Rotating to the new: Achieve both digital and financial high performance

PUBLISHED : Friday, 15 September, 2017, 10:12am
UPDATED : Friday, 15 September, 2017, 9:50pm

As the growth engine in China sputters, many industry sectors are struggling to maintain the momentum while finding new growth drivers. This is especially true for the manufacturing sector, which is suffering from weak demand and overcapacity. Revenue growth has slowed, profitability has stagnated and in some cases declined.

But digitally enabled business models could be a game-changer. Grasping the opportunity and taking full advantage of digital levers, however, is easier said than done.

According to Accenture research, only 4 per cent of Chinese manufacturing companies are significantly outperforming their industry peers by translating their digital investments into stronger financial performance and becoming digital high performers. A majority (58 per cent) have achieved neither improved financial performance nor higher digital performance.

The ideal is to be a digital high performer and generate more sustained and profitable growth. These companies also enjoy higher investor confidence, as indicated by their higher future values.

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But this requires a commitment to digital transformation across the full breadth of their business activities. Embracing digital strategies in parts of the company, or merely in customer-facing channels, does not amount to true digital transformation.

Digital transformations require implementation throughout the organisation, from planning to manufacturing and then selling a product. Companies must look beyond only improving efficiencies, or adding ad hoc digital solutions and instead focus on generating a holistic approach to digital that drives sustained growth in new digitally contested markets.

Real success comes from the courage to innovate and change the entire business

To achieve both high digital and financial performance, manufacturing companies need to embrace the following principles:

· Enhance digital strategy: Develop new digital growth strategies, targeted at identifying and capturing opportunities within and outside current industry boundaries;

· Be open to ecosystem work: Apply digital technologies (including mobile, cloud, analytics, robotics, cyber security, IoT), which are key to enabling innovation, from design to production of new products and services;

· Escalate customer experience: Generate customer insights using big data to create hyper-personalised experiences across both digital and physical channels;

· Make continuous improvement: Remember digital transformation is a new driver of change touching not only processes, but also culture and talent, all of which will enable established organisations to become more agile and competitive.

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By doing so companies can identify and release value in all parts of their organisation and across their ecosystem. Most notably, they apply digital technologies and strategies to both their core business and to new technology-enabled business models. The companies use growth in the core to generate the investment to scale new market opportunities.

Take Midea, a leading appliance manufacturer in China. Its kitchen appliances arm was able to improve productivity and shorten its delivery period by 50 per cent through significant digital investments – about 100 million yuan (US$15.3 million) – in both hardware and software. The open-minded company shares the data along its value chain to encourage end-to-end productivity efficiency drives.

The most successful companies do not just maintain their core businesses but rather they invest in them, transforming them into platforms for new customer experiences and revenue streams.

Enterprise transformation is no longer optional if businesses are to thrive in the changing digital environment in China. Real success comes from the courage to innovate and change the entire business. We call this “Rotating to the New”.

Leo Ng is managing director of Accenture’s Hong Kong office