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In Trying to Find New Ways to Collect and Profit from Data, Small Steps Pay off More Than Giant Leaps

Companies that rush to digitize their businesses to gain competitive advantage often fail because such efforts involve sweeping IT programs that take years to implement properly. There is a faster and less risky way, according to BCG. 

BOSTON—Data-driven transformation is becoming a question of life or death in most industries. Data can help build new business models. Data-driven companies reduce waste and drive performance improvements far beyond historical levels. Using fresh, granular data in sales, marketing, supply chain, manufacturing, and R&D can improve EBITDA by 20% to 30% over their peers. But initiatives to embed data in operations throughout a company often fail, because companies try to achieve the transformation in giant leaps instead of small steps.

According to a new publication by The Boston Consulting Group (BCG), Data-Driven Transformation: Accelerate at Scale Now, data-driven transformation initiatives can succeed only if they are cost effective, incremental, and sustainable. The resulting step-by-step approach is faster, less expensive, and more likely to succeed than a system-wide overhaul.

“Six of the ten most valued companies are now built on data: Apple, Alphabet, Microsoft, Amazon, Facebook, Alibaba. Ten years ago, the corresponding number was one. 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, says Lars Faeste, a senior partner and global leader of the Transformation practice at BCG and coauthor of the paper. “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.”

 “Working with clients across industries, we’ve developed an approach that starts with small-scale, rapid digitization efforts that lay the foundation for the broader transformation and generate returns to help fund the transformation’s later phases. In the second and third phases, companies draw on knowledge gained from their early wins to create a roadmap for companywide transformation, industrialize data and analytics, and build new capabilities to execute new data-driven strategies and processes,” says Antoine Gourévitch, coauthor of the article, a senior partner at BCG and leader of the firm’s global work in digital transformation and big data. “By using existing data systematically and combining it with external data, companies can generate results fast. We’ve seen companies achieve 15% to 20% of the potential of a full data-driven transformation in six to nine months.”

The publication highlights two companies that have excelled in achieving a data-driven transformation—and have done so by eschewing major core IT system updates as a first step:

  • A large industrial company that built momentum for transformation through a series of pilots that demonstrated to the rest of the company how data-based operations can succeed and pay off.  
  • A major logistics company, which rebounded from a top-down IT systems overhaul that had failed to deliver any operating improvements. The company methodically spread data-driven approaches across its operations and now leads its industry in EBITDA growth.

A copy of the report can be downloaded here.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

ABOUT THE BOSTON CONSULTING GROUP

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 85 offices in 48 countries.

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