Companies That Promote Digital Transformation Through Marketing & PR Are Rewarded by Shareholders

Harvard Business Review Study Shows Returns Greater When Companies Promote Activities

Technology is everywhere, and with the advancement of artificial intelligence and machine learning, digital transformation strategies seem to be inevitable for all companies, and many leading companies are reaping the rewards. The trend is catching on as the pace of digitization in traditionally non-tech sectors is rapidly increasing, and the benefits are astounding.

For one thing, investors seem to LOVE it, as they’re queuing up to support companies that promote their digital transformation. In fact, companies investing in their own digital transformation are seeing their stocks increase each year as seen in a recent summary of Loup Ventures AI Portfolio.

Those companies that not only undergo digital transformation but also promote it publicly also see great returns. From a recent Harvard Business Review study:

Valuations of firms that go digital are 7% to 21% higher than peers. For example, Korn Ferry, an executive search and management consulting company that rolled out its Talent Analytics product in 2014, improved its valuation by over 60% (increase in market-to-book ratio from 1.21 to 1.94) in the same year.

Interestingly, we find that the valuation benefits of going digital continue to increase over time, rising by 4% to 12% over the subsequent two years. This presents investors with an opportunity to earn profits based on disclosure by firms of their digital activities. We find that an investor can make a 5% risk-adjusted annual return (or alpha, in finance-speak) on a trading strategy that considers whether firms report digital activities.

Investors positively reward companies that not only execute on digital transformation strategies, but especially those that promote these strategies through marketing, PR and social media communication with customers and stakeholders.

Investors have seen the financial benefits in backing tech companies and are now envisioning the benefits it could hold for the traditionally non-tech sectors. Investors have a higher chance of positive returns when investing in companies that are not only investing in digital transformation, but openly market and promote these corporate advancements.

One of the biggest, traditionally non-tech industry success stories may be the food industry. Everyone needs to eat, and it seems technology is finding a way to bring us higher quality, environmentally sound food supplies – which investors are eager to support.

But what do the numbers say? According to PitchBook, investment in food tech has exploded – from a mere $60 million in 2008 to more than $1 billion in 2015. This could be seen as still relatively small, given that food tech has a potential global client base of more than 7 billion people (and growing).

There seems to be great incentives for companies to adopt tech and even market their digital transformation. One example of a company reaping the marketing benefits is none other than Coca-Cola: “In 2015, Coca-Cola bolstered its data strategy by building a digital-led loyalty program. While consumers chalked up rewards, the organization was able to collect essential ‘first-party’ data through social authentication. With this ever-growing database, Coca-Cola was able to connect with its consumers better to increase consumption of its existing line of products, as well as ‘upsell’ new products,” as reported by the Association for Data-Driven Marketing & Advertising.

Innovation and digital adoption seem imperative, but then why are so many non-tech industries still lagging? It seems that digitization doesn’t hold immediate financial gains for the companies – processes are improved, production streamlined, and sales analyzed, but it still takes time to see the financial rewards. One study reported that investors are more likely to support digitization of back office operations such as accounting, and facilitation of current business practices such as sales, customer service and logistics, and all of these are simply taking investments from the companies, with little promise of immediate returns. However, it seems investors see the bigger picture – and future gains – and are willing to bet on it.

It is critical to have the right talent in place to facilitate the process of digital transformation. A recent analysis of hiring data by Indeed showed a rise in the employment of tech occupations in non-tech industries such as finance, retail and energy. Having the right senior managers in addition to the right strategy can make all the difference.

“Going digital” seems to be unavoidable and starting sooner could have immense benefits paired with monumental funding opportunities and higher potential financial gains in the long run. It also seems that companies not accepting the change might get left behind completely. However, the process of digital transformation itself is only half the story; successful companies that today deliver great shareholder returns are the ones out in the public promoting their efforts through marketing, PR and social media measures.

Want to learn how your company can promote its digital transformation? Schedule a consultative session with Merit Mile today.