We asked respondents whether their digital initiatives brought new digitally based products and/or services to market. Two industries are far more likely to say yes than the other 11: high tech (75%) and media and entertainment (74%). Why is this the case? Software delivered from the cloud is a purely digital offering, and so are streaming movies and TV shows, and online newspapers, magazines, and books.
More than half the telecom, automotive, travel-related, banking, and industrial manufacturing respondents said their firms brought a new digital offering to market. But only a minority of healthcare, energy, and consumer packaged goods respondents did so. Why? Energy (41% of which have brought a digital offering to market) and CPG (30%) have physical products that can’t be 100% digitized. Attaching digital sensors to gas and many other perishable consumer goods may not make economic sense. (See Exhibit lll-9.)
Exhibit lll-9: Industries that have developed Digital Products
Of the respondents that said their companies brought digitally based products or services to market through their digital initiatives, the industries reporting the highest mean 2013 revenue from those offerings were telecom ($343 million), automotive ($285 million), and high tech ($284 million). (See Exhibit lll-10.) In addition, utilities ($43 million) and retailers ($109 million) generated the lowest mean revenue. But digital product and/or service revenue as a percentage of total firm revenue shows a different picture – of certain industries in which digital offerings are a greater percentage of overall revenue (although still small):
- Media andentertainment companies’ digital products represented 3.2% of revenue last year (the most of any of the 13 sectors).
- High tech (1.2% of revenue) was second highest.
- Telecom was third (1.1%).
According to published reports, digital products represented 1% (or $1.5 billion) of General Motors’ $155 billion in 2013 revenue.27 That digital revenue came from its OnStar unit (which provides digital services to GM vehicles such as Wi-Fi and remote service). OnStar’s profit margins (a reported 30-35%)28are 10 times those of GM’s overall (3.4% in 2013).
Exhibit lll-10: Mean Revenue from Digital Products Brought to Market
By 2017, media andentertainment companies expect their digital revenue to grow to 4.6% of revenue. High-tech (1.5%) and telecommunications companies (1.3%) expect their digital spending to be a higher percent of revenue (Exhibit lll-11.)
Exhibit lll-11: 2017 Projections for Revenue from Digital Products