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Research   Roman Friedrich           Matthew Le Merle           Florian Gröne           Alex KosterMeasuring IndustryDigit...
Use your smartphone to scan the QR code on the cover of this Perspective, and you will be taken to the CMT Foresighthome p...
EXECUTIVE        The pace of digitization is picking up rapidly, as consumers,                 companies, and entire indus...
THE WORLD       Broadband connectivity, wireless                mobility, cloud computing,                                ...
DIGITAL                                   industry use to orchestrate their        differentiated data becomes available  ...
LEADERS AND                                              highest-spending industry in terms                               ...
chip and component makers like            which employees at Google and           by the way they do business; the often  ...
BUILDING                                                    Not only is there a distinctly wide                           ...
• Financial services and insur-            advantage of consumer interest        • Meanwhile, real estate, business  ance,...
INVESTMENT                                          Europe have put in place the key build-                               ...
of variance between the leaders and the                At the sector level, the differences                               ...
THE          The process of digitization is differ-             entiated not just along sector lines,                     ...
Exhibit 5Geographic Distribution of Industry Digitization in Europe     DIGITIZATION IN DIFFERENT REGIONS                 ...
BUILD          The real value of the digitization               index is the insight it provides into the                 ...
Resources                                                                                       About the Authors“The Next...
The most recent             Worldwide Officeslist of our officesand affiliates, with        Asia                          ...
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Booz co measuring-industry-digitization-leaders-laggards-digital-economy

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Publish Date:
December 13, 2011

Author(s):
Friedrich, Roman; Gröne, Florian; Koster, Alex; Le Merle, Matthew

Abstract:
The pace of digitization is picking up rapidly but the speed at which digitization is taking place varies a great deal from industry to industry. To gain a better understanding of the relative degree to which digitization is transforming different industries, we have created the Industry Digitization Index. Whether they are currently digitization leaders or laggards, all industries can benefit by investing in the input, processing, and output capabilities needed to extend their digital footprints throughout their business ecosystems.

Related Industries:
Aerospace & Defense, Automotive, Chemicals, Consumer Products, Energy & Utilities, Financial Services, Health, Industrials, Media & Entertainment, Oil & Gas, Private Equity, Public Sector, Retail, Technology, Telecommunications, Transportation

Related Expertise Areas:
Enterprise Strategy, Information Technology, Innovation

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Transcript of "Booz co measuring-industry-digitization-leaders-laggards-digital-economy"

  1. 1. Research Roman Friedrich Matthew Le Merle Florian Gröne Alex KosterMeasuring IndustryDigitizationLeaders and Laggardsin the Digital Economy
  2. 2. Use your smartphone to scan the QR code on the cover of this Perspective, and you will be taken to the CMT Foresighthome page on Booz.com.Contact InformationBeirut London/Düsseldorf ShanghaiBahjat El-Darwiche Dr. Michael Peterson Andrew CaineyPartner Partner Partner+961-1-985-655 +44-20-7393-3310 +86-21-2327-9800bahjat.eldarwiche@booz.com michael.peterson@booz.com andrew.cainey@booz.comBerlin New York SydneyDr. Florian Gröne Philip Minasian Vanessa WallacePrincipal Principal Partner+49-30-88705-844 +1-212-551-6098 +61-2-9321-1906florian.groene@booz.com philip.minasian@booz.com vanessa.wallace@booz.comDelhi Paris ZurichAshish Sharma Pierre Péladeau Alex KosterPrincipal Partner Principal+91-124-4998705 +33-1-44-34-3074 +41-43-268-2133ashish.sharma2@booz.com pierre.peladeau@booz.com alex.koster@booz.comDubai San FranciscoKarim Sabbagh Matthew Le MerleSenior Partner Partner+971-4-390-0260 +1-415-994-4320karim.sabbagh@booz.com matthew.lemerle@booz.comDüsseldorf/Stockholm São PauloDr. Roman Friedrich Ivan de SouzaPartner Senior Partner+49-211-3890-165 +55-11-5501-6368roman.friedrich@booz.com ivan.desouza@booz.comBirger Maekelburger and Florian Stürmer also contributed to this Research. Booz & Company
  3. 3. EXECUTIVE The pace of digitization is picking up rapidly, as consumers, companies, and entire industries become increasingly con-SUMMARY nected at home, in the office, and on the go. It is already obvi- ous, however, that the speed at which digitization is taking place varies a great deal from industry to industry. And these differences can already be felt in how quickly certain indus- tries are capturing value as digitization grows in importance. To gain a better understanding of the relative degree to which digitization is transforming different industries, we have cre- ated the Industry Digitization Index, consisting of the four factors involved in the digitization effort: input, processing, output, and underlying infrastructure. At the top of the list is the financial services and insurance sector, which should come as no surprise, given its purely informational products and services, and its long-standing effort to automate both back- office and customer-facing transactions. At the bottom are such industries as hospitality and real estate, both of which have made great strides in digitizing their contacts with cus- tomers but still struggle to automate supplier and construction management in a highly fragmented environment. The race to capture value in the age of digitization is not yet over, however. All industries can benefit by investing in the input, processing, and output capabilities needed to extend their digital footprints throughout their business ecosystems.Booz & Company 1
  4. 4. THE WORLD Broadband connectivity, wireless mobility, cloud computing, Governments, too, can gather and disseminate information quickly—forIS DIGITIZING e-commerce, social media, sensors— purposes both good and bad—making they’re all coming together to their operations, in the best cases, transform the world as we know it: more transparent and their dealings how we work, play, consume, interact, with their populations more efficient. stay in touch. We call this process “digitization”: the pervasive adoption The process of digitization is taking of a wide variety of digital, real- place on a global scale, and the time, and networked technologies, benefits for companies on the leading products, and services that will enable edge of the trend—greater customer people, companies, governments, insight and reach, higher productivity, and even machines to stay connected and the creation of new business and communicate with one another, models—are already being realized. gathering, analyzing, and exchanging However, those benefits are not yet massive amounts of information on all evenly distributed among different kinds of activities—and the economic nations, markets, or industries. In and societal impacts those activities previous studies we have investigated will have. the causes behind this transformation and the benefits to be reaped (see People at home, in the office, and on “Resources,” page 13). In this the go can now find a vast wealth of study, we analyze which industries information on just about everything, are leading the pack in digitizing and exchange, rate, and review that themselves, along with the supply, information for all to see. In turn, demand, and industry-level aspects of companies are collecting detailed digitization that are driving industry information on consumers and leadership and differentiation. To their behavior—not just their Web- that end, we have created what we browsing preferences but also their call the Industry Digitization Index, location—and even their friends a core component of a body of and their behavior, and using that global research we are conducting information to target marketing to understand the digitization trend efforts more effectively and to and its effect on national economies, design better products and services. industry sectors, and society at large. The benefits for companies on the leading edge of the digitization trend are already being realized.2 Booz & Company
  5. 5. DIGITAL industry use to orchestrate their differentiated data becomes available internal value chain as well as for other geographies. Despite thisCAPABILITIES interactions within their industry limitation, we believe that the index ecosystems, including strategic provides a comprehensive picture partners, financial institutions, of the current state of digitization or government bodies. The third and why some industries are already consists of the industry outputs for gaining traction while others are not.The primary goal of the index is which digitization enables morestraightforward: to understand better efficient delivery of products and The information provided bywhich industries in which markets services, including distribution, Eurostat includes data on theare adopting, and benefiting from, electronic commerce, and the relative sophistication of the digitaldigitization first, and which are like. And the fourth concerns the infrastructures to be found inlagging. A further goal is to gain foundational infrastructure that companies across the 27 nationalinsight into the specific technological underpins it all, since without markets of the E.U., as well asfactors that are enabling certain the underlying connectivity and data on digital inputs, internalmarkets and industries to move computing capabilities, digitization processes, and outputs. Compilingforward more quickly. To do this, would be impossible. and weighing these four dimensionswe wanted to get a complete picture allowed us to create the overallof how these markets and industries The most complete and reliable index of digitization, by market anduse technology. This picture source of such data we have found industry, and to understand betterincludes four separate but tightly comes from Eurostat, the E.U.’s where certain markets and industriesinterconnected dimensions: The first central statistics agency. To our are leading or lagging. Thus, theis the way in which transactions knowledge, no other country or financial services and insuranceinto an industry are enabled by region currently has a comparable sector has an index of 53, whichdigitization (through electronic public source of such data; therefore, means that, on a scale of 1 to 100,procurement or inbound supply chain we have restricted the scope of the sector scored an average of 53logistics, for example). The second the index to the European Union. for the four factors contributing toinvolves the digital platforms and Ultimately, we plan to extend digitization (see “Methodology,”tools that companies in a particular the index further as sufficiently page 13).Booz & Company 3
  6. 6. LEADERS AND highest-spending industry in terms of information and communica- sector’s lead in digitization comes as no surprise: Our previous analysisLAGGARDS tions technology (ICT) investments, of the digitization trend found that first digitizing key transaction information-intensive industries processes like electronic transfer will naturally spend more to main- of funds, securities trading and tain their competitive advantage, clearing, and interbank settlement. and thus will be affected first. More recently, it has worked toAt the highest level, the top further digitize the front office, • Computers and electronics: Thethree sectors in terms of industry moving from traditional retail and various elements of this sector havedigitization are financial services and call center activities to fully online evolved complex ecosystems whoseinsurance, computers and electronics, processes by which virtually every supply chains have been dividedand media and telecommunications aspect of retail and home banking among multiple specialized players.(see Exhibit 1). is digitized, and developing smart The electronics sector, for example, ATMs and online banking solutions consists of a tiered production• Financial services and insurance: to boost convenience and service system that includes product design This sector has long been the delivery efficiency. The financial and integration players like Apple,Exhibit 1The Industry Digitization Index INDUSTRY DIGITIZATION INDEX (2011) 0 5 10 15 20 25 30 35 40 45 50 55 Financial Services & Insurance Computers & Electronics Media & Telecommunications Automotive Equipment & Machinery Trade & Retail Chemicals Basic Manufacturing Utilities Business & Administrative Services Transportation & Logistics Consumer Goods Real Estate, Rental & Leasing Construction Hotels & Restaurants 43.3 Leading Midfield Lagging Index averageSource: Eurostat; Booz & Company analysis4 Booz & Company
  7. 7. chip and component makers like which employees at Google and by the way they do business; the often Samsung and Intel, and assembly elsewhere work and collaborate. lower affinity for digital technology firms such as Flextronics. In the among their labor pools; and their search for ever greater efficiency These were the industries that fragmented nature. Taken together, and specialization, digital process- piloted and perfected technologies these characteristics ultimately reduce ing is essential to orchestrate and like electronic data interchange, and these industries’ appeal to digital control these complex value chains, where, more recently, machine-to- suppliers—but by the same token from electronic procurement to machine (M2M) communications, suggest that digitization offers the paperless supply chains and trans- smart tags, and mobility are potential for these sectors to make port logistics to digital factories. providing the next level of efficiency, great strides in pushing efficiency and transparency, and flexibility. Global customer convenience.• Media and telecommunications: companies such as Dell have long This sector, which includes IT ser- focused on digitizing their end-to-end Hospitality, for example, is a huge vices firms, telecom operators, and supply chains, tying customer demand industry that has already seen Internet companies, both supplies in real time with custom business great strides in digitization, though and uses the means of digitization. streams through digital tools. Now, primarily on the reservations front. As such, its leadership position is Apple, the world’s largest consumer Social media has the potential to not surprising—companies in the electronics company, is leading the further this process significantly; sector are the closest to the source pack at combining bricks and mortar indeed, a variety of digital service of digitization in terms of the with real-time, cloud-based sales offerings will increasingly become creation and use of infrastructure and service. a differentiator along with service, and enabling technologies, digital location, and price. Construction, service integration capabilities, and Down at the bottom of the list, too, will likely see strides in how the like. Here, examples include on the other hand, are the labor- workforces are managed, through Cisco Systems, a leader in the intensive, old-economy sectors like the automation of hitherto manual digitization of its internal opera- hotels and restaurants (hospitality), processes. And though real estate is tions, and Google, which not only construction, and real estate, rental, already largely online on the sales has succeeded in playing a visible and leasing. The position of each of front, the identification, development, role in the everyday digital life of these can be explained by the relative and management of the construction billions of consumers, but also is simplicity of their value chains; the of specific projects remains a highly pushing Web-based apps and cloud high degree of hands-on, on-site, fragmented, analog process. technologies to digitize the way in “personal touch” interaction required Digitization offers the potential for old-economy sectors to make great strides in pushing efficiency and customer convenience.Booz & Company 5
  8. 8. BUILDING Not only is there a distinctly wide gap between the digital haves and zation are moving ahead quickly, while progress among many of theMOMENTUM have-nots, but that gap appears to laggards remains relatively slow (see be growing. The leaders in digiti- Exhibit 2).Exhibit 2Industry Digitization Index Change, 2010–11 INDUSTRY DIGITIZATION INDEX CHANGE (2010–11) 0 1 2 3 4 5 6 Financial Services & Insurance Dynamically innovating Automotive Equipment & Machinery Basic Manufacturing Construction Chemicals Transportation & Logistics Consumer Goods Media & Telecommunications Utilities Business & Administrative Services Trade & Retail Real Estate, Rental & Leasing Computers & Electronics Lacking Hotels & Restaurants momentum Leading Midfield LaggingNote: Chemicals and basic manufacturing figures for 2010 are based on expert estimates. LeadingSource: Eurostat; Booz & Company analysis Midfield Lagging6 Booz & Company
  9. 9. • Financial services and insur- advantage of consumer interest • Meanwhile, real estate, business ance, the leader in digitization, is in social media and other digital and administrative services, and also the most dynamic sector; its technologies. hospitality are making little head- digitization index grew by more way in their efforts to digitize— than five index points between • Industries in the middle of the despite their direct connection 2009 and 2011. Industry play- pack, such as utilities, consumer to the consumer. Fragmented ers continue to invest heavily in goods, and transportation and demand and an inherent lack of new digital capabilities—most logistics, are also gaining momen- digital skills have kept suppliers recently, big data analytics, mobile tum, a clear sign that technolo- from aggressively pursuing these payments, social media, and gies such as smart tags, M2M sectors. Unless conditions change, lean “bank-in-a-box” concepts. communications, and remote these industries will continue American Express, for example, metering have reached sufficient to lag. has developed a company-wide levels of technical maturity and digital strategy designed to lever- cost-efficiency. Moreover, new These results suggest that as age its digital assets and capabili- regulatory regimes have pushed digitization progresses, a profound ties to drive future growth. To that some of these sectors into adopting shift of importance, and ultimately end, the company plans to capture new technologies more quickly; value, will occur among these and analyze large amounts of data the utilities sector, for example, industries. Consumers themselves from both customers and mer- has seen the further liberalization will likely continue to find more chants to improve segmentation, of energy markets and a push for value in fully digitized industries— aid merchants in their marketing smart meters, while transportation consider the shift in status from cars efforts, and ultimately generate continues to make investments to smartphones, especially among more precisely targeted offers to in digitally enabled new infra- young consumers. And increasingly, cardholders and participating structure and has achieved overall those industries that are digitizing merchants. As part of this effort, efficiency gains as a result of fastest will start seeing the highest the company is also expanding its open-skies agreements and other growth rates. partnerships with other compa- regulations. nies such as Facebook to take Increasingly, those industries that are digitizing fastest will start seeing the highest growth rates.Booz & Company 7
  10. 10. INVESTMENT Europe have put in place the key build- ing blocks of broadband, wireless, and The results are less encouraging at the processing dimension, indicating thePRIORITIES computing infrastructure; according to existence of a substantial gap between the index, industries vary by no more the base infrastructure needed for than 10 points in their degree of infra- standard office communication and structure digitization. This is clearly a daily office work and actually putting reflection of the maturity of a great deal that infrastructure to work in the form of the underlying technology, the imme- of differentiated digital processingOur analysis of different industries also diate benefits to be reaped in promot- capabilities for driving business processallowed us to “look under the hood” to ing the enabling role of infrastructure, efficiency and effectiveness. The processexamine in greater detail where compa- and, thanks in part to Moore’s Law, the dimension is a good predictor of thenies in particular industries are pushing relatively low costs involved. degree of digitization in a particularthe digitization envelope in each of the industry, since this dimension capturesfour elements of digitization—input, At the input level, companies in many the essence of the respective industry’sprocessing, output, and infrastructure— industries are beginning to put together core value chain, while the other threeand where they still have work to do. paperless supply chains to speed up the dimensions primarily enable these pro- acquisition of raw materials, although cesses, or provide the interfaces neededAnd though the results vary by indus- insular digital environments in dif- to interact with suppliers and custom-try, it is fair to say that for the most ferent industries still slow down this ers. As such, the processing dimensionpart, virtually every industry has made process. Companies in customer-facing shows very strong variances amongstrides in building the digital infra- industries like financial services, trade industries.structure it needs, but even the most and retail, and consumer goods areforward-looking companies have not having greater success in digitizing their Perhaps the most surprising findingyet reached the stage of true digitally supply-side relationships for a simple, involves the difficulty companies inenabled, real-time, connected design, structural reason: Being downstream every industry still have in the outputsupply, build, sell, and service capabil- players, they are further removed from dimension, despite most consum-ities—the real long-term aspiration of the non-digital world of raw materials ers’ familiarity with processes suchmany corporate players (see Exhibit 3). as the ultimate input factor, but rather as e-commerce. The data suggests interact with other service or manu- that in most cases, bricks and mortarAccording to the Eurostat data, more facturing players that are active in the may still be far more important thanthan 70 percent of companies in supply side further upstream. clicks; moreover, there is a great dealExhibit 3Overall Degree of Digitization Across Business Process Dimensions Input 31.4 Processing 30.5 Output 19.5 Infrastructure 90.1 0 10 20 30 40 50 60 70 80 90 100Source: Eurostat; Booz & Company analysis8 Booz & Company
  11. 11. of variance between the leaders and the At the sector level, the differences procurement and logistics, network andlaggards in this area. This may be due among the four dimensions stand out IT equipment sourcing, and orderingin part to the phenomenon that by now, even more vividly (see Exhibit 4). For and warehouse management neededlarge corporations have all engaged in instance, financial services and insur- to efficiently build and maintaine-commerce activities in some shape or ance, the overall leader in digitization, their networks and service produc-form, while small and medium-sized is particularly strong with respect to tion infrastructure. At the same time,enterprises often tend to be more tradi- underlying infrastructure, transaction many operators face challenges in thetional in the sales channels they use. We processing both internally and with output dimension, where their effortsare still far from a true multichannel external partners, and the digitization to improve the e-commerce and overallcustomer-facing capability that would of output processes such as interfaces digital customer experience is not yetallow customers to move seamlessly among banks, stock exchanges, clearing on par with leaders in this discipline.from online channels to physical shops and settlement parties, and regulatoryto call centers. institutions. Clearly, the essentially As noted, however, most industries digital nature of financial products, continue to face difficulties in theBy and large, however, companies in services, and information lends itself to output dimension. Even trade and retailmost industries tend to be more fully digitization. and consumer goods, surprisingly, dodigitized the closer to the customer they not perform better than the average inare. Many industries, especially those On the other hand, the computers and this area. Despite their well-publicizedthat deal in physical goods, still oper- electronics industry, though it out- efforts in the digital realm, these sectorsate in an essentially analog mode in performs the industry average index continue to be dominated by bricks-working with suppliers, whereas those across all dimensions, is stronger on and-mortar players that are movingdealing primarily in information and the input side than the output. And toward a Web-centric, digital modelservices have moved forward quickly many telecom operators have created only gradually.in digitizing their output contact with impressively optimized inbound supplytheir customers. chains involving handset and deviceExhibit 4Industry-Level Digitization Index Across Business Process Dimensions INDUSTRY VARIATION FROM AVERAGE FOR EACH DIMENSION Input Processing Output Infrastructure Overall Dimension Average 31.4 30.5 19.5 90.1 43.3 Financial Services & Insurance 3 15 15 7 10 Computers & Electronics 14 12 6 6 9 Media & Telecommunications 17 6 5 7 9 Automotive 5 9 10 2 6 Equipment & Machinery 5 6 0 4 4 Trade & Retail 5 3 1 0 2 Chemicals -5 3 0 2 0 Basic Manufacturing -3 0 1 1 0 Utilities -4 -2 -7 4 -2 Business & Administrative Services 1 -8 -7 1 -3 Transportation & Logistics -7 -6 -2 -4 -4 Consumer Goods -10 -5 -1 -8 -6 Real Estate, Rental & Leasing -6 -10 -12 0 -6 Construction -7 -10 -9 -4 -8 Hotels & Restaurants -6 -15 -2 -18 -11Source: Eurostat; Booz & Company analysisBooz & Company 9
  12. 12. THE The process of digitization is differ- entiated not just along sector lines, given the complexity of their legacy production environments.GEOGRAPHIC but along geographic lines as well.DIVIDE Europe demonstrates these distinc- tions clearly. In general, the farther These distinctions should come as no surprise, given the well-established north and west a country is located, link between the extent of digitiza- the more advanced it is in terms of tion in any particular country and its digitization, and this is true not just per capita gross domestic product. in overall terms but on the industry The fact that this relationship also level as well. Germany, the U.K., and holds true on the sector level— the Benelux and Nordic countries Germany’s financial services sector is are the most digitized in Europe, more advanced digitally than Italy’s, and they lead eastern and south- for example—only confirms the ern Europe in all but one industry. effect that country-level characteris- Southern Europe is close behind, tics such as governmental policy and while eastern Europe clearly lags (see the availability of investment capital Exhibit 5). have on promoting digitization. Moreover, the relationship between On an industry basis, the gaps digitization and wealth creates a among regions tend to be largest in virtuous circle: The availability of the old-economy non-service sectors, investment funds enables digitiza- such as basic manufacturing and tion, and more digitization supports chemicals. These industries typically higher levels of GDP growth, making require significantly higher levels of more money available for invest- investment in order to digitize than ment. Every government would be do service sectors, and the digitiza- wise to try to encourage this positive tion process itself is more difficult, spiral in its economy.10 Booz & Company
  13. 13. Exhibit 5Geographic Distribution of Industry Digitization in Europe DIGITIZATION IN DIFFERENT REGIONS Financial Services & Insurance Computers & Electronics Media & Telecommunications Automotive Equipment & Machinery Trade & Retail Chemicals Basic Manufacturing Utilities Business & Administrative Services Transportation & Logistics Consumer Goods Real Estate, Rental & Leasing Construction Hotels & Restaurants 10 15 20 25 30 40 45 50 55 60 Central/Northern Europe Southern Europe Eastern EuropeNote: Central/Northern Europe: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, Netherlands, Norway, Sweden, and United Kingdom. Southern Europe:Croatia, Cyprus, Greece, Italy, Macedonia, Malta, Portugal, Serbia, Slovenia, Spain, and Turkey. Eastern Europe: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania,Poland, Romania, and Slovakia.Source: Eurostat; Booz & Company analysisBooz & Company 11
  14. 14. BUILD The real value of the digitization index is the insight it provides into the be taking in the future. So they overspend on infrastructure andCAPABILITIES risks and rewards for digital leaders underspend on intelligent processNOW and laggards alike, on both the sector and the country levels, in an increas- automation and better digital output mechanisms. ingly digital future: • ICT companies should place their • Sectors already leading the race to bets on supporting the industries digitize, such as financial services that are digitizing fastest, as those and insurance and computers and are the ones spending the most electronics, have a unique oppor- money to further the digitization tunity to build sustainably advan- process. taged positions. • All national governments need to • Lagging industries, including real set their digital agendas to take into estate and hospitality, are at risk of account the importance of digiti- missing out on the digital revolu- zation—solidifying their current tion, and becoming less relevant strengths, remedying their current in the minds of consumers. If this shortcomings, and investing further trend continues, these industries to compensate for “GDP bias.” will likely also begin to lag in their ability to capture their fair share of As the process of digitization evolves consumer revenues in the future. and matures, monitoring how it is It is therefore critical that they affecting different industries and reassess the value of digitization in countries will be critical. Our Industry their industries and speed up their Digitization Index is designed to do digitization efforts. just that. Tracking these changes is the only way to understand where prog- • Too many companies in every ress is being made, and thus where it industry fail to understand the needs to be supported further. direction that digitization will As the process of digitization evolves, monitoring how it is affecting different industries and countries will be critical.12 Booz & Company
  15. 15. Resources About the Authors“The Next Wave of Digitization: Setting Your Direction, Building Your Capabilities,”by Roman Friedrich, Matthew Le Merle, Michael Peterson, and Alex Koster Dr. Roman Friedrich is a partner with(Booz & Company, 2011). www.booz.com/media/uploads/BoozCo-Next-Wave-of- Booz & Company based in Düsseldorf andDigitization.pdf Stockholm. He leads the firm’s communi- cations, media, and technology practice“The Rise of Generation C: Implications for the World of 2020,” by Roman in Europe, and specializes in the strategicFriedrich, Matthew Le Merle, Michael Peterson, and Alex Koster transformation of these industries in the(Booz & Company, 2010). www.booz.com/media/uploads/Rise_Of_Generation_ context of digitization.C.pdf Matthew Le Merle is a partner with“Value Shifts in the Telecom, Media, and Technology Industries,” by Pierre Booz & Company based in San Francisco.Péladeau, Roman Friedrich, Timo Benzin, and Frédéric Sarrat (Booz & Company, He works with leading technology, media,2011). www.booz.com/media/uploads/BoozCo-Value-Shifts-Telecom-Media- and consumer companies, focusing onTechnology.pdf strategy, corporate development, marketing and sales, organization, operations, and innovation. Dr. Florian Gröne is a principal with Booz & Company based in Berlin and heads up the firm’s CRM Center of Excellence in Europe. He works with METHODOLOGY telecom, media, and consumer players on building world-class front-office processes The Industry Digitization Index is derived from a wealth of data gathered by and information technology capabilities on Eurostat, the European Union’s statistical agency, under its 2011–15 information their path to digitization. society benchmarking framework. Among other dimensions, the program captures data on how many companies (of the total number of companies Alex Koster is a principal with with 10 or more employees) use or have deployed various elements of digital Booz & Company based in Zurich. He infrastructure, tools, platforms, and management capabilities and policies. focuses on strategy, revenue growth, and business model transformation opportu- In creating the index, we began by dividing the data into four separate factors, nities across technology, telecom, and each of which is defined by several sub-factors and components. The four Internet companies, and advises these dimensions summarize the following underlying data points: companies on their route toward a digitized world. • Digital input: The extent of digital processes in the procurement stage of the business, including data points regarding the use of computer networks as well as electronic transmissions suitable for automatic order processing. • Digital processing: The degree to which processes are integrated, both internally and with external partners. The internal integration sub-factors include data points regarding the existence and use of digital technologies such as enterprise resource planning and customer relationship management, as well as data points regarding the use and purpose of internal information sharing with different organizational functions like accounting, inventory management, and production and services management. External integration comprises such activities as electronic data interchange, including the electronic transmission of data with business partners, public authorities, and financial institutions, as well as activities like supply chain management, which includes the use of electronic data transmissions to and from business partners both upstream and downstream. • Digital output: The importance of digital processes in the sales function, including the use of computer networks as well as electronic transmission of data suitable for automatic sales processing. • Infrastructure: The sophistication of the underlying IT technology, focusing on the presence and use of computers and computer networks (wired and wireless) as well as the presence and type of connection to the Internet, including the use of fixed and mobile broadband or other fixed connections, such as cable or leased lines. Then, by logically aggregating the results of the data collected for each factor within each industry, we were able to construct both the overall index and a deeper understanding of the progress each industry has made in each of the four factors.Booz & Company 13
  16. 16. The most recent Worldwide Officeslist of our officesand affiliates, with Asia Middle Eastaddresses and Beijing Brisbane Helsinki Abu Dhabi Detroittelephone numbers, Delhi Canberra Istanbul Beirut Florham Parkcan be found on Hong Kong Jakarta London Cairo Houstonour website, Mumbai Kuala Lumpur Madrid Doha Los Angelesbooz.com. Seoul Melbourne Milan Dubai Mexico City Shanghai Sydney Moscow Riyadh New York City Taipei Munich Parsippany Tokyo Europe Paris North America San Francisco Amsterdam Rome Atlanta Australia, Berlin Stockholm Boston South America New Zealand & Copenhagen Stuttgart Chicago Buenos Aires Southeast Asia Dublin Vienna Cleveland Rio de Janeiro Auckland Düsseldorf Warsaw Dallas Santiago Bangkok Frankfurt Zurich DC São PauloBooz & Company is a leading global managementconsulting firm, helping the world’s top businesses,governments, and organizations. Our founder,Edwin Booz, defined the profession when he estab-lished the first management consulting firm in 1914.Today, with more than 3,300 people in 60 officesaround the world, we bring foresight and knowledge,deep functional expertise, and a practical approachto building capabilities and delivering real impact.We work closely with our clients to create and deliveressential advantage. The independent White Spacereport ranked Booz & Company #1 among consultingfirms for “the best thought leadership” in 2011.For our management magazine strategy+business, visitstrategy-business.com.Visit booz.com to learn more aboutBooz & Company.©2011 Booz & Company Inc.

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