Accelerating digital to

build the 'bionic company'

BCG's Digital Acceleration Index (DAI) to measure digital maturity

SEPTEMBER 23, 2020

 The Bionic (Digital) Company

Measuring digital maturity

Agenda
What bionic companies do differently

Case: Digitizing Government

1
COVID-19 is forcing companies to face a new reality

High uncertainty Disruption to operations Suboptimal workforce Drastic change in

Copyright © 2020 by Boston Consulting Group. All rights reserved.

complicating decision & supply chain resulting allocation for fast consumer demand
making, effective in lost revenue and changing supply/demand requiring ways to re-
responses and planning increased costs and new ways of working build it and find growth

Companies are looking to deploy solutions quickly, and

plan for a successful recovery
Source: BCG 2
 Basically all industries need to cope with digital disruption
Disruption

Major disruptions have

occurred and players from
Risk of losing the race Technology
Telco
adjacent industries enter
Insurance

Healthcare Financial Services

Disruptive moves have Industrial Manufacturing
already affected these Consumer Goods
Energy
industries, e.g., digital CJ

Less attractive to
investors and VC, high Public Sector
barriers to disrupt/enter Using disruption to win the race

Digital maturity

Leverage digital to reduce customer journey pain Need to have a strong focus on digital as a defensive
points and then scale across the value chain move to avoid disruption from pure digital players

1. Based on six variables assessing the perceived industry digital disruption

Source: BCG DAI assessment
Pre-crisis, digital capability Now, ~80% of companies plan to
investments have been top priority accelerate digital transformations

Investor views on priority areas companies should Percentage of respondent2,

aggressively invest in1 by views on priority of digital transformation post crisis

Digital Capabilities All industries 83%

50%
or Tech Stack

Research & Development 44%

Consumer 87%

Marketing & Sales 41% Energy 85%

Industrial Goods 84%

Other Innovation 38%
TMT 82%

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Mergers & Acquisition 34% Healthcare 82%

Public Sector 80%

Emerging Markets 31%
Insurance 80%
Divestitures
29% Financial Institutions 80%
and/or Spin-Offs

Become more urgent No change Become lower priority

1. Respondents were asked what percentage of companies should be more aggressive in pursuing the following strategies for value creation
2. Respondents asked if COVID-19 pandemic affected the urgency of their organization’s overall digital strategy
Source: DSR Digital Transformation 2020 Survey still ongoing with n=775; BCG 11th annual investor survey 2019 with n=251 4
Leaders outperform laggards in earnings, innovation and value

1.8× higher earnings ~1.5× higher spend on Enterprise value more

growth p.a. innovation p.a. than doubling p.a.

1.8× +53%
1,5× 2.4×
+149%
8.7%5.9
7.2% 7.2%

4.1% 4.7%
3.5%

EBITDA R&D expenditure Total enterprise value

Bionic leaders Bionic laggards

1. Digital Performer and Digital Leader aggregated to one category

Source: Capital IQ (n=224), DAI Global Database
Still, several challenges why digital transformations fail to deliver

• 1 Lack of complete •1 Resistant legacy workforce Aspiration

understanding in •2 No connection between projects
economics of
Digital Transformation Progress

and BU owner benefits

digital
•3 Conflicting leadership
• 2 Underestimating accountabilities
scale and
momentum of
digital impact
• 3 Setting small, Limited / incremental
short-sighted success
Base Reality
digital ambition

Not •1 Lack of scale / flexibility in the underlying legacy tech

scaling platforms to scale the digital transformation
Unfocused Loss of •2 Shifting overall business focus
Strategy momentum • Lack of adoption or lack of payoffs from anticipated
3 ‘quick wins’
Blueprinting Activation Scaling

Source: BCG
 The Bionic (Digital) Company

Measuring digital maturity

Agenda
What bionic companies do differently

Case: Digitizing Government

7
Now, the overall nature of work is transforming significantly

From human operated … … to human designed

Human Technology/AI Technology/AI

operated augmented transformed

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Source: BCG
The company of the future is bionic

Outcomes Building the Bionic Company

means "designing technology and
Personalized customer the human org around each other
experiences &

Bionic
relationships
New offers, services
to realize transformation
Operations and business models
outcomes operations, customer
experiences & relationships, and
Strategy new offers and businesses"
Technology: and Purpose Human:

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Data and Data
& AI
Dynamic
Platform Org, Talent,
Organizations
Digital Platform Ways of working
Modular
Technology
Digital Talent

Source: BCG 9
Bionic DAI with 40 dimensions to measure digital maturity
Level 3 – 40 dimensions

Personalized Customer Outcomes New Offers,

Services and Business Models
Experiences & Relationships
Bionic Operations
E2E customer journeys Innovation and disruption
Manufacturing Shared services &
Digitally driven pricing (I4.0/ICO) Centers of excellence New business build
Next-generation sales Start-up incubation, VC, M&A
Procurement Corporate center
Personalization Lighthouses & prototyping
Digital supply chain Service operations
Digital marketing Digital ecosystem go-to-market
Customer services Digital ecosystem operating model
Research & product development Purpose
Strategic vision and ambition
Priorities & alignment xx
Roadmap
Data & AI Digital Talent
Data governance Strategy and purpose Talent ecosystem Exponential learning Bionic
Data strategy Digital & data platforms New leadership models maturity
Artificial intelligence Cybersecurity
Dynamic Platform Organization
Modular Technology Technology Human Governance Platform organization
World Class Tech function Digital transformation accelerator
Internet of things Modularity Virtual teaming Agile@Scale
Digital delivery (DevOps)

Source: BCG Digital Acceleration Index (DAI) 10

Each dimension is scored along 4 maturities to calculate overall DAI

DAI score
Bionic maturity
(1-100)
0-7 8-15 16-24 25-32 33-40 41-49 50-57 58-65 66-74 75-82 83-90 91-100

Starter Literate Performer Leader

Unclear Digital vision Clear vision/strategy & Strong digital mindset and Initiatives are contributing
roadmap defined agile culture to strategy with
Business and IT sometimes a clear value added
work on digital topics Processes are being Business and IT have jointly
based on ad hoc demands, digitized and Businesses, built key Digital Digital has been embedded
align only if projects jointly Functions execute digital capabilities across all areas throughout the company:
executed initiatives, but in innovation, value
functional silos Digital initiatives are built proposition, tech, & ops.
Organization not yet & commercialized with
digitally enabling Digitally enabling success. Some disruptive Outperforms peers in key
governance in place businesses have already digital metrics, and digital
been launched is seen as the key driver of
the company value

Source: BCG Digital Acceleration Index (DAI)

Global study 2019 | FI and Telco companies with highest DAI scores

Gap between top and

low sectors smaller in
Asia vs. EU or US

Europe with no
EUROPE sector which is
globally leading

High spread in US btw

top sectors & those
falling behind

Note: Scores are the average DAI score from 0 (lowest) to 100 (highest) per industry in a region.
Source: BCG global DAI study 2019
 The Bionic (Digital) Company

Measuring digital maturity

Agenda
What bionic companies do differently

Case: Digitizing Government

13
Bionic companies apply four boosters in their digital transformation

Tech & Data investments Digital people & upskilling Core process transformation New digital revenue

>15% OPEX for digital >15% FTE in digital roles E2E digital solutions at scale >10% from digital solutions

55% 44% 61%

33%

29% 23% 7% 33%

Higher sales growth vs.

Inv. focus on tech & data >15% FTE planned to upskill >25% of processes digitized
peers

35% 47% 25% 51% 14% 33% 22% 34%

Bionic leaders Bionic laggards

Source: Global DAI study 2019/2020

>60% companies incorrectly assessed changes needed to technology

~80% of companies felt they had necessary IT In hindsight, >60% among them said they
architecture to support digital transformation1 underestimated the changes required2

Percentage of transformations , Percentage of transformations,

assessment of IT infrastructure available estimation of IT changes required

54% 45%
38%

Copyright © 2020 by Boston Consulting Group. All rights reserved.

27%
16%
15%

4%

Completely Drastic Incemental Was already Drastically Somewhat Estimated

redesigned improvements improvements in place underestimated underestimated changes correctly
needed were needed changes changes

1. Respondents asked to rate the level of sophistication of IT architecture / data and digital platform to support digital transformation initiatives
2. Respondents asked to identify in hindsight the ability to plan the type of changes to IT infrastructure and data platform required to allow for flexibility
Source: DSR Global Digital Transformation 2020 Survey; n=825 15
Bionic companies prioritize human enablers
Dedication of people

Dedication Hiring Upskilling

Q: Share of FTE dedicated to Q: Digital FTE growth target in Q: Share of FTE for upskilling in
digital / working in digital roles coming 3 years digital along the coming year

23 26 28
>15% 44 >15% 44 >15% 51

Copyright © 2020 by Boston Consulting Group. All rights reserved.

77 74 72
<=15% 56 <=15% 56 <=15% 49

B L B L B L

Bionic companies Bionic laggards

Source: Global DAI study 2019/2020 16

 Companies that transform successfully, follow 6 key success factors

Define strategy Integrated strategy with clear

1
Outcomes and Purpose transformation goals

Leadership commitment from CEO 2

Personalized customer to middle management
Bionic
experiences &
relationships New offers,
Drive to
Operations services &
business models
Outcomes Effective monitoring of progress
3
towards outcomes
Strategy
and Purpose

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Technology Data Dynamic High-caliber talent dedicated to 4
& AI Platform
Human: transformation program
: Organization
s Org, Talent, Invest in
Data and Ways of
Digital Modular Digital working
Human Agile leadership & persistence,
Platform Technolog Talent 5
y driving broader adoption

Invest in Flexible, modular technology &

6
Technology data platform

Source: BCG DSR 17

 The Bionic (Digital) Company

Measuring digital maturity

Agenda
What bionic companies do differently

Case: Digitizing Government

18
Digital transformation of a major …but faces major hurdles
Government bureaucracy… in its journey to drive sustained
change

Improve agency's delivery of 200+ departments and agencies

digital services

Improve the way government $10B annual spend on IT

buy/use technology

Copyright © 2019 by Boston Consulting Group. All rights reserved.

Help build digital skills and 72 digital projects over $10M
establish agile ways of working "reported" as at 2018

Provide greater transparency on Lacked consistent digital ambition

IT projects, costs, risks and and a coherent digital agenda
opportunities
Source: BCG project experience 19
Client Government's aspiration to become digital leader by 2025

Ambition

Digital passive Digital literate Digital performer Digital leader

Digital
maturity

DK
EE Western Govt
future ambition
NZ

US
UK

FR Whole of Government
DE
Global Telco average
AU Global Airline average
BE Global Banking average Digital
journey

• Often unclear vision • Clear vision/strategy • Key digital capabilities • Digital visionaries
• Isolated initiatives • Roadmap defined • Digitalized processes • Digital first governments
• Organisation not yet • Digitally enabling • Strong digital mindset • Most citizen interactions
digitally enabling governance in place and agile culture through digital

Source: DAI survey conducted from 15th May 2018 to 1st June 2018 (n=537), BCG experience
Client Government has a digital maturity score of 33

Digital Government Strategy 1. Vision 2. Ambition 3. Priorities and alignment 4. Roadmap

Digital practices in core business areas Re-imagine government

Policy Delivery Gov 2.0 Shared services
6. Procurement 19. New digital services/
13. Central functions products
7. Revenue optimisation 11. Digital marketing

5. Policy development 8. Next-gen channel mix optimisation 14. Using shared services 20. Degree of digital disruption
9. Digital supply chain and logistics 12. Personalisation
15. User service digitisation 21. Exemplar projects and
10. Delivery Prototyping

Shared digital 22. Collaboration

16. User journeys 17. Process digitization and robotics 18. Build accelerator centre
accelerators

Enablers

23. Leadership and culture 27. Data strategy 30. Tech function (Simplify IT) 33. Digital delivery (DevOps)
24. Org and governance 28. Advanced analytics 31. Data platforms/ 34. Digital intelligence and 36. Digital ecosystem
25. Skills and people and artificial intelligence infrastructure artificial intelligence and partnerships
29. Data and analytics 32. Digital architecture
26. Agile at scale governance 35. Cybersecurity
and cloud
People and Organisation Data and Analytics Technology Ecosystems
DAI

33
Digital passive Digital literate Digital performer Digital leader
Digital maturity score
0-7 8-15 16-24 25-32 33-40 41-49 50-57 58-65 66-74 75-82 83-90 91-100

Source: DAI survey conducted from 15th May 2018 to 1st June 2018 (n=537), BCG experience 21
Client Government ambition to become a digital leader

Digital Government Strategy 1. Vision 2. Ambition 3. Priorities and alignment 4. Roadmap

Digital practices in core business areas Re-imagine government

Policy Delivery Gov 2.0 Shared services
6. Procurement 19. New digital services/
13. Central functions products
7. Revenue optimisation 11. Digital marketing

5. Policy development 8. Next-gen channel mix optimisation 14. Using shared services 20. Degree of digital disruption
9. Digital supply chain and logistics 12. Personalisation
15. User service digitisation 21. Exemplar projects and
10. Delivery Prototyping

Shared digital 22. Collaboration

16. User journeys 17. Process digitization and robotics 18. Build accelerator centre
accelerators

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Enablers

23. Leadership and culture 27. Data strategy 30. Tech function (Simplify IT) 33. Digital delivery (DevOps)
24. Org and governance 28. Advanced analytics 31. Data platforms/ 34. Digital intelligence and 36. Digital ecosystem
25. Skills and people and artificial intelligence infrastructure artificial intelligence and partnerships
29. Data and analytics 32. Digital architecture
26. Agile at scale governance 35. Cybersecurity
and cloud
People and Organisation Data and Analytics Technology Ecosystems
DAI

79
Digital passive Digital literate Digital performer Digital leader
Digital maturity score
0-7 8-15 16-24 25-32 33-40 41-49 50-57 58-65 66-74 75-82 83-90 91-100

Source: DAI survey conducted from 15th May 2018 to 1st June 2018 (n=537), BCG experience 22
Enablers with highest importance and largest maturity gap

Client Government digital maturity matrix Digital government strategy Enablers

Gap to ambition (Future ambition—current state) • 1. Vision • 23. Leadership and culture
• 2. Ambition • 24. Organisation
55 • 3. Priorities and alignment and governance
31
• 4. Roadmap • 25. Skills and people
14
34 12. 29. 28 Digital practices in core business areas • 26. Agile at scale
30 • 27. Data strategy
25. • 5. Policy development
50 17 32 • 28. Advanced analytics and AI
6 5 23 • 6. Procurement
9 15 • 29. Data and
18 • 7. Revenue optimisation
13 16 analytics governance
26. • 8. Next-gen channel
• 30. Tech function (Simplify IT)
33 mix optimisation
45 • 31. Data
7 11 8 • 9. Digital supply chain and logistics
10. 27. platforms/infrastructure
• 10. Delivery

Copyright © 2020 by Boston Consulting Group. All rights reserved.

36 • 32. Digital architecture
3 19 • 11. Digital marketing
and cloud
21 1 • 12. Personalisation
40 • 33. Digital delivery (DevOps)
2 • 13. Central functions
24 • 34. Digital intelligence and AI
22 4 • 14. Using shared services
• 35. Cybersecurity
Reimagine government • 36. Digital ecosystem
35 and partnerships
20 • 15. User service digitisation
35 • 16. User journeys
• 17. Process digitisation and robotics
• 18. Build accelerator centre
• 19. New digital services/products
0 • 20. Degree of digital disruption
0 65 70 75 80 85 90 • 21. Exemplar projects and prototyping
Importance • 22. Collaboration

Source: DAI survey 2018 (n=537) 23

 1 Skills and People
Four priority areas for
client government
2 Leadership and Culture
identified by gap to
ambition, relative
3 Advanced Analytics and AI
importance and

Copyright © 2019 by Boston Consulting Group. All rights reserved.

alignment to strategy 4 User Journeys

24
DAI provided critical foundations for the digital strategy

Identified four priority Ongoing monitoring and Facilitated great

Evidence base for digital areas to focus efforts and tracking of digital conversations with agency
transformation strategy investments performance leaders

The DAI assessment provided The team used DAI outputs to DAI was proposed to be DAI helped drive better
a benchmarked capability develop playbooks for four integrated into client's conversations with the client
assessment to priorities priority areas to support reporting process to measure and with the 20+ large
initiatives and develop a case agencies to increase their digital maturity government agencies/leaders
for change for the whole of digital maturity improvements in agencies on on their digital agenda
government digital an annual refresh cycle
transformation strategy Playbooks for advanced
analytics & AI, leadership &
culture, skills & people, and
user journeys

Source: BCG case experience

Further content | BCG.com DAI page and publications

DAI-based study reports (Links)

• The Real Champions of Building the Digital Future (July 2017)
• Discovering the how and where to add digital to your privat equity (November 2017)
• Is the Digital Revolution in Aerospace and Defense in Crisis? (May 2018)
• Digital maturity is paying off (June 2018)
• How Digital Champions Invest (2019)
• The Race for Digital Advantage in Africa (March 2020)

Copyright © 2020 by Boston Consulting Group. All rights reserved.

• Digital Underinvestment Hurts Insurers (May 2020) BCG.COM
• Is Your Technology Ready for the New Digital Reality (May 2020) DAI PAGE
• Bionic Champions in the Middle East (July 2020)
• The Digital Path to Business Resilience (July 2020)
• Bionic champions in the middle east (July 2020)

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