McKinsey: The digital tipping point

InsightaaS: McKinsey & Co. is a world-leading management consulting firm, known for advising senior management within the world’s largest enterprises. 

In “The digital tipping point,” McKinsey uses data from a recent survey to illustrate current approaches to digital business initiatives, and how these approaches have changed since 2012. The data shows that C-level executives (including, increasingly, the CFO) are actively involved in formulating digital business strategy. The post’s authors – experts drawn from the US and UK – note that this reflects the “high expectations for digital” expressed by respondents, 35% of whom “expect at least 15 percent of their companies’ growth in the next three years will be driven by digital.” The survey shows that in pursuit of this growth, senior management will invest primarily in digital customer engagementand digital product innovation; respondents also recognize the longer-term importance of Big Data, but the survey shows that nearly half believe that they are under-investing in this area.

Where McKinsey’s reporting is distinguished from other survey sources is in its analysis of the strategic factors affecting digitization. This post drills down into issues like executive understanding of “value at stake” in digital business initiatives, ROI metrics and appropriate accountability measurements, issues that are often beyond the reach of traditional research houses. This depth provides a meaningful basis for the recommendations – understand value, focus on organization-wide impact, and prioritize talent – that conclude the post.

After years of revving their engines, many companies are gaining momentum with their digital initiatives. Executives say their CEOs are more involved in digital efforts than ever before and that their enterprises are now investing enough to meet their overall digital goals. Yet McKinsey’s latest survey on digitization1 also finds that many respondents say their companies must address key organizational issues before digital can have a truly transformative impact on their business.

This year’s survey asked respondents how their companies spend on digital and organize their digital work, as well as the goals, challenges, and best practices they see across these initiatives. Many respondents agree that their companies’ digital programs are growth oriented, that future spending on digital will increase, and that a large portion of future company growth will be driven by digital efforts. But organizational challenges and a dearth of talent are common, significant hurdles that prevent companies from scaling up their digital efforts or seeing clear returns on their investments. So are limited accountability and a poor understanding of potential value. Less than 40 percent of executives say their companies have accountability measures in place, either through targets, incentives, or “owners” of digital programs, while only 7 percent say their organizations understand the exact value at stake from digital.

Going digital to grow

It’s evident that digitization has become a critical asset in many companies’ quest for growth. More than three-quarters of executives say the strategic intent behind their digital programs is either to build competitive advantage in an existing business or to create new business and tap new profit pools…

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