To gain competitive advantage, companies are rushing to digitalize their businesses—but their efforts often fail. Many organizations start with sweeping IT programs that take years—and don’t deliver. BCG has developed a faster, better, and less risky way.
Six of the top 10 companies ranked by market capitalization are built on data—Apple, Alphabet, Microsoft, Amazon, Facebook, and Alibaba—according to S&P Capital IQ. A mere 10 years ago, there had been only one.
Data can help build new business models. Data-driven companies reduce waste and drive performance improvements far beyond historical levels. Using fresh, highly specific data in sales, marketing, supply chain, manufacturing, and R&D can help a company improve its EBITDA by 20% to 30%.
But initiatives to embed data in operations throughout a company often fail. This is because companies start by trying to reinvent their core IT systems—a multiyear effort that can run to hundreds of millions of dollars. Sadly, most of this money is wasted, because these massive centralized efforts take far too long. When the rules of business are being rewritten on a quarterly basis, companies need an approach to transformation that is agile, focused on results, and manageable.
There is a better way. Drawing on our experiences from working with clients, BCG has developed an approach that is cost effective, incremental, and sustainable; we highlight it in greater detail in BCG's Data-Driven Transformation: Accelerate at Scale Now.
This three-step approach is faster, less costly, and more likely to succeed than a systemwide overhaul. Companies can achieve fast results by using existing data systematically and combining it with external data—from social networks, for example—for marketing or for resolving customers' issues. BCG has seen companies achieve 15% to 20% of the potential of a full data-driven transformation in six to nine months.
The approach starts with small-scale, rapid efforts in digitalization that lay the foundation for a broader transformation and generate returns to help fund later phases of the effort. In the second and third phases, companies draw on knowledge from their early wins to create a roadmap for companywide transformation, industrialize data and analytics, and build systems and capabilities to execute new data-driven strategies and processes.
The companies that succeed in achieving data-driven transformation will be agile, pragmatic, and disciplined. They will move fast and capture quick wins, but they will also carefully plan a transformation roadmap to optimize performance in the functions and operations that create the most value, while building the technical capabilities and resources to sustain the transformation.