by Emily Newton, Editor in Chief of Revolutionized Magazine
Industrial companies of all types and sizes are at various stages of digital transformation. Most leaders realize they must progress toward using more technologies, but how will the impact of digital transformation affect participating companies?
Advanced Digital Transformations Spur Revenue Growth
It takes time, money and other resources to get on the right track with a digital transformation, and significant trial and error often occur before companies find out what works. However,
research shows successful digital changes will likely lead to revenue growth. A 2021 Valoir survey of 1,400 companies required participants to rank their digital transformation progress on a 10-point scale, choosing a higher number if they were further along with the desired amount of digital technology usage. The results showed businesses scoring eight or higher had approximately twice the revenue growth than those ranked as three or less.
The study also investigated which types of companies or departments were making the best progress with their digital transformations. Those outcomes indicated the high-tech, financial services and health care fields were the most advanced. In contrast, the public sector and utilities and consumer goods industries were doing the worst with furthering their digital transformations.
Another takeaway was that it was highly unlikely companies would use digital human resources tools. Less than 20% of organizations in the study did, highlighting a possible area for improvement.
It’s not always easy to get company leaders to approve digital transformation strategies, and that’s understandable. Various factors influence them at any given time. However, many will be eager to participate when they realize increased revenue is a likely impact of digital transformation.
Getting to a more advanced level with a digital transformation requires companies to meet milestones and determine the justification for choosing certain strategies. For example, pursuing digitalization in the packaging industry often increases affordability because it enables easier error correction.
Digital Transformations Can Reduce Emissions
Emissions-reduction efforts have become a hot topic, particularly as world leaders discuss the need to set and reach specific climate targets. Succeeding with a digital transformation is not
the only way to meet those goals, but studies suggest it’s a significant component.
One study from Accenture and the World Economic Forum targeted the impact of digital transformation in industries with hard-to-reduce emissions. The results showed deploying digital technologies would cause a nearly 20% reduction by 2050. Further, the study indicated that the mobility, materials and energy sectors contribute the most greenhouse gases, and thus could benefit the most from digital transformations.
The research suggested deploying digital technologies in four clusters as follows:
● Big data and measurement/reporting technologies as foundational components
● Cloud computing, 5G, the blockchain, and virtual and augmented reality as enabling technologies
● Digital twins, artificial intelligence and machine learning as technologies to aid decision- making
● Automation and robotics, drones and imaging, and the Internet of Things (IoT) for improved sensing and control
Scenarios in the study also describe how specific industries could achieve the highest impact of digital transformation. For example, a company in the materials industry could use cloud and edge computing, big data, and the blockchain to improve the sustainability of mining and upstream production and enhance the circular economy. Together, those technologies could cause a 7% emissions reduction by 2050.
The circular economy is an important part of sustainability improvements. Fortunately, many representatives from the manufacturing industry and elsewhere are exploring various ways to emphasize its aims. Sometimes, that means making products more durable by design. It also may entail using more recycled materials in products or giving customers options to easily recycle items that have reached the end of their useful life spans.
Board Members View Growth as an Impact of Digital Transformation
Most company leaders are eager to help their enterprises grow. There’s no single way to do that, but board members often see digital transformation and growth as linked. Research published in 2022 by Gartner found 89% of board members said digitalization is part of their business growth strategies.
Relatedly, 40% of the board members chose artificial intelligence and machine learning technologies as imperative to their future digital business success. Software enhancement was next on the list at 30%. Another finding was that 64% of board members expect an increased risk appetite through 2024. That should be advantageous since digital transformations don’t
always immediately go smoothly, and doing things differently often comes with risks. However, only 35% of respondents reported being on track with their transformation strategies. That’s not uncommon. A 2021 Everest Group survey indicated 68% had not seen the impact of digital transformation they envisioned. Moreover, 58% mentioned resistance to change as a significant obstacle contributing to disappointing outcomes.
Those statistics are a strong reminder that a substantial part of helping a digital transformation go smoothly involves preparing people to do things differently. Even the most excited individuals
usually show some change resistance. Recognizing that reality and planning specific ways to conquer it can support better outcomes for everyone.
The 2022 Digital Maturity Global Study from BCG also indicated 93% had challenges while choosing the most appropriate disruptive technologies for their transformations. Tackling that obstacle requires adequate advanced research and carefully weighing all the options before deciding.
Be Patient and Work Hard to See the Impact of Digital Transformation
These outcomes show it’s usually worthwhile to invest in digital transformations. A company taking that approach can boost revenue, reduce carbon emissions and more. However, business leaders also need a balanced viewpoint of its impact. Achieving the desired effects can take a while, so the overall time frames may be longer than expected — even when decision-makers are doing most things right and still accomplishing noticeable progress.
People should increase their chances of getting great results by creating a detailed digital transformation plan that accounts for some of the obstacles the company might encounter.
Tying certain milestones to the allocated technology budget is also a good idea. That helps people see if their money was well spent on the initiative so far or if tweaking the approach is necessary.
Get in touch with the author:
emily@revolutionized.com
