Are you a company with a digital sell-by date? If so, you may find future investors turning their attention elsewhere.
The business landscape is tough and getting tougher. Competition is intense, and investments are under pressure to deliver growth almost from day one. However, many businesses overlook a critical issue: digital transformation. Those that do could be giving themselves a digital sell-by date.
Digital technology can provide enormous benefits at almost every point of business operations. The latest CRM software, for example, can improve engagement between sales people and customers, increase revenue per client and improve demand at the top of the sales funnel.
ERP software, meanwhile, is being harnessed to reduce administration, free up staff for more profitable tasks and deliver real-time data which helps managers make better business decisions.
Businesses are becoming more agile and adopting new digital ways of working. Gone are the days when transformational projects would take years to implement. Today firms can adopt a test and learn approach to new initiatives in which new concepts are either quickly brought to market or dropped.
Those businesses which are ahead of the game will be able to deliver their services faster, better and more affordably than the competition. It stands to reason, therefore, that incorporating elements of digital transformation into your business strategy should be a top priority, but that’s not always the case.
Many businesses are still struggling to get to grips with technology. A recent report (i), found that most businesses were still at the ‘awareness’ phase of key digital technologies with only a minority progressing to implementation phase.
Due Diligence and Value Creation through Digital
So the question businesses preparing for exit should be asking themselves is; How will I fare in digital due diligence?
Things are changing. More and more private equity firms are adopting digital DD and that will have an impact on businesses future exit plans. Here at Palladium Digital we’re seeing demand for our digital DD services doubling year on year with no sign of slowing down.
Digital analysis tends to focus on a number of factors including:
- The digital needs of that industry: Different sectors will have their own approaches to digital technology.
- The capacity for change: Digital transformation depends on having the skills, talent and infrastructure within the organisation to foster change.
- Executive digital competence: How involved are the executives? Are the executive technophobes, or do they place the IT/Digital functions at the centre of their strategy?
- Online presence: How is a firm managing its online presence and how does their online visibility compare with the competition? How does it generate demand through and manage its reputation?
- Future investment: Has the company earmarked resources within the organisation for digital transformation. How long might this take and where do they stand against the competition?
So, whilst a digital change programme may be the reserve of more forward-thinking firms today, that won’t be the case much longer. In a few years it will be standard practice, and that has enormous implications for investments being made today. If a firm shows no sign of implementing a digital transformation roadmap they could be in for shock when they reach exit.
This is why we warn about a ‘digital sell by date’. Innovative technology is revolutionising the business world and is creating a gulf between the early adopters and the slow movers. In this fast-moving world, firms live by the same rules as sharks. They have to keep moving forward or else they die. If you invest in a business which is tech ignorant, you risk being left with a dead shark.
(i) The Digital Transformation Imperative, KPMG 2017