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How can South African businesses win in the digital age?

HigHAcHieving DigitAl

mAnce

Business exPectAtions of DigitAl investment Are HigHer tHAn ever, But few comPAnies Are ABle to trAnslAte tHeir investments into enHAnceD finAnciAl PerformAnce AnD

Accenture’s Digital High Performance research shows that only a few companies globally are able to leverage their investments in digital capabilities to substantially improve their performance. The pressure on businesses to remain ahead of the curve is tremendous. Companies need to adapt and apply digital capabilities to increase gains from their current business to create the investment capacity necessary for building sustainable futures. Most companies are not able to harness digital technologies to create business efficiencies and new growth opportunities and their returns on digital investment are unpredictable.

A similar scenario is played out in South Africa where 78 percent1 of companies understand they need to digitally innovate at a rapid pace to maintain a competitive edge. In fact, the larger companies in South Africa expect to generate 29 percent2 of total revenue from digital technologies, products and services in the next three years, up from 15 percent today.

The question is: how can South African business win in the digital age, given their current position?

The Fourth Industrial Revolution is transforming many aspects of business – even whole industries – and reshaping customer experiences and expectations. This is thanks to ever faster emerging and maturing technologies and has given rise to the digital enterprise, which leverages these technologies to truly revolutionise and disrupt the status quo. The result of these shifts is being felt locally with 73 percent3 of South African companies currently facing moderate to complete disruption.

new Business growtH

2 | Achieving digital high performance

DigitAl HigH Performers

gloBAlly AnD in soutH AfricA

To better understand the interplay between digital and financial performance, Accenture conducted an outside-in analysis of more than 1,200 companies.

The results were then combined and compared with Accenture’s High Performance Business framework to evaluate business performance

against industry peers.

As Figure 1 shows, only six percent of companies analysed globally can be classified as Digital High Performers, truly reaping the benefits of their investments in digital.

The percentage of Digital High Performers drops to a mere three percent closer to home with more than 70 percent of South African companies lagging behind in their level of digitalisation as well as their ability to realise superior financial returns on their digital investments. Globally, this is only marginally better at 60 percent4.


A DeArtH of

To gain greater insight into companies’ digital performance, Accenture created the Digital Performance Index, which tracks 42 business activities and more than 100 detailed metrics across all areas of the business, including Strategy, Research & Development, Manufacturing, Supply Chain, Operations, Marketing, Sales, Customer Service and Internal Culture.

Prioritising digital, awaiting rewards

Got by without digital

digitAl leAderSCompanies made significant progress in digital capabilities, but failed to translate that into financial strength

tHe reStCompanies have survived in the past without building up digital capabilities

Achieved high performance in the digital world

Maintained financial strength with legacy

digitAl HigH performerSCompanies with both strong demonstrated digital acumen and financial performance

buSineSS leAderSCompanies that have achieved strong financial performance without prioritising digital

digitAl leAderS

tHe reSt

digitAl HigH performerS

buSineSS leAderS

finAnciAl performAnce(HPB score)

digitAl performAnce(DPI score)

figure 1: digitAl verSuS finAnciAl performAnce

locAl 2%Global 18%

locAl 3%Global6%

locAl 73%Global 60%

locAl 22%Global 16%

South African Digital High Performers and Digital Leaders enjoy, on average, higher revenue growth of 32 percent compared to other companies.

trAPPeD vAlueto increAse comPetitiveness

unlockingonly two percent of South african companies fall into the Digital leaders category (see Figure 1). While Digital leaders demonstrate leadership in digital capabilities and services, they have yet to realise and unlock the trapped value from these investments. Their inability to do this is often due to the preservation of their existing core business at the expense of truly expanding into digitally contestable markets.

Interestingly, business leaders, which have not yet embraced digital change, as indicated by their low score on the Digital Performance Index, make up 22 percent of the sample.

one rationale for the limited investment in digital by business leaders could be their focus on sustaining their current profitability levels. However, the research revealed that business leaders lag behind Digital High Performers across all other financial indicators, including, more specifically, the company’s “future value”, which measures how investors expect the company to grow. Here, South African Digital High Performers outperform their business leader peers by 21 percent in terms of future value expectations, as reflected in the share prices.


figure 2: digitAl inveStment mAturity AcroSS SectorS

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0.0 electronIc & HIgH tecH

BAnKIng retAIlcommunIcAtIons consumer gooDs & servIces

mInIngInsurAnce energY constructIon HosPItAlItYDIgItAl nAtIves

gloBAl cross InDustrY AverAge 2.1

gloBAl cross InDustrY AverAgesoutH AFrIcAgloBAl


A closer look at the local industries analysed indicates varying levels of maturity in relation to digital investment. At first glance, the financial services industry – incorporating Insurance and Banking – is ahead of other industries (see Figure 2). On closer inspection, however, when the impact of the Digital High Performers is extracted from these two industries, there is an overall drop in score to 1.8 and 2.4 respectively, which is in line with global averages.

South Africa’s telecommunication, mining and hospitality industries are aligned with their global peers. However, there are notable gaps across the electronics and high tech, consumer goods & services, energy, retail and construction industries.

Globally, Digital Natives – companies that originate as disruptive players and are set up as digitally enabled organisations from inception – were also assessed. These companies, such as Amazon, Alphabet (previously Google), apple, Facebook, Salesforce, Uber and Netflix, significantly outperform other companies, demonstrating their ability to clearly translate digital investments into superior business performance, with a score of 3.5 compared to the global cross-industry average of 2.1 and the South African cross-industry average of 2.0.

not All inDustries Are mADe

equAl

Investors favour Digital High Performers for their “digital first” approach to all aspects of their businesses, as well as their ability to take action and follow through – a strategy that positions them optimally for future growth and business performance.

Digital High Performers clearly demonstrate a holistic approach to digital investment with mastery across their entire business and therefore command a significant premium when it comes to their digital performance. When comparing non-Digital High Performers globally to those in South Africa, local companies’ digital maturity is well below that of their global peers and they underperform across all components.


figure 3: tHe digitAl HigH performer’S AdvAntAge

Improve operating efficiency through digital training, digital processes and digitally enabled

employee incentives

Restructure organisation to adapt to digital agenda

Identify corporate cultural fit with digital agenda

Sell through digital channels, offer digital payments and integrate physical/digital

Improve customer data security and transparency in transactions

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emPHAsIse AnD eXecute on DIgItAl groWtH strAtegY

use DIgItAl tecHnologY to unlocK neW revenue streAms

DePloY DIgItAl tools to engAge AnD AntIcIPAte customer neeDs AnD WAnts

Foster culture FIt WItH DIgItAl AgenDA AnD reneW orgAnIsAtIon to ADAPt

Embed digital in growth strategy

Uncover and act on new opportunities enabled by digital Build products and

services using digital technologies

Design new products and services using digital processes and emphasise digital

products/services

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DIgItAl HIgH PerFormer PremIum everYone else

64%126%

55%

36%

101%71%

71%49%

87% 29%

59%31%

tHe necessAry Pursuit of A

“ DigitAl first”minD-setUnderstanding the drivers of successful digital investment is key to unlocking trapped value and ensuring businesses remain competitive. To truly capitalise on digital, companies need to demonstrate a “digital first” mind-set and effectively execute on delivering across all areas of their organisations with a relentless focus on value.


In South Africa specifically, there seems to be an even greater case to act fast on the digital agenda to benefit from the window of opportunity.

PlAn mAKe sell mAnAge

figure 4: tHe digitAl premium

sA: DIgItAl HIgH PerFormer PremIum gloBAl: DIgItAl HIgH PerFormer PremIum

90%

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When comparing the Digital High Performers versus non-Digital High Performers, a significant ‘digital premium’ is evident (Figure 4). It appears that in the local market, there is an even greater premium for companies that successfully move on the digital agenda while the market is still maturing.

This is especially notable in the areas of Plan, Make and Sell, where there is a bigger maturity gap compared to what we see globally, indicating that Digital leaders in South africa can distinguish themselves even more so in the market through leveraging digital.

PlAn: PlAnning AnD executing DigitAl strAtegies

The ability to effectively plan and execute on their digital strategies is a clear differentiator of local Digital High Performers. It demonstrates a clear intent and outcomes-driven approach to realising value from their digital investment. Digital High Performers have a clearly articulated digital strategy versus only 57 percent of Everyone Else locally. Over and above, only 39 percent of South African companies are investing comprehensively in digital technologies as part of their overall business strategy.

In addition, there is a significant gap between Digital High Performers and Everyone Else when actively engaging with the broader innovation and digital ecosystem, including partnering or collaborating with digital start-ups, incubators and accelerators.

While local Digital High Performers are actively engaging with the start-up and investor communities, only 16 percent of Everyone Else are exploring similar partnership opportunities.


one example of successful planning and execution is burberry, which in 2006 made it their goal to become the world’s first company to go fully digital and build a social enterprise. Since then, the company has carried out its plan by changing the primary way it engages with and sells to customers from traditional to digital channels. It does this through campaigns such as Tweetwalk, Art of the Trench and Burberry Bespoke. Burberry has truly blurred the line between the physical and digital world, leveraging technology to create an engaging and seamless customer experience.

General Electric formed GE Digital, its first new business unit in 75 years, aimed at capturing value from the Internet of Things. The CEo of the new business unit is also the CDo of GE Group, demonstrating its commitment to rotating to the New. Setting up a platform business, Predix, has enabled new business models and revenue streams for GE in a digital world.

Closer to home, FNb was the first South african bank to launch a mobile banking app as part of its plan to become a digital bank. The bank has successfully grown core transactional accounts by offering customers a compelling value proposition, supported by exciting rewards programmes and platform innovations such as its banking app, cellphone banking and e-Wallet. This is evidence that not only having a plan, but acting on it swiftly, affords companies a significant advantage.

mAke: Designing AnD mAking DigitAl ProDucts AnD services

While many South African companies are developing and launching digital services, few are fundamentally changing the way they design and make them. Approaches remain traditional, with a limited number of companies embracing immersive, creative and innovative approaches, such as Design Thinking to reimagine services or leverage agile and rapid sprint cycles to deliver new services to market faster.

Digital High Performers, on the other hand, excel in this area with nearly all embracing innovative, customer-led approaches to designing, building and launching new products and services, compared to only 34 percent of local non-Digital High Performers.

While a critical component in delivering digital services, these user-centred design and innovation approaches do not need to be built in-house, but can be sourced by partnering with others to leverage these powerful capabilities at scale and speed.


By way of example, a decision to invest in new, digital capabilities, such as mobile and console games, digital content and multimedia, transformed lEGo from a struggling, traditional toy manufacturer into a successful operation that now attributes 60 percent of its annual sales to new products and services. Today, lEGo’s design capabilities have been increasingly handed over to its fans, for example, through lEGo Ideas, fans can get their lEGo idea produced and share in the profit.

Monsanto has expanded beyond its product portfolio to offer farmers hyper-personalised recommendations through field-level actionable intelligence to improve yields. Detailed analysis of weather patterns based on data collected through sensors and from secondary sources allow Monsanto to provide intelligence to farmers that enables them to lock in profits in the event of drought, heavy rain or other adverse weather conditions.

In South Africa, Discovery introduced Active Rewards, which recommends, measures and adjusts individuals’ fitness goals using analytics. The product integrates with wearable and mobile fitness devices for ease of use and engagement. Active Rewards has been its most successful benefit to date, with more than 160,000 activations. This is about two to three times more than it anticipated.

sell: DigitAl mArketing, sAles AnD customer service

Digital High Performers show a greater mastery of digital marketing, sales and customer service, and delivering superior customer experiences than their less digitised counterparts.

Digital has created new possibilities for interacting and engaging with customers, enabling personalisation at scale. locally, very few are taking advantage of these capabilities with only two out of every 10 South African companies utilising location-based services to customise offers for their customers. Another area of concern is digital customer service, with less than four out 10 South African companies enabling digital service, feedback or complaints.

Almost all Digital High Performers, on the other hand, are leveraging digital technology to create engaging, interactive experiences that are designed to continually pull users back in.


Notably, Coca-Cola amatil in australia and asia-Pacific retrofitted vending machines with touchscreens, video cameras and Microsoft Kinect technology to create a digital, personalised vending experience for customers. The business capitalises on the Internet of Things to connect with consumers’ personal devices and provide them with an interactive multimedia and social media experience via games, contests and Facebook posts that have been known to increase sales and brand loyalty.

adobe, wanting to be more flexible in what it offers in its software, moved the traditional upgrade path to Creative Cloud, a subscription-based model, allowing users to effectively rent the software each month.

South african retail chain, Pick ‘n Pay, is piloting self-service check-outs at one of its stores. These are aimed at increasing efficiencies in the selling process and improving customer satisfaction by reducing queuing time.

In one example, Rio Tinto is empowering frontline employees with intelligent tools at its “mine of the future”. These tools allow employees to make decisions that improve performance based on leveraging their human contextual knowledge and the intelligent analytics of the tools.

Spanish bank, BBVA, is intent on becoming the world’s best knowledge-based bank. In pursuit of this goal, it has set up a big-data technology platform; fully re-engineering its processes; promoted a change-driven culture; and developed a leaner organisation. These changes have led to BBVA increasing its ability to process transactions by more than 170 percent, leading to an eight percent reduction in costs for its corporate centre. In addition, BBVA is focused on attracting the right digital talent, investing €40 million a year in the selection and training of its workforce and building an e-learning platform that has delivered three million hours of courses. Notably, bbVa partnered with FinTech companies, which helped it accelerate the process and demonstrated the advantages of collaborating with partners to achieve optimal results.

on South african shores, anglo american has introduced a new automated drill at its Kumba Kolomela mine in the Northern Cape. Using advanced computers and screens, employees operate the drill remotely. The drill is viewed as a useful tool aimed at improving the lives of employees rather than a threat. In this instance, the new technology enhances rather than eliminates jobs, with the operators and robots working side by side.

mAnAge: BuilDing DigitAl culture AnD oPerAtions

Not surprisingly, Digital High Performers demonstrate a superior ability in building a digital culture. They embrace “digital on the inside”, actively working towards a digital culture and supporting their people through continuous skills development to better equip them to compete in the digital age.

In South Africa, Digital High Performers are making significant investments in developing their talent for the future versus only 30% companies within Everyone Else. In addition, less than a third of companies are leveraging digital tools and services to support and foster innovation and employee development. In comparison, Digital High Performers have invested significantly in new tools and technologies to support productivity and employee effectiveness.

Shifting the culture and becoming “digital on the inside” is one of the most difficult challenges companies face today. It is, however, imperative as business leaders to focus on developing an organisation that is agile and fit for the future amid the constant threat of disruption.


Few Digital High Performers are digital natives, yet they manage to use digital technologies as both enablers and drivers of change in their organisations. They master the ability to renew and transform their core business while growing into new businesses. Digital High Performers distinguish themselves through a clear, disciplined focus on transformation and growth. In short, they master rotating to the New.

Rotating to the New means embarking on a perpetual transformation journey that relies on making wise investment choices, and on reinventing the legacy business while scaling new businesses.

Senior executives in South Africa may have concerns about how to address the digital opportunity and unlock trapped value, but it is becoming increasingly clear that to rotate to the New, organisations need to act with a revised set of rules and they need to do so quickly.


time to

rotAteto tHe new

trAnsforming tHe core Transforming the core to release investment capacity requires that companies drive increased competitiveness with higher levels of efficiency and more agile cost structures. This means simplifying the operating model, rightsizing the organisation and removing non-productive costs to help create a fit-for-purpose operation. Proven technologies, such as robotics, can be applied to streamline for process effectiveness and remove unnecessary costs.

growing from tHe core Reinvesting in the core business can help drive additional growth. By reinventing the customer experience and creating a far better fit with customer needs, companies can create new growth opportunities from within their existing businesses.

growing from new Business Deliberately establishing an innovation architecture can help companies convert ideas into concepts and ultimately into scale. This involves establishing an innovation culture where experimenting is the new norm, enabling the rapid design, development and testing of concepts to scale and pace or, alternatively, allowing them to fail fast without heavy investment in time and resources.

Pivoting wisely Wise pivoting involves balancing investments between the near and longer term, as well as between core and new businesses. This means executives need to smartly and deliberately determine the timing, scale and direction of investments.

reviseD set of rules to Boost DigitAl trAnsformAtion

accenture has identified seven “no regret” capabilities that companies can start to build immediately to accelerate their digital transformation, irrespective of their maturity or the industries they operate in.

Sense and interpret disruption

Immersing oneself in ecosystems both inside and outside traditional industry boundaries to better guide and shape decision making

design a delightful customer experience

Delivering experiences that keep customers and consumers coming back for more. Digital consumers have liquid, that is, fluid and ever-changing, expectations and compare their experiences not within an industry peer set, but across the whole digital universe. Every digital interaction is effectively competing with the best that is currently out there.

organise for speed

Structuring the business from the top down, with a clear mandate for digital change, and the governance to support it. New performance metrics, in addition to traditional financial measures, also have a role to play by shedding light on the success of digital value creation activities.

experiment to develop and launch new ideas faster

Harnessing digital technologies to create and continuously test new ideas, customer propositions and operational enablers, at speed and scale

fully understand and leverage data

Using data as a means to enhance operational capabilities, open new streams of revenue and develop new, relevant products and services

build and maintain a high digital quotient team

Developing a sense of digital savviness. Developing this may mean targeted acquisitions of start-ups’ digital talent, as well as searching within the organisation for up-and-coming stars among the existing workforce.

partner and invest for all non-core activities

Entering into new and sometimes unorthodox or unexpected partnerships. These relationships bring a refreshing mind-set, and free the organisation to focus on its core competencies.

get stArteD witH

seven


“no regret”DigitAl cAPABilities

Through applying these capabilities, South African companies will be able to start rotating to the New in a conscious and deliberate act to renew and transform the core business, while growing into new businesses and perhaps even new industries.

In making this shift, organisations will improve their chances to secure their future, ensuring their ability to compete and achieve superior business outcomes. This will require a higher degree of decisiveness and courage to act, now.

Accenture examines Digital High Performance from two angles: digital performance and financial performance. To help companies better understand the interplay between these two, Accenture leveraged its Digital Performance Index (DPI) framework and High Performance Business (HPB) framework.

About the digital performance index framework

The Digital Performance Index is based on a global Accenture study of over 1,200 companies. The Index uses a framework to assess the level of digital investment and progress across four business functions, each broken down to three key action points along the value chain. Companies are assessed across 42 business activities and 117 detailed behaviour metrics. This enables a comprehensive view of companies’ digital integration across the full breadth of business activities.

Publicly available information on companies is used to obtain an outside-in view that equates to that of a potential future customer or investor. Scores, on a scale of one (basic level) to four (best practice), reflect a company’s relative position against its peer set. Digital High Performance corresponds with a score that falls into the top quartile of a company’s peer set.

A company’s digital performance is then cross-referenced with its financial performance using the accenture High Performance business (HPB) framework.

ABout tHe

reseArcH

figure 5: digitAl performAnce index frAmework

Seedigital as a key

consumer/technology trend for their business

deSigninnovative product

via digital technologies or approaches

(open inovation)

engAgewith customers

via digital means (social media,

personalised offer)

Seedigital/IT infrastructure and capabilities status

(i.e. cybersecurity)

digitAl cuStomer

experience

digitAl production

And delivery

digitAl corporAte

culture And operAtionS

digitAl StrAtegy

plAntheir strategies

around digitilisation and digitisation and dedicated budget

buildproducts and services with the aid of digital

technology

Sellproducts and services through multiple on/

offline channels

improveoperating efficiency and

effectiveness through digital deployment

Actto promote digitilisation internally and externally

(i.e. CDO, digital teams, cooperate with start-ups...)

runstreamlined activities by

using digital solutions like cloud, mobility,

analytics

Servecustomers by

enabling digital secure self-services

renewresources via digital

(crowdsourcing workforce, hire new

talent)

SellmAke mAnAgeplAn

compAny StrAtegy compAny operAtionS


The HPB framework comprises five components – profitability, growth, positioning for the future, longevity and consistency. For each metric, companies’ scores are measured against an industry peer set, along a normal distribution, to gain a comprehensive view of companies’ performance.

About the four digital performance categories

Combining the digital performance and financial performance, four categories of companies were identified:

digital High performers – companies that achieved both strong digital and financial performance

digital leaders – companies that have made significant progress in digital capabilities, but have failed to translate these into financial strength

business leaders – companies that have achieved strong financial performance without prioritising digital

the rest – companies that have survived to date without building up digital capabilities

HigH performing buSineSS?

longevity

gro

wth

consistency

productivity

positioning for the future

peer Set compAriSon

figure 7: HigH performing buSineSSeS


ABout tHe

reseArcH(continueD)

About the High performance business framework

About AccentureAccenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialised skills across more than 40 industries and all business functions – underpinned by the world’s largest delivery network – Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 394,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

About Accenture StrAtegyAccenture Strategy operates at the intersection of business and technology. We bring together our capabilities in business, technology, operations and function strategy to help our clients envision and execute industry-specific strategies that support enterprise-wide transformation. our focus on issues related to digital disruption, competitiveness, global operating models, talent and leadership helps drive both efficiencies and growth. For more information, follow @AccentureStrat or visit www.accenture.com/strategy.

About Accenture reSeArcHAccenture Research uncovers disruptors, shapes trends and creates data-driven insights about the most pressing issues organisations face. Combining the power of innovative research techniques with a deep understanding of our clients’ industries, our global team publishes hundreds of reports, articles and points of views every year. our thought-provoking research is supported by proprietary data that guides our innovations and allows us to transform theories into real, practical solutions.

Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. 16-3298

Join the conversation

@AccentureStrat @Accenture-Strategy

contact the Authors

Joost de Haas [email protected]

Neil asherson [email protected]

Additional contributors

Chantal Moodley [email protected]

Steven Perks [email protected]

references

1. In South Africa, 78% of South African companies realise that they must innovate at a rapid pace to keep a competitive edge (Accenture Technology Vision 2017, South Africa vs. Global results – accenture research)

2. In South Africa, the contrast between expectations and reality is even more pronounced: whereas the larger companies expect to generate 29% of revenues from digital technologies, products and services in the next 3 years, up from 15% today, nearly 80% of companies lack the digital capabilities required to win. (Harnessing the Power of open Innovation through Digital Collaboration - a $12 billion opportunity for South africa – accenture report)

3. In South Africa, 73% of companies believe that their industry currently faces a moderate to complete disruption (Accenture Technology Vision 2017, South africa vs. Global results – accenture research)

4. Achieving Digital Performance – Time to Rotate to the New – Accenture report

higachieving digithal perfor mance - accenture€¦ · digital insurance energy mining construction...

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