Leading companies are increasingly using annual reports to discuss their digital ambitions and their journey to become a technology empowered company. In the annual reports, they clearly articulated their technology vision, their accomplishments so far, and their future digital direction. Companies are even launching Technology Committee in their Board of Directors to further elevate technology’s positioning within their companies. As more and more companies shift towards making technology an essential part of their businesses, discussions on technology strategy will become a core part of every annual report.
As technology becomes the driving force for companies across industries, more and more CEOs are viewing technology as a core part of their top agendas. In the meantime, many companies are still struggling to raise the profile of technology within their companies. Technology is being viewed as IT’s sole responsibility. In annual reports of public companies, companies would typically disclose significant IT investment as a part of the capital investment. However, discussing technology as a core part of their strategies and highlighting the technology investments and impacts associated with the investments in annual reports can be a great way for companies to raise the profile of technology in their companies. It can also contribute to the image shifts of the companies and attract more technology talents in the future.
I recently went through over 30 companies’ latest annual reports and identified a number of companies who have contributed a significant portion of their annual reports to discuss their technology investment. I also summarized seven key themes of how those leading companies discussing technology in their annual reports. The identified companies are J.P. Morgan Chase, Nike, Best Buy, Nordstrom, Hilton, PingAn Financial Services Group in China, and Allianz. The companies represent a variety of industries and geographies.
7 key themes
1 – Technology as a part of their mission
Leading companies are explicitly stating to their shareholders and their employees their goals of using technology to empower their business strategies. Examples of such mission statements from the annual reports include:
- JPMC: “we challenge ourselves to think, innovate and deliver like a technology company”
- Best Buy: “to enrich our customers’ lives through technology”
- PingAn: “world-leading technology-powered retail financial services group”
- Allianz: “Digital by Default – build legacy-free platforms with core processes automation”
- Nordstrom: “Be the best fashion retailer in a digital world”
Each of them then discussed in detail what they wanted to accomplish via technology. For example, Nike discussed its “Customer Direct Offense” strategy where it aims to turn the global shifts across customer population and sports preferences into accelerated global growth for Nike.
2 – Relentless focus on customers
Customer centricity is front and center in those companies’ annual reports. These leading companies focus not only on customer acquisition using digital channels, but also emphasize the deepening of customer relationships, leveraging technology. Examples include:
- PingAn: In 2018, the number of Internet users for the group was 538 million, a YoY increase of 23.4%. The number of active users was 252 million with an average of 2.37 services per user. Furthermore, in 2018, the average operating profit per customer was ¥531 and the average number of PingAn products per customer was 2.53.
- JPMC: in 2018, JPMC served 49 million active digital customers with 33 million active mobile customers.
- Nike: focusing on the 2X Direct strategy to break down the barrier between physical and digital retail. In 2018, it exceeded all of its membership targets—adding new members, heightening engagement, and improving conversion.
Customer centricity and technology are intricately linked. Customers’ desire to use technology is the impetus for companies to invest in technology. Using technology to create more intuitive user experiences and better value for customers will in turn drive more customers’ desire for technology-powered products. The flywheel effect from the customer centricity unquestionably is what the leading companies are seeking.
3 – Business Outcomes from the Technology Investment
In addition to the technology capital investments that traditional annual reports would disclose, leading companies now also provide details on the business outcomes they were able to accomplish from their technology investments. The outcomes would cover both operational process efficiency improvement and new revenue brought in by the technology investment.
- In its 2018 annual report, PingAn described that it was able to process 96.4% of auto accidents within 5 to 10 minutes.
- JPMC described that for its consumer & community banking segment, the simplified onboarding experience allows customers to open a new deposit account digitally in three to five minutes. This functionality added approximately 1.5 million new accounts since its February 2018 launch.
- Best Buy continued to streamline its online buying process, enabling faster and more efficient delivery, and further enhancing the in-store pickup experience. In fiscal 2018, Best Buy grew its online revenue from $4.8B in 2017 to $6B. Best Buy is also entering the Health Technology Solutions space, aiming to help aging population stay healthy at home with the assistance from technology products and services.
- Hilton highlighted its effort to scale Digital Key technology to more than 4,100 properties with 7.6 million keys downloaded in 2018. It also rolled out more than 1,800 Connected Rooms.
- Nordstrom now supports more than 60 combinations in which merchandise is ordered, fulfilled and delivered. This not only enables Nordstrom to serve customers in multiple ways, it but also provides customers a seamless experience across stores and online
- Nike expects that digital revenue, both owned and through partners, will increase from nearly 15% today to over 30%
Leading companies would also explicitly discuss in their annual reports the competitive differentiation that the technology investment is creating. For example, PingAn disclosed in its annual report that in 2018 alone, it applied for 9021 patents, a 400% increase from 2017.
4 – Changing the Company Fabrics
Leading companies are aggressively changing their underlying fabrics across organization structure, management processes, and talent to weave technology into every part of their businesses. Their annual reports explicitly disclose some of the changes that they are embarking on.
For example, JPMC mentioned in its 2018 annual report that it sent one of its senior teams to China to study what’s being achieved there with artificial intelligence and Fintech and to motivate the whole company to move quickly. In its 2017 annual report, JPMC also detailed its efforts to use agile to combat big company bureaucracy and streamline application development efforts.
5 – Technology becoming key performance metrics to top management teams
To really embed technology into all parts of businesses, companies must change KPIs to emphasize the criticality of technology. For example, Allianz has adjusted its top management team’s mid-term bonus, a bonus for the performance over the last 3 years, to explicitly include technology-related KPIs. The mid-term bonus now focuses on both the performance and the health of the company, with “Digital by Default” being one of the five key metrics underneath the health pillar.
6 – Technology as an ongoing agenda item for the Board of Directors
In addition to the common board committees such as the Audit Committee, the Risk Committee, and the Compensation & Nomination Committees, there is now an emergence of a Technology Committee in Boards of Directors. My quick research showed that a number of major companies have installed Technology Committee as a part of their Board structure.
For example, Allianz Board’s Technology Committee met twice in 2018 to discuss IT transformation and IT harmonization across the Allianz Group. They also discussed emerging technologies such as Blockchain and its implications for Allianz.
In addition, Bank of New York Mellon’s Technology Committee in its Board would review the Technology Operations reports, including software development project performance, technical operations performance, and technology architecture.
7 – Technology Testimonials by Customers
Curious readers must be wondering how the above themes would compare to the annual reports of technology companies such as Apple, IBM, Cisco, Alphabet/Google. Are there themes that are missing? The one missing theme that I identified is the case studies of users/customers and how the internally developed technology by the leading companies has created customer impact. Tech companies such as Apple and IBM prominently profile the impact of external customer and user impacts. As the leading tech-empowered companies such as JPMC and PingAn continue to push their technology agendas, we are confident that they will be profiling such stories in their annual reports soon!
In conclusion, more and more companies are going to do what JPMC stated in its annual report: “we challenge ourselves to think, innovate and deliver like a technology company”. As those companies deploy technology to empower their businesses, we hope the seven themes described above will appear in every annual report.