Only Four Percent of China’s Manufacturing Companies Achieve Both Digital and Financial High Performance

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The FINANCIAL — A small minority of Chinese manufacturing companies are significantly outperforming their industry peers by combining strong commitment to digital initiatives with strong financial performance, according to new analysis by Accenture.

The analysis shows that these companies are successfully committing to digital transformation across the full breadth of their business activities.

The Accenture Digital Performance research, published in Rotating to the New: How can Manufacturing Companies in China Thrive in the Digital Age, examines 170 manufacturing companies in China across six industry sectors. The research was done in collaboration with the National Research and Development Center for Industrial Information Security and the China Service Platform for Integration of Information and Industrialization.

It identifies only four percent of the sample manufacturing companies as Digital High Performers, companies that have successfully translated their digital investments into stronger financial performance. Nineteen percent are Digital Leaders, companies that made significant progress in digital capabilities, but are yet to realize the full scale of financial benefits. A majority (58 percent) have achieved neither strong digital nor outstanding financial performance

According to the Accenture Digital Performance Index, the Digital High Performers outperformed the Digital Leaders by 67 percent on revenue growth and 98 percent on profitability. Similarly, they generated more sustained and profitable growth than Business Leaders, those who perform relatively well financially without having made strong digital commitments in the past. The Digital High Performers enjoy higher investor confidence, as indicated by 14 percent higher Future Value when compared to Business Leaders.

Digital High Performers succeed by identifying and releasing value in all parts of their organization 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. This comprehensive approach enables them to turn digital investments into sustained financial performance.

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“Embracing digital strategies in parts of the company, or merely in customer-facing channels does not amount to true digital transformation,” said Wu Qi, Senior Managing Director and Deputy Chairman of Accenture Greater China. “Digital transformations require implementation throughout the organization, 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.”

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

Plan: Develop new digital growth strategies, targeted at identifying and capturing opportunities within and outside of current industry boundaries.

Make: 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.

Sell: Generate customer insights using big data to create hyper-personalized experiences across both digital and physical channels.

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

“Some Chinese companies are not acting fast enough to make significant investment in digitalization to see any changes,” said Wu. “The most successful companies don’t just maintain their core businesses but rather they invest in them, transforming them into platforms for new customer experiences and revenue streams.”

“Technology is really just an enabler. Enterprise transformation is no longer optional if businesses are to thrive in the changing digital environment in China, the largest digital market. Real success comes from the courage to innovate and change your entire business, we call this rotating to the new,” said Yu Yi, Digital Lead for Accenture Greater China.

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