What traits do digital-transformation leaders share?

Feb. 22, 2022
"Today, some companies are ‘born digital’ and may grow rapidly to overtake existing competitors."

By Marianne D’Aquila, director of research at ARC Advisory Group

ARC Advisory Group has released the first edition of the ARC Industrial Digital Transformation Top 25  special report, which highlights companies that excel at integrating digital technology into all areas of their business, fundamentally changing the way they operate and deliver value to customers.

Leading companies take a strategic approach, integrating digital technology throughout their value chains. Design and engineering, production operations, maintenance, logistics, supply chain, business systems, customers, products and organizational structure are subject to innovative change as companies examine and update processes and deploy new tools and technologies.

With a digital-transformation mindset, the core business model by which a company produces and/or offers services to the marketplace can be replaced by new business models that more fully leverage cognitive analytics, digital twins, predictive technologies, or other technologies that enable the company to expand their worldview, embrace competitive excellence as a goal, and thereby move beyond production efficiency to a much more dynamic, responsive, and resilient business model.

Undoubtably, digitalization in production plays a crucial role in opening new opportunities for flexible, fast and high-quality production systems. Such systems can fulfill orders to individual customer requirements. Top companies know that ‘digital’ can’t be bolted on—they must intimately weave digital together with their internal and external processes. Traditional organizational silos must be broken down, multi-functional teams must innovate around customers, processes, and employees, and workforce hesitancy must be addressed head-on and overcome. 

Bold digital strategies may fuel a company’s growth as well. Today, some companies are ‘born digital’ and may grow rapidly to overtake existing competitors. These companies are not encumbered by legacy systems, more importantly, they are unencumbered by legacy thinking and the need to overcome resistance to ‘the way we’ve always done it.’ They can build systems and processes better from the start, and not plan for incremental improvements to eventually achieve top performance. 

In one form or another, software is key to digital transformation. For industrial companies, there is a correlation between investment in software and transformational technologies and corporate valuation. Software powers digital transformation, necessity drives innovation, and the whole cycle accelerates year after year. Many leading companies have engaged in this process for some time, but the best organizations understand that the successful, ongoing transformation relies not only on getting the technology right, but also on empowering the right people to guide, interpret, and leverage that technology. The workplace, work methods, and workforce may all need to change, but done well, this can become a powerful source of competitive advantage. 

Another driver for digital transformation is the pressure companies feel to become more sustainable and significantly change their operations in response to increased pressure from citizens, stakeholders, and governments to address climate, environmental and circular economy concerns. In fact, these same digital technologies, such as artificial intelligence, are also utilized by shareholders to increase pressure on boardrooms and leadership to quantify sustainability progress. Leading companies recognize that they can’t make these changes quickly and effectively—or maybe at all—without substantial digital transformation. 

To create the Digital Transformation Top 25, ARC developed a rigorous process based on financial performance, a community-intelligence-based ranking system, and software and sustainability data. Publicly available financial information, ARC primary and secondary research, data from ARC’s market database, and the opinions of members of ARC’s community of end users were also factored into the rankings. The resulting analysis and listing of the Top 25 companies includes their scores in various categories, profiles of each of the leading companies, details about the research methodology, and more.