Applegate-Brunel Digitisation Index. A research collaboration on digital activity in UK businesses

Transcription

1 Applegate-Brunel Digitisation Index 2015 A research collaboration on digital activity in UK businesses

2 Key Findings Website Online Banking E-government filing Remote Access Intranet 5% 53% 47% 46% 54% 98% 2% 88% 12% 80% 20% 44% of businesses spend over half their marketing budget online E-commerce 18% 82% Businesses with / without E-marketing tools 61% 55% Twice as many businesses consider marketing important as consider display advertising important 34% 31% 45% make over half their purchases online Marketing Social Media Pay per Click Online Display Average growth levels 64% of businesses find over half their suppliers online 3% Employment 6% Profitability 7% Turnover Businesses report double the growth in turnover and profitability to job creation ABDI 2015

3 Executive Summary The Applegate-Brunel Digitisation Index, published now for the first time, is the result of an extensive research study in which over eight hundred UK businesses participated. With a score of 50 representing the midpoint between entirely undigitised and completely digitised, the index overall stands at 56.9, providing an indicative representation of the adoption of digital technology and processes across British businesses. There is appreciable regional variation, with the East Midlands leading at 60.8 (London, surprisingly, languishes in third place on 59.3) whilst the North West, at 54.0, has the furthest to go. Corporates score higher than SMEs. Two decades on from the launch of graphical browsers, 98% of businesses now have websites, but only 17% use them to sell their products online. Firms are more likely to identify suppliers online a quarter of companies finding over 90% of their suppliers on the web than they are to buy online, suggesting that digital technology is still more a supplementary tool than core to business processes. There has been rapid take-up of some new channels 41 % have adapted for smartphones and tablets, 53% consider social media important in marketing but older digital technologies such as marketing are important to far more businesses (61%) than newer approaches like pay-per-click (34%) and online display advertising (31%). The strongest area of digitisation is in management processes. Government and banks have pushed companies into online tax filing (used by 80% of businesses) and online banking (88%) and this may well have prompted the automation of connected finance processes. Two fifths of businesses, however, still receive significant volumes of cash and cheques, chaining them to manual transactions and data entry with the concomitant risks of error, fraud and graft. The research looked at business performance solely to assess correlations with digitisation. Notably, however, it found average growth in turnover (7%) and profitability (6%) significantly outstripping employment (3%). These initial findings from the study are shared now to highlight some of the key emerging messages. Further evaluation will be undertaken by the research team, with the intention of publishing academic papers providing more detailed analysis of the data in due course. The study will be repeated annually, both to track trends over time and also to support more substantive conclusions as a robust pattern of data emerges. ABDI

4 Contents The Applegate-Brunel Digitisation Index Company size Regions Buying Selling Innovating Managing Business performance Implications Research Team Brunel University London Prof Zahir Irani Dr Kawaljeet Kapoor Dr Christina Scandelius Prof Vishanth Weerakkody Advisory Panel Dr Ruth Dixon Prof Jim Norton FREng Gareth Parker Oxford Univeristy BCS, The Chartered Institute for IT Russell Indexes Dr Dorothy Yen ABDI

5 The Applegate-Brunel Digitisation Index Brunel University London and Applegate Marketplace Ltd have formed an academic-business collaboration to facilitate academic research, inform public policy debate and provide valuable analysis for the business community. At its core lies the establishment of the Applegate-Brunel Digitisation Index, a new measure against which companies can benchmark themselves, that also provides a national gauge to assess take-up and use of digital technologies by businesses. This index will be published annually, to track both overall movement and also changes in different regions and types of business. Applegate, which maintains an extensive database of businesses independent of its commercial relationships, contacted 87,440 businesses by or telephone. Of those 1,030 opted to participate in the study and meaningful data was obtained from 830. Whilst there was no identified selection bias or claims of statistical significance, the participants were mapped against the distribution of businesses in Britain by size and by location, and were found to be a broadly representative sample. Brunel led the design of the study, following review of pertinent academic literature, and analysis of the results. Participants were asked to respond to a series of questions using a seven point scale. In accordance with the advice of authorities in index design, minimal manipulation was applied to the resultant data, solely weighting responses to give equal emphasis to the four categories of business activity (Buying, Selling, Innovating and Managing). A score of 50 would equate to a mid-point response to every question. Level of digitisation Overall Index Buying Selling Innovating Managing ABDI

6 Company size 68.3 SMEs are significantly behind corporates in digitising their businesses 56.9 SMEs Index score Corporates With a 20% higher score, corporates are predictably ahead of SMEs in digitising their businesses Corporates defined as businesses with 251 or more employees - participating in the study achieved on average an ABDI score 20% higher than SMEs. Whilst this is not surprising, it underlines the challenges smaller businesses can face in implementing new technologies and business techniques. The graph below charts participants in the research study against all UK businesses, by number of employees (source: Business Population Estimates for the UK and Regions 2013, Department for Business Innovation and Skills). The majority of participants were micro-businesses with fewer than ten employees just as are the majority of UK businesses. Company size (Employees) 81% 63% Research participants All UK businesses 28% 15% 7% 3% 2% 1% / Employees ABDI

7 Regions 56.0 GVA 117bn 54.0 GVA 141bn 54.9 GVA 110bn 56.4 GVA 52bn 59.6 GVA 113bn 56.4 GVA 45bn 55.8 GVA 101bn 60.8 GVA 88bn 56.9 GVA 130bn Region rankings East Midlands 60.8 South West 59.6 London 59.3 East of England 56.9 North East 56.4 Wales 56.2 Scotland 56.0 Yorkshire & Humberside 55.8 South East 55.4 West Midlands 54.9 North West Overall Index 55.4 GVA 227bn 59.3 GVA 338bn The highest ranked region the East Midlands - has an ABDI score 13% higher than the lowest the North West. Different regions led in the separate categories of business activity: the East Midlands on Buying, Wales on Selling, the South West on Innovation and the North East on Managing. Index scores do not correlate strongly to regional Gross Value Added (GVA). ABDI

8 Buying 15% 17% Proportion of suppliers sourced online 11% 5% 8% 8% 7% 6% 8% 6% 7% % Suppliers sourced online Half of businesses source 70% or more of their suppliers online Businesses are far more likely to find a supplier online than to complete a purchase 50% of businesses source 70% or more of their suppliers online, only 32% make that proportion of purchases online. 21% Proportion of purchases made online 5% 12% 9% 6% 7% 6% 7% 10% 12% 3% % Purchases made online ABDI

9 Selling 17% 2% 9% Don t have a website Company information only, no products and/or services details / Websites Detailed product and/or service information E-commerce website, transactional 72% 98% of businesses have a website Only 17% operate transactional e-commerce websites. 61% of businesses consider marketing important Social media is also important to 54% of businesses but only 34% consider pay-per-click important, only 31% display advertising. 41% have adapted websites for tablets and smartphones E-marketing tools 61% 55% 34% 31% marketing Social media Pay-per-click Online display % considering the following an important tool for their business ABDI

10 Innovating 66% Monitor competitors online 52% Research customers requirements online 29% Conduct online surveys 15% Use Beta tools Two thirds of businesses look up competitors, half look up customers Passive use of online information is widespread. It is not clear whether more businesses research their competitors because they focus more on them than their customers, or because it is easier to gain insight into customers from speaking with them directly. Active engagement with customers online is rarer Under a third of businesses survey their customers online. This may potentially be less relevant for some businesses with small, discrete customer bases. Similarly, fewer than one in six conducts online Beta testing of new ideas and innovations. Whilst such techniques have been adapted to test a wide range of products and services, they may be less pertinent to some business sectors. More businesses research their competitors online than their customers ABDI

11 Managing 46% Have an Intranet 53% of businesses provide remote IT access to staff Intranet 54% Don t have an Intranet Managing is the most digitised category of business activity The ABDI score for Managing is 19% higher than that for Innovating. Strong pull-factors from government and banks are in part responsible, with exceptionally high numbers reporting that they make extensive use of online banking and electronic communication with government (such as to file tax returns). It is also notable that over half of businesses provide staff with remote IT access and almost half have an Intranet. Given the predominance of small businesses, the latter seems surprising. However only 14% have a transactional Intranet even fewer than the 17% who have transactional customer-facing websites. Businesses make extensive use of... 88% 80% Online Banking E-government 38% receive significant volumes of cash and cheques ABDI

12 Business performance Turnover 45% Profitability 39% Employment 22% Increasing -12% Social Media -10% Pay per Click -8% Decreasing Turnover and profitability are growing faster than employment Average growth levels 7% Turnover 6% Profitability 3% Employment ABDI

13 Businesses expect digitisation to improve 63% Customer satisfaction 33% Employee satisfaction 57% Turnover 56% Profitability Twice as many companies are growing turnover than increasing jobs Average growth in both turnover and profitability is also over double that in employment. The average level of growth in revenue exceeds that in profit, suggesting that costs are rising faster than revenue. Digitisation is expected to bring benefits, chiefly to customers More businesses expect digitisation to increase customer satisfaction (63%) than to grow revenue (57%) or profitability (56%). Only one in three businesses expect it to boost employee satisfaction even though almost half have already provided staff with an Intranet. One in five firms depend on the government for over half their revenue A third of businesses receive no custom from the public sector, a further 51% receive less than half their turnover from government, 18% are dependent on it for over half their revenue. Almost twothirds of businesses expect digitisation to benefit customers; only one-third, their employees ABDI

14 Implications The Applegate-Brunel Digitisation Index has been launched to provide a benchmark against which companies can measure themselves and a national gauge to assess corporate digital activity. Although the research collaboration is only at an early stage, it has already presented some fascinating initial findings. A substantial majority of businesses now make use of digital technologies operating their own websites, interacting with government and banking online. Relatively few - 17% - sell their goods online via a transactional website. Businesses are markedly more likely to source a supplier online and then complete the purchase offline than they are to complete the purchase online. They are more likely to use the web to research their competitors than their customers. Twice as many expect digitisation to benefit their customers than to benefit their employees. On average businesses are seeing twice the growth in profitability than in employment. Further research is required to understand the implications of these findings. The initial results raise several questions which the currently available data cannot answer. Relatively few businesses buy or sell online. The data does not support analysis as to which side of the market drives this. Stronger growth reported in turnover than in profitability implies costs are rising faster than revenues. With employment rising at under half the rate of either, wages are unlikely to be the source of the extra costs. This might be due to increasing investment but it could equally stem from inefficiency. Applegate and Brunel hope that this research will promote debate and further study in this important area. In January 2016 the second iteration of the index will be published, tracking progress towards digitisation and changes in business performance. Further information can be found at ABDI

15 Applegate Marketplace Applegate Marketplace is the UK s leading means for business buyers to source the tools, components and services they require, detailing over 17 million products and 400,000 companies. Over 300,000 buyers a month use Applegate, and thousands of businesses publish their product information on the site. Applegate assists both buyers and sellers, providing an efficient information marketplace. The company is ISO 9001 certified and has established broad expertise in assisting firms to grow their business online. Applegate has close links with the engineering sector, funding industrial heritage charity Grace s Guide (www. gracesguide.co.uk) and promoting British design and manufacturing. Brunel University London Brunel University London is a dynamic institution with 13,500 students and 1,700 academic and related staff operating in a vibrant culture of research excellence. Brunel comprises three colleges and three Research Institutes, conducting ground breaking studies. Brunel maintains close links with industry in teaching, research and technology transfer, embracing an ethos of collaboration to develop investigative programmes that make substantial contributions to the body of business and management knowledge. Brunel Business School was named Business School of the Year in the 2013 Times Higher Education Awards. ABDI 2015

16 Published by Applegate Marketplace Ltd, Riverside Road, Barnstaple, Devon EX31 1LS Applegate Marketplace Ltd 2015 ABDI 2015