THE DIGITAL STRENGTH INDEX
DSI: LINKING DIGITAL TO SHAREHOLDER VALUE
WHAT IS DIGITAL STRENGTH?
Based on over five years of data gathering, analysis and benchmarking, the Digital Strength Index is an aggregate measure of the digital performance of the top 1000 public companies in the US. The index can determine those companies’ relative digital position across a composite set of analytic measures. Most importantly, the index translates the digital strength score of companies into forward looking top-line growth acceleration expectations.
“Digital strength may be the most important determinant of business health and future growth not being measured….”
Read more in the Harvard Business Review
BUILDING BLOCKS OF DIGITAL STRENGTH
Proprietary algorithms integrate digital datasets
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.
- Most Recent
- Industry Reports
- Topline Report
- White Paper
Casual Dining RestaurantsPublished February 2018
Casual Apparel Retail ReportPublished December 2017
Big Eight Retail ReportPublished November 2017
Hotel ReportPublished October 10, 2017
Airline ReportPublished July 27, 2017
Q3 2017 Quarterly Growth ReportPublished January 2018
2017 Topline ReportUpdated July 2017
Digital Strength White PaperUpdated July 2017
Isobar and alpha-DNA in the news
Isobar CEO Geoff Cubitt and alpha-DNA Co-Founder Rod Fertig discuss the Digital Strength Index, how it works and why "digitally strong" companies are more likely to see the value of their shares increase over time.
Read the full interview on the Salesforce Blog.
If you're in retail, you might as well throw in the towel. If you haven't heard there's an imminent apocalypse on the horizon.
This demise of retail has been instigated and expedited by the gargantuan growth of Amazon, which has been hell-bent on taking over the world. Soon we'll ask Alexa to order a pizza that will be delivered by a drone and when it arrives it will take a picture of you and then send in your measurements for your new bespoke suit and on the way out the door it will complete last year's taxes and the payment will be taken out in bitcoin through your new Prime Membership wallet.
Read more here.
Armed with a hypothesis that the stock market was undervaluing digital, we sought to create the largest known repository of digital data on U.S. companies. Our aim was to prove the link between digital strength and shareholder value, and do so in a way that passes the rigorous standards of hedge funds. We looked at the top 1,000 U.S. public companies, mapped every digital property for those companies, collected 75 billion digital consumer interactions per month over a period of five years, and made thousands of calculations.
Read more here.
Isobar 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 CMO's arsenal is replete with all manner of tools — yet the challenges faced by lead marketers at brands continues to pile up. Digital, certainly an important part of a brand’s marketing, tells a critical part of the story, yet its impact on a revenue, profit and shareholder value is less understood. To that end, Isobar, with its Digital Strength Index (DSI), is making digital a vital boardroom topic.
Read more here.
We're here to tell you. Global digital agency, Isobar along with financial firm, Alpha-DNA, has uncovered the link between digital strength and revenue/shareholder value. Because of this, industry by industry, we're able to predict who will end up on top and who is bringing up the rear.The research analyzes digital strength by looking at magnitude, share, momentum, growth and trajectory. So what are the big things to know?
DMN'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.
Isobar'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.
Isobar 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.
Leveraging Predictive Power
alpha-DNA is a boutique research firm that specializes in growth analytics leveraging real-time digital information and machine learning. alpha-DNA’s proprietary algorithms assess digital strength of businesses to systematically predict forward looking topline acceleration expectations within a portfolio. The predictive capability has been developed and refined over a broad spectrum of businesses covering Large, Mid, Small, Micro, Nano Cap public companies and private Small & Medium Enterprises. alpha-DNA client engagements span across hedge funds, private equity firms, banks, market research and strategy consulting firms.
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.
Learn more about Isobar here.
More information about our digital transformation capabilities.