Digital transformation: Swiss family and privately owned businesses advancing and investing gingerly

Whether artificial intelligence, big data or robotic process automation, the use of digital technologies is one of the greatest challenges that companies around the globe face today. Whether large or small, and irrespective of the industry, those companies that fail to make the right investments in time and take advantage of the opportunities offered by digitisation, sooner or later will feel the pressure.

And this is true not only for listed companies but of course also for family and privately owned businesses. Increasing digitisation and globalisation allows companies to enter new markets more easily and at lower costs. At the same time, competitive pressure is increasing as digitally-driven companies from outside the industry increasingly become competitors. The traditional Swiss family-owned media conglomerate Ringier is a good example for such a transformation. Over the past decade, the group has invested millions of Swiss francs in digital marketplaces – much more than their core discipline, journalism, – thus expanding into areas outside of their traditional realm. Today Ringier generates almost half of its turnover with non-journalistic activities.

To find out how family and privately owned businesses are meeting the challenges of the digital age, Deloitte conducted a global survey of 2,500 executives of family-owned or privately held, mid-sized companies with sales of at least $10 million. The survey was also conducted in Switzerland, where more than 50 executives participated.

A comparison of the Swiss results with the global ones reveals astonishing findings. While on global average one in five of the companies surveyed (20%) considers digital transformation to be a main component of their growth strategy, in Switzerland that figure is just 6%. In other words, Swiss family and private owned companies seem to consider the technological transformation of their own company as less significant as compared to their peers in other countries, as well as larger, public companies.

This different prioritisation is also reflected in their investments. The figure below compares investments in different digital technologies made by all Swiss companies surveyed with those of the companies surveyed outside Switzerland. The y-axis shows the proportion of Swiss companies investing in the listed technologies, while the x-axis shows the proportion of non-Swiss companies. If one point is on the diagonal, the proportion of investing companies in Switzerland is the same as on the global level. Or in other words, the corresponding technology has the same importance. If a point is to the right of the diagonal, the technology is more important for global companies and vice versa.

It is clear that – with the exception of three areas – investments in digital technologies are prioritised much higher in family and privately owned companies at the global level than in their Swiss counterparts. The differences are clearest with regard to the Internet of Things. Here the share of investing global family and privately owned companies is 25%, while in Switzerland it is only 8%. There are also considerable differences in the areas of data analytics, 3D printing and machine intelligence. The proportion of Swiss companies is slightly higher only in three, more traditional areas, namely mobile devices, automation of business processes and CRM.

Other surveys and studies have also concluded that Swiss companies often lag somewhat behind international competitors in the use of and investment in digital technologies. One current example is a comprehensive Deloitte study on digital innovation capability. What generally applies to Swiss companies seems also to apply to family and privately owned companies. While other countries are investing proactively in new digital technologies on a broad front, the trend in Switzerland is to be more cautious, with a general ‘wait and see’ attitude. This is probably due not least to the fact that the effects of digitalisation are underestimated in some Swiss companies, especially SMEs. In a report published by Credit Suisse in 2018, almost 60% of the more than 1,000 SMEs surveyed agreed fully or partially with the statement that digitisation would affect them only marginally in the foreseeable future.

This hesitancy is not without risk. Any company neglecting the opportunities of digital transformation and thus investment in digital technologies runs the long-term risk of losing competitiveness and thus competitive share. Airbnb, Amazon and Zalando are examples that show how quickly traditional business fields can be conquered by new digitally-drinven companies. They caused the turnover of many family and privately owned companies to collapse as well.