Measuring Industry Digitization: Leaders and Laggards in the Digital Economy

Research Roman Friedrich Matthew Le Merle Florian Gröne Alex Koster Measuring Industry Digitization Leaders and Laggards in the Digital Economy Use your smartphone to scan the QR code on the cover of this Perspective, and you will be taken to the CMT Foresight home page on Booz.com. Contact Information Beirut London/Düsseldorf Shanghai Bahjat El-Darwiche Dr. Michael Peterson Andrew Cainey Partner Partner Partner +961-1-985-655 +44-20-7393-3310 +86-21-2327-9800 bahjat.eldarwiche@booz.com michael.peterson@booz.com andrew.cainey@booz.com Berlin New York Sydney Dr. Florian Gröne Philip Minasian Vanessa Wallace Principal Principal Partner +49-30-88705-844 +1-212-551-6098 +61-2-9321-1906 florian.groene@booz.com philip.minasian@booz.com vanessa.wallace@booz.com Delhi Paris Zurich Ashish Sharma Pierre Péladeau Alex Koster Principal Partner Principal +91-124-4998705 +33-1-44-34-3074 +41-43-268-2133 ashish.sharma2@booz.com pierre.peladeau@booz.com alex.koster@booz.com Dubai San Francisco Karim Sabbagh Matthew Le Merle Senior Partner Partner +971-4-390-0260 +1-415-994-4320 karim.sabbagh@booz.com matthew.lemerle@booz.com Düsseldorf/Stockholm São Paulo Dr. Roman Friedrich Ivan de Souza Partner Senior Partner +49-211-3890-165 +55-11-5501-6368 roman.friedrich@booz.com ivan.desouza@booz.com Birger Maekelburger and Florian Stürmer also contributed to this Research. Booz & Company 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 THE WORLD Broadband connectivity, wireless mobility, cloud computing, Governments, too, can gather and disseminate information quickly—for IS 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 DIGITAL industry use to orchestrate their differentiated data becomes available internal value chain as well as for other geographies. Despite this CAPABILITIES 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 more straightforward: to understand better efficient delivery of products and The information provided by which industries in which markets services, including distribution, Eurostat includes data on the are adopting, and benefiting from, electronic commerce, and the relative sophistication of the digital digitization first, and which are like. And the fourth concerns the infrastructures to be found in lagging. A further goal is to gain foundational infrastructure that companies across the 27 national insight into the specific technological underpins it all, since without markets of the E.U., as well as factors that are enabling certain the underlying connectivity and data on digital inputs, internal markets and industries to move computing capabilities, digitization processes, and outputs. Compiling forward more quickly. To do this, would be impossible. and weighing these four dimensions we wanted to get a complete picture allowed us to create the overall of how these markets and industries The most complete and reliable index of digitization, by market and use technology.