The Digital Strength Index
Linking digital to shareholder value
WHAT IS DIGITAL STRENGTH?
One short week in the Wall Street Journal told the story. An article explained “Why All CEOs Need to be Tech CEOs”; the J. Crew Group chairman lamented the company’s slow movement to digital in marketing and its supply chain; Ford’s valuation fell behind Tesla’s, and Ford replaced its CEO because the company was slow against digital natives Uber and Google. The following week? Amazon bought Whole Foods. Digital is a boardroom topic.
The Digital Strength Index links digital to shareholder value. It measures the digital performance of the top 1000 public companies in the US. It’s based on over five years of data, analysis, and benchmarking, and determines relative digital rankings across a composite set of analytic measures. The Index proves the link between digital footprint and shareholder value, and provides forward-looking, top-line growth expectations.
BUILDING BLOCKS OF DIGITAL STRENGTH
Proprietary algorithms integrate digital datasets
- Magnitude
- Share
- Momentum
- Growth
- Trajectory
size of a company’s digital presence
Magnitude measures the volume of digital customer interactions for a business across the broad online landscape. It is represented as a z-score calculated within the specific competitor peer set. It aggregates a diverse set of metrics across platforms (site, search, social) and effectiveness dimensions (penetration, engagement, popularity). Bigger businesses with larger customer files should score high on Magnitude.
Share of digital relative to share of total revenue
Share contextualizes the volume of digital customer interactions relative to the overall size of a business, its customer base and total revenues (online and offline channel revenues aggregated). It is represented as a percentage calculated within the specific competitor peer set. High growth companies tend to score better on this Share measure since digital interactions often reflects underlying growth dynamics in the customer base and points to market share gains in the near future.
Digital measures with positive sequential acceleration
Momentum captures the strength of the incoming trend in digital customer interactions for a business in recent times, typically 2-3 years depending on the category. A range of velocity measures are considered to represent Momentum, i.e., month-over-month, quarter-over-quarter, year-over-year change in order to de-seasonalize the data across categories over time and tease out true changes in acceleration. It is represented as a percentage of digital acceleration measures with positive growth. Businesses experiencing customer acquisition spurts typically score high on Momentum.
revenue growth PROJECTION Based on change in digital INTERACTIONS
Growth is the translation of change in digital velocity to forward looking topline revenue growth expectations for a business. The predictive signal has been developed primarily to rank order a portfolio of companies based on their future growth potential. The underlying algorithms leverage and benefit from near-real-time digital data on businesses available after the last quarter earnings release publicly disclosed by the company. Growth is expressed as a year-over-year percentage change in topline revenue expected in the upcoming period.
Correlation of digital trends to overall revenue trends
Trajectory reflects the strength of the fit between digital customer interactions and overall revenues of a business over time. Companies with fundamentally stronger customer bases, superior customer experience and high growth profiles typically have a digital trajectory that mirrors its revenue trajectory. Conversely, struggling businesses lag in their digital act compared to peers and it manifests in poor digital correlation measures. Trajectory is visualized as a measure of correlation.
Reports
- Most Recent
- Topline Report
- White Paper
- Industry Reports
2017 Topline Report
Updated July 2017Digital Strength White Paper
Updated July 2017Airline Report
Published July 27, 2017News
Isobar and alpha-DNA in the news
CMOs' Evolving Analytics Imperative: A Q&A With Isobar Co-CEO Jeff Maling
Published August 1, 2017Isobar US co-CEO Jeff Maling, sat down with Forbes’ Jenny Rooney to discuss the data challenges facing CMOs and how harnessing the power of digital and data will ensure success. Pointing to the Digital Strength Index (DSI) created by Isobar and alpha-DNA, Jeff talks through the importance of digital transformation to stay ahead of the pack.
"Our Digital Strength Index (DSI), created with hedge-fund data provider alpha-DNA, shows that the top decile of public companies achieve nearly 10% revenue growth in the following year compared to -8% for laggards. This is a nearly 20-point gap between digital winners and losers. And that is only in one year. The longer-term shareholder-value implications are even more striking."
Read more here.
The Monday Stack: Flexing Digital Muscles
Published July 17, 2017DMN's Kim Davis takes a look at the Digital Stregnth Index, noting the long-term impact for digital laggards and why digital transformation matters.
"How many ways does digital transformation matter — in marketing, of course, but also across the business? One non-trivial way is shareholder value, and global agency Isobar set out to measure the connection. Its Digital Strength Index measures the digital performance of 1,000 top U.S. public companies."
Read more here.
8 Key Points You Need to Know From Mary Meeker’s Internet Trends Report
Published on June 26, 2017Isobar's Saurab Bhargava dissects the 355 page report into 8 key points so you don't have to. Key themes include betting big on digital (given its linear connection to revenue), the shifting retail landscape and digitised health management.
“At Isobar, we know there is a linear connection between revenue/EPS and digital strength. It’s something we proved in our proprietary Digital Strength Index, which uses historical data to show that ability to project revenue strength against digital sophistication. Mary Meeker’s report echoes our findings. 40% of the top 20 companies, in terms of current market value, are tech companies, with Apple, Alphabet, Microsoft and Amazon leading the pack, followed closely by social media giant Facebook.”
Read the full article here.
Transforming The Experience For The Post 95s
Published on June 8, 2017Isobar Global CEO Jean Lin spoke about Brand Commerce at this year's Advertising Week Asia. Her session titled "Transforming The Experience for the Post 95s" focused on digital transformation and the potential for revenue growth. The keynote included compelling stories and results that spoke a single truth; agility needs to be a fundamental element present for businesses.
“Joint research between Isobar and U.S-based research firm Alpha-DNA showed that from the top 1,000 companies with strong revenue growth, Digital Transformation will only improve the strength of businesses. So, how can brands maximize the potential of digital transformation, especially when engaging the key post ’95 audience?”
Read more here.
About Us
Leveraging Predictive Power
alpha-DNA was founded in 2014 with the primary goal of leveraging real-time digital information within scalable consumer analytics frameworks to improve high value financial decisions. alpha-DNA client engagements span across hedge funds, private equity firms, banks, market research and strategy consulting firms, all with the primary focus on assessing digital performance of companies/brands and translating that into forward-looking topline growth acceleration expectations.
Ideas Without Limits
Isobar is a full-service, digital agency with 6,000 people and 85 offices around the globe. Isobar is the only agency named as a Leader on Gartner’s Magic Quadrant for Digital Marketing Agencies for the third consecutive time (2015, 2016, 2017) and as a Leader in The Forrester Wave™: Digital Experience Service Providers, Q4 2015. With expertise in large-scale digital transformation and Product and Service Design capabilities, we creatively solve complex client challenges – delivering business results for clients including the US Air Force, Enterprise Holdings, HBO and Bloomberg.