15.03.2019

How digital are big companies really?

Prof. Dr. Martin Mocker shares interesting findings from his latest research on digital offerings

ESB Prof. Dr. Martin Mocker stellt Forschungsergebnisse über „digitale Angebote“ vor. / ESB Business School Prof. Dr. Martin Mocker shares interesting findings from his latest research on digital offerings.
ESB Prof. Dr. Martin Mocker stellt Forschungsergebnisse über „digitale Angebote“ vor. / ESB Business School Prof. Dr. Martin Mocker shares interesting findings from his latest research on digital offerings.

Together with colleagues Jeanne Ross and Cynthia Beath from the MIT Center for Information Systems Research, ESB Business School Professor Martin Mocker recently studied the state of digital transformation in large, global companies.

“The question was how much companies are using digital technologies to enhance their offerings to customers. We also examined what it takes for companies to provide these digital offerings”, says Mocker, who teaches in the Bachelor programme International Business and the MBA International Management Part-Time programme at ESB Business School and is the spokesperson of the research group Digitisation and Management“.

In 2018, Mocker and his MIT colleagues surveyed digital, business, and technology executives at 150 big companies. While the full report will be available for download in May, Prof. Dr. Mocker today already gives a sneak peek and reveals four major findings:

1) Digital offerings are here
Prof. Dr. Mocker: “While all companies use digital technologies to enhance their processes, 60% of respondents were using digital technologies (most often mobile computing, analytics, cloud computing, artificial intelligence, internet of things and social computing technologies) in their offerings, mostly with the aim of generating new revenue. Now, what is a digital offering? To give you one example: Think of traditional car manufacturing companies. Audi offers digitally-enhanced, sharing economy-based mobility solutions such as Audi on demand, Daimler and BMW are offering SHARE NOW (formerly car2go and DriveNow).” 

2) It's early days.
Prof. Dr. Mocker: “On average, big companies still provide very few digital offerings at this point (the median number of digital offerings was five) and they generate a very small percentage of their company's revenues (median 5%) and profits (median 5.5%).”

3) It takes five.
Prof. Dr. Mocker: “Five building blocks help companies to deliver digital offerings and to generate value from them: First, an operational backbone: "Traditional" IT systems like enterprise resource planning (ERP) and customer relationship management (CRM) systems need be readied for digital offerings. Second, a digital platform: The traditional IT systems support business processes, not offerings to customers. Thus, companies need to build new IT-based platforms. Third, an external developer platform: Most companies realize they cannot do it alone. Apple enables third party developers to develop mobile apps for Apple's App Store. Similarly, large companies need to open their digital platforms to developers if they don't want to provide all aspects of their digital offerings by themselves. Fourth, shared customer insights: To start with, no company knows what customers are willing to pay for when it comes to digital. Therefore, they need to generate insights, for example by co-creating offerings with customers in a highly iterative fashion. Fifth, an accountability framework: Introducing digital offerings changes accountability. Who is responsible for the offerings and their components? Companies need to rethink the distribution of decision-rights for the digital age.”

4) The biggest challenges.
Prof. Dr. Mocker: “Although companies have been working on operational backbones since the 1980s, 44% of respondents still regard them as the biggest obstacle to their digital transformation. On average, the least mature building block is still the external developer platform: Although most CEOs dream of becoming drivers of their own "ecosystem" (like Apple with their iOS ecosystem of apps), it takes quite some maturity in the other four building blocks to get there.”