Sydney, NSW, Australia - 06 Aug 2013: A new study released today by IBM based on research by the National Institute of Economic and Industry Research (NIEIR) forecasts that significant gaps will open up between major Australian enterprises that actively transform their operations for the coming digital economy and those that stick to business as usual.
As part of its Smarter Planet initiative, IBM has commissioned research to provide evidence that Australian enterprises will need to adapt, change and take advantage of key technologies to lead in the digital economy and compete in what IBM terms the era of “smart”.
The era of “smart” is a time when success will be driven by how effectively enterprises can harness the power of new technologies to deliver unique value to customers and citizens with the speed, efficiency and ubiquity they demand. These technologies include high-speed broadband, mobile devices, cloud computing, Big Data, robotics, sensors and intelligent systems, and social media and collaboration tools.
One example in the study describes two banks that start in a similar position today but follow different business strategies. By 2025, their paths have diverged dramatically: one has a market capitalisation of $69 billion and the other $22 billion – a ‘digital divide’ of $47 billion.
The story is similar in other commercial sectors analysed:
Adding the value of those gaps across the eight stylised companies in four sectors produces a total difference in market capitalisation of $269.5 billion. This calculation uses real company data as a starting point then bases the forecasts on hypothetical strategies to illustrate the importance of making the right strategic decisions in the digital age.
In the government sector, the research maps the future for universities, health providers and public administration agencies. It finds those that pursue an ‘accelerated’ route by taking advantage of digital technologies will deliver better outcomes at a comparable or lower cost than if they stay on their current paths.
It shows that the cost of public administration, for example, could be contained or reduced (as a share of GDP). In health, Australians could live longer on average and be 5.5 per cent more satisfied with the healthcare system as a result of digital transformation. In higher education, an accelerated digital strategy would see leading institutions able to increase the quality of teaching without increasing costs to the nation.
Mr Andrew Stevens, Managing Director, IBM Australia and New Zealand, said:
“This report follows on from research we completed last year looking at how digital technology would change the Australian economy from now until 2050. This year, we wanted to explore what these trends mean for individual enterprises in the next decade, and the way in which technology can dramatically shape where they stand in 2025. For example, the powerful combination of cloud and Big Data has the potential to radically improve the quality and accessibility of healthcare across urban and rural communities in Australia. While the use of sensors and robotics can completely revolutionise outdated methods of exploration and extraction within the mining sector.
“Where some people see digital technologies disrupting business, we see unparalleled opportunity for the nation’s future productivity and prosperity, even in a more competitive global market. However, this is not just about adding an online store to existing capabilities; this is about transforming your business model to compete in the digital economy.
“We found there will be huge differences in the performance of organisations that lead and transform their business models for the digital age and those that don’t. NIEIR’s modelling clearly shows that success can compound rapidly and deliver strong gains to leaders by 2025. At the same time, organisations that slip behind will find it even harder to catch up and often won’t survive as stand-alone entities.”
Building on its economic forecasting and modelling capability, NIEIR developed financial models for seven sectors that make up about 45 per cent of the Australian economy. Within these sectors, it constructed two model enterprises – a ‘leader’ and a ‘follower’. The sectors were financial services, retail, mining, telecommunications, public administration, education and health. NIEIR then mapped the future financial path for the model enterprises, based on research into how they will be affected by digital technologies and other trends from now until 2025.
For example, the report finds that retailers will move to hybrid business models that combine the strengths of today’s online and bricks-and-mortar strategies; banks will maintain branches but they will become smaller and more specialised; and universities will embrace online technologies to reinvent the value and experience they offer to students. At the same time, enterprises will face new competitors, changing customer demands, a relentless need to invest to maintain relevance, and other challenges that arise directly from digitisation.
Dr Peter Brain, Founder and Executive Director of NIEIR, said: “The report reveals significant gaps between leaders and followers and shows that the biggest risk for enterprises is failing to develop and implement strategies that transform their operations for the digital era. Our research has highlighted how much the world is going to change over the next decade – in a number of sectors we are at a tipping point between an analog world and the coming digital one.”
The report also highlights the importance of digital transformation for Australia’s productivity growth. Our international competitiveness and ability to maintain living standards will rely on individual enterprises transforming their business models and operations in coming years.
Business Council of Australia Chief Executive Jennifer Westacott said boards must come to grips with the magnitude of the change ahead and must challenge themselves about whether they are asking the right questions. “Are boards asking these questions? Have they got the technology skills, have they got the diversity of thinking and the imagination. Are we really having a conversation about our business model? That is fundamental if we want to get the quantum leaps around the business model.”
The research was launched today by an expert panel featuring Andrew Stevens, Managing Director, IBM Australia and New Zealand; Dr Peter Brain, Executive Director of NIEIR; and Phil Ruthven, Chairman, IBISWorld.
Key findings from the report are listed in the Appendix below. For further information and to download the full report, see: http://www.ibm.com/au/eraofsmart
- Access the report: http://ibm.co/14qX4e5
- Infographic and Podcasts with IBM subject matter experts: ibm.com/au/eraofsmart
Appendix – Key report findings
Australian enterprises already face six main fundamental changes, which will gain even greater significance by 2025 as a result of digital technologies:
Most major business sectors will be substantially affected by digital technology by 2015; almost all will have been significantly transformed by 2018.
No description at this time.
News about how IBM is helping to create Smarter Cities.