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Uncovering the Connection Between Digital Maturity and Financial Performance

Ragu Gurumurthy, David Schatsky, Jonathan Camhi, Deloitte.

Last year’s digital transformation survey found that enterprises that apply seven “digital pivots” broadly and deeply tend to perform better financially. This year, we investigate why.

Digital Maturity’s Bounty of Benefits

Digitally mature companies enjoy a wide range of specific benefits arising from their digital transformations that include, but go well beyond, the bottom line. Many of these benefits, such as improved product quality and customer satisfaction, contribute to better financial performance. Others, such as reducing environmental impact and increasing workforce diversity, are increasingly seen as part of companies’ broader social responsibility.

To reap benefits such as these, organizations should do far more than simply implement new technologies. Successful digital transformation requires the coordinated integration of technology-related assets and capabilities—which we call “digital pivots” (figure 1)—across an entire enterprise.

Last year’s digital transformation study found that enterprises that apply the pivots broadly and deeply tend to perform better financially.1 Our data this year affirms this finding: Higher-maturity organizations surveyed were far more likely than lower-maturity ones to significantly outperform their industry average on key financial metrics.

The question remains, however: Why is digital maturity associated with better financial performance? In this year’s report, we dig deeper into the factors that could link greater digital maturity with superior financial performance. Our broad conclusion: Digital maturity’s impact on financial performance comes from enabling improvements in efficiency, revenue growth, product/service quality, customer satisfaction, and employee engagement—as well as by prompting a greater focus on growth and innovation. We also found that executives seem to credit some pivots for contributing to these benefits more than others. However, we continue to believe that a balanced approach to investing across all of the pivots is required for attaining higher levels of digital maturity.

Digital Transformation Continues to Drive Financial Performance

Our results from this year’s study soundly corroborate last year’s finding that greater digital maturity is associated with better financial performance. The higher-maturity companies in this year’s sample were about three times more likely than lower-maturity companies to report annual net revenue growth and net profit margins significantly above their industry average—a pattern that held true across industries.

Our definition of digital maturity is based on the extent to which digital transformation has delivered positive business impact, not necessarily positive financial impact. The superior financial performance resulting from higher digital maturity is a consequence of—not equivalent to—the business impact on which our definition is based.

Read the full story on Deloitte.

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