Digitization affects almost everything in today’s organizations

business

Description

Digitization affects almost everything in today’s

organizations, which makes capturing its benefits

uniquely complex. Here are the most important

aspects that winning companies consider.

Few companies need to be sold on the benefits of digitization. McKinsey research shows that

companies have lofty ambitions: they expect digital initiatives to deliver annual growth and cost


efficiencies of 5 to 10 percent or more in the next three to five years.1 Yet despite the often-

substantial investments companies have made in digital initiatives, few see that kind of growth.


That’s because getting the engine in place to digitize at scale is uniquely complex. Since digital

touches so many parts of an organization, any large digital program requires unprecedented


coordination of people, processes, and technologies. A strategy to increase revenue from high-

value customer segments, for example, requires analytics-based insights into which purchasing


journeys generate the most value, a clear vision and plan for how to capture that value, and

technologies and tools to digitize interactions with customers. New capabilities and teams are

also needed to manage and coordinate the delivery of those journeys across the organization.2

Of course, adapting over time has always been essential to corporate success. Yet while the

average corporate life span has been falling for more than half a century—Standard & Poor’s

data show it was 61 years in 1958, 25 years in 1980, and just 18 years in 2011—digitization is

placing unprecedented pressure on organizations to evolve. At the present rate, 75 percent of

S&P 500 incumbents will be gone by 2027.3 That means managing your transition to a digitally

driven business model isn’t just critical to beating competitors; it’s crucial to survival.

Six building blocks

In our experience, companies that have successfully transitioned to become high-performing

digital enterprises are able to orchestrate six building blocks: strategy and innovation, the

customer decision journey, process automation, organization, technology, and data and analytics

(exhibit). Now, not every digital initiative requires each building block to be developed and used

to the same degree. Some blocks will also serve as more natural starting points, depending on

a company’s circumstances—for instance, a company whose IT constraints make it hard to

deliver a cutting-edge customer experience will naturally want to focus on the technology

and process elements first. But we’ve found that this framework provides executives with

a coherent structure for thinking through and managing large-scale digital programs.

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