Chinese Companies Need to Reinvent Themselves to Drive Sustainable Growth, According to Accenture Report

Accenture identifies five capabilities to accelerate the reinvention of Chinese companies

Beijing; Sept. 21, 2023 – The latest edition of Accenture’s (NYSE: ACN) China Digital Transformation Index shows that just 2% of Chinese companies are undertaking the holistic, continuous digital transformation steps needed to drive long term, sustainable growth.

Samantha Zhu, chairperson of Accenture Greater China, said, “A convergence of external forces like technology innovation and shifting consumer preferences is increasing disruption, and creating new challenges as well as opportunities for Chinese companies. To effectively respond, organizations need to embrace a strategy focused on reinventing every part of their business. They need to adopt a new approach to digital transformation as part of their continuous reinvention, going beyond benchmarks, and embracing the art of possible.”

The Accenture China Digital Transformation Index reflects cross-industry research that assessed the digital maturity of companies across China. First published in 2018, the latest edition analyzed five new capabilities including strategy, operations and innovation, digital core, sustainability, and talent that are key to drive business reinvention. The study surveyed more than 550 companies in eight industries and has been published in collaboration with China Industrial Control Systems Cyber Emergency Response Team (CIC).

The research indicates that only 22% of businesses are transforming all parts of their organization, and only 28% recognize that digital transformation is an ongoing process. It also shows that organizations are lagging in building key capabilities needed for them to reinvent. On a total of 100, Chinese companies scored 58 in optimizing operations, and 39 in building a digital core, which could hamper their efforts in leveraging technologies such as generative AI. Forty six percent said they will increase future investments in AI and automation.

“Reinvention requires an enterprise-wide approach that focused on constantly evolving to create new best practices in the industry, drive innovation, and strengthen initiatives that deliver value for all stakeholders. Companies that embark on a Total Enterprise Reinvention strategy have the opportunity to achieve greater success, such as creating 1.3 times more financial value, and 32% greater sustainability impact,” added Ms. Zhu.

The report listed five key areas of action that the 2% of leading companies or the ‘Reinventors’ focus on, and if prioritized can help more Chinese companies achieve sustainable growth:

• Set a new performance frontier: Guided by a long-term approach, Reinventors lead a strategy across the entire business, prioritize innovation, and inspire entire industries to reach new heights. Only 14% Chinese companies set a new level of performance in their industry, and most limit their actions to their current market and competitors (66%).
• Integrate for enterprise-level change: Reinventors connect people, processes, and data to enhance value creation across the whole business. Some Chinese companies (20%) are strengthening cross-business and cross-functional connectivity and capability, while many (37%) still choose to digitize one function at a time. 
• Strengthen the digital core: The technology landscape has changed, and companies need to build a cloud-first infrastructure, create the data foundations for large language models and AI, work seamlessly across technology platforms and address security threats. In the next one to two years, Chinese companies said they will increase investments in cloud (37%) and security (36%).
• Embed sustainability into strategy and operations: Sustainability can be an enabler of innovation and growth. Chinese companies must commit to embedding sustainability into all aspects of their business. Currently only half (51%) of the companies surveyed are using digital technologies for environmental impact in energy management and measurement. 
• Empower tomorrow’s workforce: Reinventors make their talent strategy a core driver of successful reinvention, empowering their people with the digital tools and skills to address future needs. Only 33% of Chinese companies agree that talent is core to drive a successful reinvention, compared to 52% at the global level.

The Accenture China Digital Transformation Index is a cross-industry framework that assesses a company's digital and reinvention progress. Accenture upgrades the framework and metrics to better factor in major economic and social shifts like technology evolutions, consumer preferences, and climate change. It defines five new dimensions to measure where companies stand in their reinvention journey. The study surveyed 553 Chinese companies in eight industries, including high-tech, automotive and industrial equipment, life sciences, consumer goods, retail, chemicals and construction materials, utilities, and natural resources. Accenture has been conducting digital transformation research since 2018 in collaboration with the China Industrial Control Systems Cyber Emergency Response Team (CIC).