Digital Incumbents Fight Back

BOSTON, Feb. 16, 2022 /PRNewswire/ -- A new cadre of companies—traditional businesses that are successfully executing digital transformations—are outperforming their peers and shaping up to compete with digital natives. These digital incumbents make up about 30% of the S&P Global 1200 Index and outperformed the index by about 50% over the three years ending December 31, 2021. Meanwhile, legacy incumbents—traditional companies that have yet to deliver a successful digital transformation—struggled to drive growth and improve productivity using predominantly traditional levers. They make up about two-thirds of the S&P 1200, underperformed the index, and risk becoming uncompetitive.

These are among the findings of a new article published today by Boston Consulting Group (BCG), titled "The Rise of the Digital Incumbent." The article describes a new hierarchy for business and highlights the different digital dynamics in four types of companies: legacy incumbents, digital incumbents, digital natives (companies founded in the digital era), and "hyperscalers," the top dozen or so digital natives whose platforms, infrastructure, and data scale with enormous breadth and depth, thus conferring major structural advantages.

"The paradigm is no longer simply, 'digital natives will destroy incumbents'," says Romain de Laubier, a BCG managing director and partner and a coauthor of the article. "Digital incumbents in traditional industries are joining digital natives and digital hyperscalers in the congregation of companies that have the capabilities to disrupt existing business models and deliver innovation and revenue growth."

The article asserts that the successful companies of the future will build the necessary digital capabilities—both human and technological—to become what BCG calls bionic. Along the way, they will deliver superior innovation and performance.

Leveraging global survey data from more than 950 senior leaders from all types of companies who were asked to describe where they are on their digital or bionic journeys, and to self-score their digital capabilities, the authors detail the five attributes that best define any company's progress toward the bionic target state:

• Leadership with a purposeful digital strategy
• A culture that promotes innovation
• An agile operating model
• The ability to attract, retain, and develop world-class digital talent
• Open-architecture technology and data platforms

"Digital incumbents should take heart from the findings of this research," says Patrick Forth, a BCG managing director and senior partner and a coauthor of the article. "They must continue to develop the five bionic attributes, which requires making the transition from successful digital reengineering to generating growth from innovation. For those that manage to build the necessary attributes at scale, the rewards of being both digitally capable and having the incumbent advantages of scale, scope, customer relationships, and data, will be substantial."

The authors note that legacy incumbents are being left behind and need to act with urgency to reapply themselves, implementing the digital reengineering that will give them the digital capabilities they need to compete for growth.

A copy of the report can be downloaded here.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or [email protected].

About Boston Consulting Group
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.

Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.

SOURCE Boston Consulting Group (BCG)