The Remaking of Industries: HIGH TECH
October 18, 2019
An increasingly diversified customer base demanding intelligent and connected products delivered “as-a-service”. The growing number of cyber-threats, compelling makers of connected products to beef up security. A more complex supply chain. And changing political and economic forces. Taken together, these trends could spell trouble for high tech companies. Yet a small group of companies are not only surviving but distinguishing themselves in this disruptive world. We call them the High Tech Champions.
This report spotlights what sets them apart.
While most industries attempt to survive the vortex of digital transformation, high tech companies occupy the eye of that vortex, albeit with varying providence. On one hand, platform companies are fueling digital transformation with rapid growth in AI-powered automation. On the other hand, semiconductor and component makers are raking in big bucks thanks to the explosion of connected devices—both consumer and industrial. Consequently, traditional products manufacturers with hardware-centric business models are squeezed for market and margin.
On the supply side, high tech manufacturers are hamstrung by an abundance of technological choice, fear of cannibalization of existing products by new product introductions, an acute shortage of skilled engineers and workers, and looming uncertainties of global trade wars.
While high tech companies are facing unprecedented economic, technological and social pressures, they can exploit new value propositions to capture 21st century consumer-driven opportunities.
High tech companies are merely scratching the surface of these new value propositions. And all these efforts to please the consumer are not cheap. It is therefore no surprise to see the high tech companies interviewed for our survey are making the most innovation investments in digital/physical security and design and engineering.
To make good on these new value propositions, high tech companies must reimagine the products and services they offer. They must innovate and create new value across key business functions, and also scale digital proof of concepts (POCs) and ensure higher returns on digital investments (RODI).
Too few companies are accomplishing that. Out of the 122 high tech companies we studied with annual revenues in excess of $1 billion, only one in five of those are successfully scaling more than half their POCs and earning higher than average RODI. We call them the High Tech Champions.
The remaining companies—about 80 percent in our research sample—earn an RODI lower than the industry average (10.3 percent), irrespective of how much they scale. Clearly, scaling more POCs doesn’t necessarily guarantee higher commercial success.
A closer look at the High Tech Champions reveals the importance of how you scale POCs over how many POCs you scale. Second, they view innovation as an essential investment and not a business cost, spending more time and money designing their products and investing in securing the connected ecosystem.
Most important, Champions know how to scale new digital innovation at the right pace so they neither miss the moment, nor overreach themselves. Their ability to develop, market and adopt disruptive technologies enables them to pivot organizations to new value propositions and earn higher RODIs. We distilled three distinct mindsets.
High Tech Champions consider innovation as an investment, looking for appropriate allocation.
High Tech Champions achieve tangible and timely returns on their investments.
Most companies continue to work and collaborate in conventional ways to avoid racking up costs. Champions make unique, differentiated investments in growth levers to enhance productivity and agility.
The critical question today is how can businesses simultaneously prepare for unprecedented social, political, environmental and technological challenges—both imminent and distant?
We’ve learned from our research that only a handful of companies are taking on disruptive forces, making dynamic decisions and successfully remaking industries. We call them the Champions.
The Champions understand that digital technology is creating more discerning customers who want connected products that don’t pollute, save time, and are easy to use. But Champions also know how to create these products.
Our research shows three mindsets work best in concert to help any company that wants to become a Champion. First, view digital innovation as an investment that needs thoughtful allocation, not a cost that ought to be cut. Second, set timely and robust expectations on return on digital investments. Third, invest in five in-house levers to scale digital innovation—skills, platforms, technology, partnerships and leadership.
The payoff from adopting these mindsets can be substantial, and help any company answer this simple question: Will you move beyond the usual guardrails and remake your business to successfully face off the forces before they take you down?
For more detailed insights on how High Tech Champions are remaking their industry, read the full research report.
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