Digital Deal Economy
Enabling a digital future requires smart capital strategy.
The business world is being transformed. Advances in technology and digital communications have not only empowered customers but also enabled companies to collect, collate and analyze data in new ways that better inform strategic decisions and change how they operate.
Over the past two decades, companies have ramped up their technology, many without a coherent digital strategy, in an effort to keep up with the relentless pace of digitalization.
Executives recognize that digital transformation is impacting all aspects of their business — from the front - end to the back. They also know that the competitive landscape is changing rapidly as barriers to entry are eroded. Digital is a continuous form of disruption to existing (or new) business models, products, services or experiences, enabled by data and technology across the enterprise. The key challenge for many companies will be a lack of sufficient capital to meet their digital ambition.
Enabling a digital future requires smart capital allocation. Selecting the right strategic investments — organic or inorganic — offers routes to growth. The key question is can companies build the capabilities required to succeed in the brave new world — or do they need to buy?
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Ryan Burke highlights what is needed to transform regular innovation into real disruption. Find out more.
The digital future is here
Today’s digitally transformed world is introducing new and unpredictable competitive pressures that businesses need to address if they want to survive and thrive. Our study finds 90% of executives facing increased competition from companies that have been quicker to embrace digital either existing competitors or new entrants.See the survey results
Capital is at the heart of an effective digital strategy
Eighty-five percent of respondents say they have an established digital transformation function in place as a focus for innovation. Digital is not an IT strategy or one-off investment. The scale of transformation needed requires a long-term capital strategy.
The key challenge for many companies will be a lack of sufficient capital to meet their digital ambition. Businesses need to take a holistic view and incorporate their digital strategy into their “capital agenda” — an enterprise’s strategy for capital allocation and confirm that leadership is committed in the long term to creating a digital mindset and a culture of agile innovation.
Inorganic growth – the way forward
Organic digital initiatives can take years to reach the bottom line. M&A, joint ventures (JVs) and alliances provide the fastest strategic route to digital transformation and growth. Two-thirds (67%) of companies are planning to use M&A to upgrade their digital capabilities in the near future.
Dealing in digital – the challenges
Our findings also reveal that most businesses rely on organic growth to fill their digital gaps. Integration (e.g, IP, systems, technology) and talent retention were major obstacles after the transaction had completed.
By developing an effective digital Capital Agenda, businesses will be in a better position to make the right investment choices. Considering digital strategy as a key component of capital allocation will support the business to transform and grow. M&A, JVs and alliances, alongside organic investment, can help build the innovation pipeline and effectively enable you to survive and thrive in the new digital world.
How EY can help
EY's Transaction Advisory Services Digital Capital Agenda helps businesses respond to digital disruption and realize strategic options by focusing on raising, preserving, investing and optimizing capital.
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