Size Really Does Matter in the Digital Game

One of the most striking differences between leader and follower companies was that leaders were bigger. While the average revenue of the followers’ parent companies was indeed sizable — $22 billion – the leaders’ revenue was more than twice as big at $49 billion. (See Exhibit IV-2) That would place the average leader in our survey at about 200th on the Fortune Global 500 list. While several companies skewed the mean revenue of both leaders and followers, even the median revenue numbers of both are quite different: $22 billion in median revenue for leaders; $4 billion for followers.

Exhibit IV-2: Leaders are Twice as Big as Followers

Exhibit IV-2 Leaders are Twice as Big as Followers

This difference is not surprising. Depending on a company’s ambition and digital mandate, the level of investments in digital technologies can be staggering. Consider the Walt Disney Co., the $45 billion media and entertainment company. In one business unit (its theme park division) and in one part of that unit alone (its Walt Disney World park in Orlando, Fla.), the company is reportedly spending upwards of $1 billion on a massive digital initiative. It promises to greatly simplify the logistics of theme park customers, attract more of them, and get them to spend more.

So it could be that huge companies like Disney find it more palatable to spend huge sums on digital initiatives. In fact, the leaders in our survey will spend three times what the followers plan to spend on their digital initiatives this year — $290 million on average vs. $93 million. But even adjusting for the average revenue of these two groups, leaders’ digital investments will amount to 0.59% of parent company revenue this year vs. 0.41% for followers. This means that per dollar of firm revenue, leaders still plan to spend 44% more than followers this year on their digital initiatives. (See Exhibit IV-3) Trends for 2017 show a slightly bigger gap than the one in 2014 between what leaders and followers expect to spend on their digital initiatives: $298 million to $84 million.
(Exhibit IV-4)

Exhibit IV-3: Leaders spend three times what Followers spend on Digital Initiatives

Exhibit IV-3 Leaders spend three times what Followers spend on Digital In

Exhibit IV-4: Projected 2017 Digital Spending: Leaders far ahead of Followers

Exhibit IV-4 Projected 2017 Digital Spending Leaders far ahead of Followe

What Do Companies With the Most Digital Revenue Do Differently?
Twice the Number of Leaders Have Digital Offerings, and They’re More Lucrative