by Rebecca Merrett

Digital laggers risk missing out on $106b in revenue by 2025: study

Aug 06, 20133 mins
Technology Industry

Companies that fail to actively pursue digital technologies and transform their businesses could miss out on up to $106 billion in revenue by 2025, according to a new study released by IBM.

The study, which was conducted by the National Institute of Economic and Industry Research (NIEIR), analysed and compared data from 81 ASX 200 listed companies, public sector organisations and international businesses.

Some 40 technology leaders from seven industry sectors – financial services, retail, telecommunications, mining, public administration, healthcare and higher education – were interviewed.

Based on the data, NIEIR modelled future scenarios to compare the difference in expected revenue between a company that invests heavily in digital technologies to improve services and drive down costs and a company that sticks to business as usual.

The study found that a digital leader in the retail sector could potentially make $106 billion more in revenue by 2025 than a business that didn’t embrace digital. This was the biggest difference in revenue, followed by financial services ($15 billion), mining ($12.1 billion), telecommunications ($9.7 billion) and higher education ($304.4 million).

Read Financial services CEOs to increase tech spend, focus on growth in Asia.

For healthcare providers, digital technologies could improve customer satisfaction from 59 per cent in 2012 to 66.1 per cent in 2025, compared to healthcare providers that lagged with digital which would only achieve 60.6 per cent customer satisfaction.

Digital technologies could also reduce costs in public administration from a 4.8 per cent share of nominal GDP to 3.9 per cent share in 2025. This is 1.2 per cent below the current trend.

The study also found significant differences in market capitalisation between digital leaders and those who lagged across the sectors. A mining company could have a market capitalisation worth $130 billion by 2025 by engaging in the digital economy, compared to $38 billion for digital laggers; a difference of $92 billion.

The difference in market capitalisation for digital leaders and laggers in retail by 2025 could be $76.5 billion, telecommunications $54 billion and finance $47 billion.

Andrew Stevens, managing director of IBM Australia and New Zealand, said he sees many organisations taking a ‘wait and see’ attitude and the risk of inaction instead of pushing ahead of the curve and investing in digital technologies is high.

He cited the World Economic Forum’s assessment that ranked Australia as 20th out of 144 countries for international competitiveness during 2012 to 2013, down from seventh place a decade ago.

Read You’re not as progressive as you think you are, Australia: AIIA.

“The key is going to be the decisions boards, CEOs, the c-suite make over the next 12 years that look at where are the export opportunities for us because really the geographic boundaries of any nation are no longer going to limited market reach.

“I think Australia in the Asian Century has an opportunity to do something because of the strength of our service industries; our service industries are about 75 per cent of employment. We have the opportunity through the application of a digital business model to power up and add to the value of those service industries.”