BCG Identifies 100 Companies from Emerging Markets That Outperform Owing in Part to Innovation in, and Use of, Digital Technologies
Boston—In its 8th report since 2006 on the leading companies in emerging markets, Global Challengers 2018:Digital Leapfrogs, which is being released today, The Boston Consulting Group (BCG) identifies a new class of 100 “global challengers,” many of which are leaders in digital innovation and adoption as well as in their home markets and globally. The new report shows that digital leadership is increasingly an emerging-markets phenomenon as consumers and companies embrace online technologies and tools.
In one telling statistic, BCG found that almost 60% of the companies on the 2018 global challenger list are either digital natives or significant digital adopters, compared with only 17% that made significant use of digital technologies in 2012. These companies are achieving their leadership positions by leapfrogging their developed-markets counterparts. (The global challengers are chosen according to consistent business performance criteria, which do not include digital adoption.)
Some companies are innovators in digital technologies—bringing their inventions to market, building major businesses on new tech foundations, and taking share from developed-market competitors. Others innovate in their use of technology to develop new products and services in more traditional industries or to upend traditional ways of manufacturing or delivering products and services.
Nontech companies are using digital technologies to improve operations and overcome many of the physical, financial, and commercial hurdles to doing business in emerging markets, including those related to geography, logistics, and infrastructure.
“Going forward, we believe the global challengers are well positioned to use their digital assets and advantages to capitalize on a number of the defining characteristics of emerging markets,” said Michael Meyer, a BCG partner, the firm’s head of Singapore, and a report coauthor. “For example, these markets contain the world’s last remaining pools of high demographic and economic growth, which the global challengers can access with efficiency and value-based productivity. Consumer-focused companies can connect more easily with a fast-growing base of digitally savvy consumers open to using new technologies. Policymakers and regulators in many developing nations are seeking to foster digital innovation with favorable regulatory environments, which facilitate the development of digitally enabled workforces, collaboration in digital ecosystems, and growth.”
Among global challengers, digital adoption is evident in multiple sectors, including:
Global challengers develop their digital capabilities in three main ways: They are active investors in internal innovation programs and research and development. They pursue partnerships and join digital ecosystems or establish their own. And they acquire digital capabilities through M&A and private investments in startup companies and technologies. All are proving to be highly productive avenues to digital development.
“Global challengers continue to produce outstanding value from traditional and digital assets,” said John Wong, a BCG senior partner, the firm’s head of Greater China, and a report coauthor. “They have multinational physical footprints from which to serve global and local client needs. They have built influential brands that attract and retain a growing customer base. Talented workforces deliver high-quality products and services, and proven operating models have built track records of consistent success. Innovation, based on extensive know-how, stays high on global challengers’ agendas.”
Indeed, BCG’s research found that in terms of long-term (2000–2016) total shareholder return, the BCG Global Challengers 100 have substantially outperformed their global peers, the S&P 500, and the MSCI Emerging Markets Index. More recently (2011–2016), the challengers’ TSR performance (as well as that of the MSCI Emerging Markets Index) has been affected by broader economic conditions in emerging markets, but even during this period, their revenue growth has outpaced that of peers in other indices across multiple sectors, and operating margins have remained strong, at an average of 10%.
A copy of the report can be downloaded here.
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