China: Reinvention Key to Sustainable Growth

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by KnowESG,

Accenture Plc

KnowESG_China: Reinvention Key to Sustainable Growth
Image courtesy of Accenture

In the most recent release of Accenture's China Digital Transformation Index, it was revealed that a mere 2% of Chinese enterprises are actively engaged in the comprehensive and continuous digital transformation required for achieving sustained, long-term growth.

Samantha Zhu, who serves as the Chairperson of Accenture Greater China, articulated the significance of this finding, stating, "The convergence of external factors such as technological innovation and evolving consumer preferences is intensifying disruptions, presenting both challenges and opportunities to Chinese businesses.

"To effectively respond, organisations must adopt a strategy centred around the complete reinvention of every facet of their operations. They need to embrace a fresh perspective on digital transformation as an ongoing reinvention process, surpassing conventional benchmarks and exploring the realm of possibilities."

The Accenture China Digital Transformation Index represents a cross-industry study assessing the digital maturity of companies across China.

Initially launched in 2018, this latest edition evaluates five critical capabilities – strategy, operations and innovation, digital core, sustainability, and talent – that are pivotal in driving business reinvention.

The research involved surveying over 550 companies across eight industries and was conducted in collaboration with the China Industrial Control Systems Cyber Emergency Response Team (CIC).

The findings of the research point to the fact that only 22% of these businesses are implementing transformation across all aspects of their organisation, and a mere 28% acknowledge that digital transformation is an ongoing, iterative process.

Moreover, organisations are lagging behind in developing the essential capabilities required for successful reinvention. On a scale of 100, Chinese companies scored 58 in optimising their operations and a modest 39 in building a digital core, potentially hindering their ability to leverage technologies like generative AI. Interestingly, 46% expressed their intent to increase investments in AI and automation in the future.

Ms. Zhu emphasised, "Reinvention demands a comprehensive approach that constantly evolves to establish new industry best practices, drive innovation, and fortify initiatives that deliver value to all stakeholders. Companies embarking on a Total Enterprise Reinvention strategy have the potential to achieve greater success, generating 1.3 times more financial value and a 32% higher sustainability impact."

The report outlines five crucial areas of action that the 2% of leading companies, often referred to as 'Reinventors,' prioritise. Embracing these areas can pave the way for more Chinese companies to attain sustainable growth:

  • Set a New Performance Standard: Reinventors, guided by a long-term vision, craft a strategy that spans their entire organisation, prioritising innovation and inspiring entire industries to reach new heights. Regrettably, only 14% of Chinese companies set new performance standards within their respective industries, with most limiting their actions to their existing markets and competitors (66%).

  • Integrate for Enterprise-Level Transformation: Reinventors create connections between people, processes, and data to enhance value creation across their entire enterprise. While some Chinese companies (20%) are enhancing cross-business and cross-functional connectivity and capabilities, many (37%) continue to digitise one function at a time.

  • Strengthen the Digital Foundation: Given the evolving technological landscape, companies must establish a cloud-first infrastructure, lay the groundwork for extensive language models and AI, seamlessly operate across various technology platforms, and address security challenges. Over the next one to two years, Chinese companies plan to increase investments in cloud (37%) and security (36%).

  • Embed Sustainability into Strategy and Operations: Sustainability can catalyse innovation and growth. Chinese companies must commit to integrating sustainability into all aspects of their operations. Presently, only half (51%) of the surveyed companies are utilising digital technologies for environmental impact in energy management and measurement.

  • Empower Tomorrow's Workforce: Reinventors consider their talent strategy as a central driver of successful reinvention, equipping their workforce with the digital tools and skills needed to meet future demands. A mere 33% of Chinese companies acknowledge that talent is pivotal in driving successful reinvention, in contrast to the global average of 52%.

About the Accenture China Digital Transformation Index

The Accenture China Digital Transformation Index serves as a comprehensive framework spanning various industries, assessing the digital and reinvention progress of companies.

Accenture continually updates this framework and its metrics to account for significant economic and societal shifts, such as technological advancements, shifts in consumer preferences, and concerns related to climate change.

It introduces five new dimensions to gauge where companies stand in their journey of reinvention. The study involved the participation of 553 Chinese companies across eight sectors, encompassing high-tech, automotive and industrial equipment, life sciences, consumer goods, retail, chemicals and construction materials, utilities, and natural resources. Accenture has been actively engaged in digital transformation research since 2018, working in collaboration with the China Industrial Control Systems Cyber Emergency Response Team (CIC).

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Source: Accenture

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