Strategy. Innovation. Brand.

Digitizing The Enterprise

Internet binary monitorsMcKinsey recently published a survey of 850 C-level executives regarding their views on digitizing the enterprise. McKinsey asked about five major trends: 1) big data and analytics; 2) digital engagement of customers; 3) digital engagement of employees and partners; 4) business-process automation; 5) digital innovation.

What do C-level executives think? Of the five trends, customer engagement is clearly top of mind today. Over half the respondents (56%) say that engaging customers and finding new customers through digital channels is at least a top ten priority.

Indeed, digital engagement is accelerating. Compared to the same report in 2012, companies are increasingly using digital techniques to: maintain brand consistency across channels, identify and advertise to target customers, make personalized offers, engage in social media, and create branded applications (and games) for mobile devices.

Big data and analytic initiatives are also growing. Executives report they are especially focused on analyses that help improve forecasts and planning processes. In general, big data activities focus mainly on growth and enhancements – growing revenue, for instance, or enhancing customer service. Using big data to reduce costs is much lower on the priority list.

Similarly, the next wave of business-process automation focuses primarily on efforts to improve quality or create new digital capabilities. Relatively few process automation projects are targeted at reducing cost or replacing labor.

Digital innovation activities revolve around improvements rather than entirely new product categories. Some 40% of respondents say they are adding digital capabilities to existing products or enhancing their technology stacks – by adding cloud computing, for instance.

Of the five key trends, digital employee engagement seems to be the least well developed. Executives report that they use digital tools for employee evaluation and feedback. By and large, however, they’re not engaging in more advanced applications like collaborative design and knowledge sharing.

CEOs are also becoming more involved in digital initiatives. In the 2012 survey, both the CIO (26%) and the CMO (25%) were more likely to be leading digital initiatives than was the CEO (23%). In 2013, the tables turned with CEOs (31%) leading the way while CIOs and CMOs stayed about the same (both at 26%). CFOs lagged far behind – 12% in 2012 and 13% in 2013.

There’s also a new C-level executive at the table – the Chief Digital Officer or CDO. Some 30% of the respondents say that their companies now have CDOs, often with “cross-cutting responsibilities for all digital activities”. Those companies with CDOs claim to have implemented more of their digital vision than those without.

Overall, the executives are quite optimistic about their digital initiatives. Nearly two-thirds (65%) expect that their digital projects will improve operating income over the next three years. Interestingly, B2B executives are more optimistic about growth potential than their B2C counterparts.

While two-thirds of executives foresee growth in income due to digitization, one-third don’t. The more pessimistic executives fear that they won’t be able “to adequately respond to changing customer behavior and expectations”.

Executives admit that they’re only roughly one-fourth of the way toward their ultimate objectives. Still, they’re quite bullish on digital initiatives as ways to transform their companies and their markets.  If they can manage three key obstacles: leadership, expectations, and talent management – they see a bright future for their digital enterprises.


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