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Where do french companies stand on digital transformation?

How do mid-sized French companies stack up against their CAC40 counterparts and the rest of Europe? Here’s what Gilles Babinet, France’s Digital Champion on the European Commission, had to say.

Mid-sized companies are waking up to digital transformation; CAC40 companies are still getting their bearings

“Three important trends emerged from the barometer measuring the digital maturity of mid-sized and CAC40 companies”, Gilles began. Firstly, mid-sized French companies have become significantly more aware of the importance of digital transformation. “Looking at the responses from corporate executives this year, we saw a certain level of detail in their digital transformation plans, which demonstrates real maturity in this regard.” Mid-sized French companies are waking up, but not all at the same rate. “Retail is ahead of the other sectors, while manufacturing is lagging,” said Gilles. “Much work still needs to be done to make manufacturing sensitive to this topic. In my view, once this is done there will be a knock-on effect for the rest of the economy.”

The last significant point for Gilles was about large companies, which were evaluated for the fourth consecutive year by the eCAC40 maturity barometer. “In 2017, we saw a flurry of rather uncoordinated investments. This is because various corporate divisions still operate in “silo” mode. “So the CDO has trouble and tries to inject some order into all these initiatives.” Gilles believes that this haphazard behaviour on the part of large companies is indicative of their “lack of a strategic vision and beyond that, their inability to change the managerial model, which is key to the digital revolution.”

Large and mid-sized companies have different approaches to the digital arena

“Comparing mid-sized and CAC40 companies is complex,” Gilles explained. CAC40 companies know that investors and market analysts expect something from them, and they are approaching digital transformation with relatively similar roadmaps. Among their major initiatives are start-up incubators and optimising the CRM and cyber security solutions they have had “for a long time”.

Because of their diversity, mid-sized companies are approaching digital transformation in a less uniform manner. While the 2016 barometer estimated that mid-sized companies had on average a two-year lag compared to CAC40 companies, some have in 2017 skilfully used digital technology as a way to get better access to consumers. Feeling less secure than large companies, they have embraced the digital arena earlier and have turned it into a new vein of growth. Gilles qualifies their approach as more “pragmatic” than that of their CAC40 counterparts. In 2017, mid-sized companies concentrated their investments on CRM and cyber security solutions.

The European General Data Protection Regulation (GDPR) will require all French companies to have a Digital Privacy Officer from 25 May 2018 onwards. Gilles thinks this could provide an “electroshock”. In order to comply, companies will have to ask “typically digital” questions on topics such as data governance. This will be an opportunity for them to take stock of their progress on digitisation and unify their efforts. “For that matter, this is a question we should ask next year: did corporate executives take advantage of the opportunity to change the way they think?”

France is moving up in the European rankings, but unevenly 

In 2017, although mid-sized French companies boosted their digital awareness and large companies made massive digital investments, “it was not the year in which France closed the digital gap at the European level.” Out of the 28 EU countries, France came in 16th place in the 2017 Digital Economy and Society Index (DESI). French companies moved up two spots from 2016 but their level of digital technology integration was still below the European average. “France was 24th in RFID utilisation, 20th in social media, 16th in the cloud, 15th in online selling and also 15th in cross-border online selling”, Gilles detailed. The European leaders were Denmark, number one in all categories, followed by Ireland, Sweden and Belgium.

Despite its lag at the European level, France has a significant advantage in the innovation race. It has a vigorous start-up ecosystem, which owes much to the “significant” incubators created by large companies. This ecosystem is pulling small, mid-sized and CAC40 companies up with it.

According to Gilles, three structural factors are still preventing France from catching up. Firstly, there is resistance from the managerial model, which remains “poorly adapted” to digital challenges, and this is a “central” issue. Secondly, payroll taxes applicable to French companies are “much higher than the European average.” As a result, they are less able to invest, “which also explains their lag”, Gilles emphasised. Lastly, France does not have enough specialised institutions of higher learning that can train world-class programmers. He concluded that “even though the French government is showing itself is more favourable to companies, we must continue to drive home the message that much remains to be done. We may think we are off to a good start, but we are not the only competitors in the race.”

Read the second edition of the Barometer on the digital maturity of mid-sized companies.

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Investment fund supporting middle-market companies in four focus sectors: TMT, Consumer, Healthcare and Services.

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