RETHINK, REINVENT, REALIZE.How to successfully scale digital innovation to drive growth Every company leader knows that to succeed, innovation must be at the core of their business. But reimagining the way products and services are made—at scale—is easier said than done. Take a global sportswear manufacturer. With ever-growing consumer demand for hyper-personalization, executives were facing a major challenge: how to create customized sneakers that were both comfortable and durable, with fast turnarounds on a global scale. To meet the challenge, the company opened a manufacturing facility that accelerated production using robotics, machine learning and 3D printing. But implementing emerging technologies wasn’t enough. The fully automated production line couldn’t ramp up fast enough. The manufacturing facility couldn’t adapt operations to support its automation system. With financial losses that stumped shareholders, production was terminated at that facility three years into the project. The otherwise successful brand couldn’t scale design and innovation profitably. The truth is, they’re not alone.Driving growth by scaling innovation: How leaders manage digital transformationHow to successfully scale digital innovation to drive growth2Today, large industrial companies need to deploy digital technologies for wide-ranging aims. To stand out among competitors and maintain customer relevance, they need to apply innovation to not only existing and new operations, but also in the products and services they develop. But when it comes to their return on digital investments (RODI), only a select few companies emerge on top. To find out why, we zeroed in on a critical transitional phase for large, innovative organizations: when and how they move from a successful digital proof of concept (PoC) to scaling that pilot innovation for growth and profit. From surveying 1,350 global senior executives in key industrial sectors, we learned that few companies win, most struggle and some are left with complete disappointment. This rings true especially as companies shift from improving the efficiency of their operations to generating new value for customers. Between 2016 and 2018, industrial companies in our survey spent a little over $100 billion on scaling digital innovations to drive new experiences and efficiencies. Yet, 78 percent of industrial companies in our sample struggled to reach expected earnings as a result. So who’s doing it right? Only 22 percent of industrial companies researched achieved a return on their digital investments that exceeded their expectations. This small breed of industrial companies, which we call “Champions,” are nailing the transition to digital and rising above the rest. Our findings show that these companies approach the organizational challenges associated with innovation very differently to their peers. They are more strategic in their approach, identifying the value they want to achieve and recognizing how their innovation efforts will affect their organization. For Champions, it’s not about scaling more PoCs (even though they do). It’s about earning more by scaling better. For Champions, it’s not about scaling more PoCs (even though they do). It’s about earning more by scaling better. 3How to successfully scale digital innovation to drive growthEyes on the prize: What Champions stand to gain A growing number of industrial companies are embracing a range of digital technologies, from AI to robotics, across key business functions. Our research shows that Champions achieve higher than average returns on their digital investments, compared with their industry peers. Their digital returns even beat the industry average for returns on overall invested capital (ROIC). What’s more, they are able to scale more than 50 percent of their digital PoCs.The other 78 percent of companies? Here’s how they fare (see Figure 1):• The companies trailing Champions—the second group (“Contenders”)—earn RODI lower than industry ROIC and lower than industry RODI, but scale more than 50 percent of their digital PoCs.• The companies in the third and last group (“Cadets”) earn RODI lower than industry ROIC and lower than industry RODI and scale less than 50 percent of their digital PoCs.Champions Earn RODI higher than industry ROIC and industry RODI; scale more than 50% of their digital PoCsContenders Earn RODI lower than industry ROIC and lower than industry RODI; scale more than 50% of their PoCsCadets Earn RODI lower than industry ROIC and lower than industry RODI; scale less than 50% of their PoCsFigure 1a:23%13%64%21%12%67%Discrete IndustriesProcess Industries23%13%64%21%12%67%Discrete IndustriesProcess IndustriesDiscrete industriesProcess industries4How to successfully scale digital innovation to drive growthof industrial companies achieved a return on their digital investments that exceeded expectations. Only22%24.2%27%7.4%6.5%10.5%8.3%ExpectedAchievedExpectedAchievedExpectedAchieved20.4%24%6.9%6.2%12%10.7%E...
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