The Digital Revolution is disrupting, not just the customer experience or the channels’ transformation, but the core of the business value. In 2011, there was just 1 tech company among the Top5 largest companies in U.S. by market cap. Exxon was bigger than Apple, and the other three companies were also incumbents: the oil companies Petro China and, Shell, as well as the bank ICBC. Just 5 years later, in 2016 all the Top 5 largest companies are digital: Apple (market cap leader with 532.000M$), Alphabet/ Google, Microsoft, Amazon and Facebook.
The good news for the incumbent companies: they can also disrupt their markets with a bold, digital transformation strategy. As an example, CVS Health is a well-known U.S. pharmacy and health company. CVS decided to become a truly health care company, so they dropped the cigarettes money. In order to gain business, they focused on innovation and new mobile payment solutions. Return? CVS is #7 of Fortune500 companies (in term of revenues)… far from the #51 position in 2008. And the company has been named the 3rd Most Innovative Company of 2016 by Fast Company, thanks to their Digital Innovation Lab and the partnership with IBM Watson AI system. Her President, Helena Foulkes, is one of the most powerful women in U.S. (Forbes).
At the end of the day, the big question is: Does these digital investments return in terms of profits for the business? Based on the analysis done by McKinsey on the ROI for Digital Banking, it seems that there are big risks on the Digital Revolution: new competitors or margin compression could reduce -35% the net profit of a bank. But the potential opportunities are huge: revenues from digital sales or new products, lower costs… could boost +45% this net profit.
To highlight: Are you getting already the profit from the digital transformation?