperform their peers in terms of revenue and profitability.

Westerman, Bonnet, and McAfee write:

“… the companies that are succeeding–and they range across industries and sectors–we’re calling Digital Masters.  And Digital Masters outperform their peers.  Our work indicates that the masters are 26% more profitable than their average industry competitors.  They generate 9% more revenue with their existing physical capacity and drive more efficiency in their existing products and processes.”

Digital Capabilities Help Generate More Revenue

Strong digital capabilities help companies generate more revenue.  Digital capabilities give a company access to a market around the world, anywhere, anytime.  Digital capabilities help companies create digital activities that can improve and extend the reach of physical activities.  

A digital business can manage more volume with less resources.  

Digital capabilities help a company reach new customers or engage with existing customers in new ways.  Digital capabilities like social media can help customers build more buzz in the market, attracting new customers and improving the engagement with existing ones.

Westerman, Bonnet, and McAfee write:

“Companies with stronger digital capabilities are better at driving revenue with their physical assets.  On a basket of measure including revenue per employee and fixed-asset turnover, Fashionistas and Digital Masters outperform average industry performance by 6 and 9 percent respectively.” 

Leadership Capabilities Create More Profitability

Digital Masters are good at driving digital investments and transformation in a common direction through leadership capability, strong vision, and disciplined governance.

Without that, digital investments don’t accrue in a meaningful way that matters.  You end up with silos or stalled efforts that don’t scale.

Westerman, Bonnet, and McAfee write:

“Moving in other dimension, companies that excel in leadership capability are significantly more profitable than their peers.  On average, Conservatives and Digital Masters are, respectively, 9 and 26 percent more profitable than their average industry competitors on a basket of measures including EBIT (earnings before interest and taxes) margin and net profit margin.

For companies that excel at leadership capability, strong vision and disciplined governance help drive digital investments in a common direction.  These firms weed out activities that run counter to the future vision of the transformed firm.  They scale successful investments enterprise-wide.  And they engage their employees in identifying valuable new opportunities.”

If you are trying to drive your digital transformation and things seem stuck or stalled, check whether it’s really a problem with your digital capabilities or leadership capabilities or a combination of both.

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