The Chinese economy is slowing after decades of rapid expansion. This has left Chinese companies struggling to sustain growth, and most are discovering that their efforts are inadequate. To restore growth, Chinese companies must “rotate to the new”—using data-driven methods and digital technologies to optimize existing businesses and build new technology-enabled ones.
While China has its share of digital champions, most Chinese companies have not even begun their rotation to the new. Our research finds that only 7 percent of Chinese companies have begun their pivot—driving deep and continuous transformation of the legacy business, while mounting a decisive expansion into new businesses.
Rotation Champions are defined as companies that derive 50 percent of revenue from business activities that they began in the past three years.1 We compared Rotation Masters and their peers using the Accenture China Digital Transformation Index and found that Rotation Masters are far ahead of the pack and excel in two key areas: implementing new digital operations and innovation.
With these new sources of growth, Rotation Champions substantially outperform their industry peers, growing revenue by 14.3 percent (compounded annually) over the past three years—or more than five times the 2.6 percent growth of peers. Moreover, Rotation Champions are racking up larger profits, with average gross margins of 12.7 percent, compared with 5.2 percent for other Chinese companies.
We developed the Accenture China Digital Transformation Index to gauge where companies stand in their rotation to the new. The index score is based on how well companies in an industry have built the two critical rotation capabilities: building intelligent operations and driving digital innovation. Working with the China Service Alliance for the Integration of Information and Industrialization (CASIII), we scored 450 Chinese companies across eight industry sectors.
Key Insight #1:
The Accenture China Digital Transformation Index scores show that in most industries, the average Chinese company is far behind Rotation Champions in digital transformation.
Key Insight #2:
Rotation Champions are ahead in digital transformation because they excel in both key capabilities that we measure in the Accenture China Digital Transformation Index building intelligent systems and innovating.
Based on our research findings, an analysis of the business practices of Rotation Champions, expert insights, and interviews with C-suite executives in China, Accenture identifies five priorities on which companies should focus to build digital capabilities.
Establish top-down ownership: Drive the digital transformation agenda with senior executives who have organization-wide influence. A dedicated digital transformation taskforce will also ensure effective implementation.
Build hyper relevance: Become customer-centric by sensing and addressing their changing needs. Inform the digital transformation with customer insights to become a hyper relevant brand. Leading companies trump competitors through constant service improvements based on sophisticated customer analytics.
Leverage ecosystems: Bring the best innovation to customers by harnessing the power of a carefully managed ecosystem of external partnerships, through means such as commercial collaboration across industry value chains and creating an open-source Research & Development innovation community.
Become “data propelled”: Master leading-edge technologies to build a solid supply chain of data, such as adopting cloud solutions, enhancing data infrastructure and improving data connectivity, as well as improving AI algorithms. These data-driven improvements can enable business innovation at an unprecedented level and scale.
Build an agile organization: Evolving workforces can help transform a static organization into the agile organism. This change can help companies gain a competitive advantage in the digital age. Companies also need to assess employees’ performance and evaluate their competence through data visibility.
Digital technologies are profoundly transforming economies and industries around the world and in China. These changes are challenging to the status quo, but they also create fresh opportunities. By spotlighting the success of Rotation Champions, we hope to inspire other Chinese companies to commit to their own digital transformations. Like the champions, the average Chinese company can use intelligent operations and innovation to find new ways to expand the current business and open all-new sources of growth. Now is the time to start.
About the research
The Accenture China Digital Transformation Index is a cross-industry framework to assess a company’s digital maturity across two business dimensions: operation and innovation.
A scale of 0 to 100 was used to rate company performance on digital rotation. A score of 100 indicates that it is the ideal model of future digital enterprise.