Research review: McKinsey on digital strategies

Just Blend In

Just Blend InIt’s always good to have data to back up thinking about trends or challenges. So it’s interesting to read this study by McKinsey giving the results of their global survey of senior executives on companies’ progress in achieving their digital strategies.

The headline identified by McKinsey is that CEOs are increasingly engaged in driving forward digital strategies, at the same time as companies step up their efforts in that direction. And actually, that’s perhaps not a surprising mix. The increasing engagement of the CEO is likely to be necessary to push the digital agenda within the company, and certainly the results of the survey do identify senior management involvement as a key issue in project success or failure.

Key trends in digital

The survey asked about five trends in digital technology —big data and advanced analytics, digital engagement of customers, digital engagement of employees and external partners, automation, and digital innovation— and respondents said that these were all key priorities for their company. Of these, however, customer engagement was far and away the most important, with 56% saying that it was one of their company’s top ten priorities. In comparison with last year, the number of companies engaging in all of the various digital customer engagement activities identified has increased. However, most companies have been slower to use digital tools to engage their own employees.

More companies are also using big data applications. For example, 46% of companies are now using big data finance and budgeting tools, compared with just 34% last year. In automation of decision-making, the percentage using big data processes has increased from 20% to 37%. Respondents also reported that their companies were using automation to improve functions, although not, it seems, with the aim of creating digital-only products. Most companies were incorporating digital technology into existing products, or improving operating models by, for example, using cloud computing.

Leadership and change management

The involvement of CEOs in sponsoring technology programs is likely to be a key driver of change. Digital technology programs are often cross-cutting, and without the CEO’s involvement, would not have one single high-level sponsor, often a problem in change management. So the increasing involvement of CEOs, up to 31% from just 23% last year, is likely to be both symptomatic of the higher value placed on digital programs, and also the cause of increasing use of digital technology. And it’s not just CEOs who are more involved, but CIOs, CFOs and Boards of Directors.

As so often, respondents are clear that the crucial challenge faced by companies in implementing digital strategies is not the technology, but rather the leadership and ability to manage change among senior executives, and the organisational structures to support it. Senior management interest and desire to change was identified as one of the top three factors in success or failure of initiatives. So perhaps it’s not so surprising to see senior executives taking an increasing interest in their company’s digital strategy, and sponsoring projects. It’s also not surprising to see that 65% of respondents believe that their company’s digital strategy will result in increasing operating income over the next few years. They expect to get the biggest boost from improved customer engagement, although whether this is a result of the increasing investment in that area, or a cause of it, is not clear.

Interestingly, the levels of investment in digital programs vary widely across regions, being much higher in North America than anywhere else. But two thirds of executives do not believe their company is spending the right amount on digital, and many believe they are under-investing. And in considering real business impact, there is plenty of room for improvement: only 40% of respondents believe their company’s digital strategy has had any measurable impact to date.

Future challenges

The report closes by identifying three key challenges for the future period:

  • finding the right leaders to drive the digital agenda, given the key importance that is laid on leadership in change management both in this survey and in classic theory.
  • managing expectations in a way that maintains aspirations without overestimating either potential or progress; and
  • prioritising talent. Many executives worry that their business does not have the right talent to drive forward the agenda, and are concerned about how to acquire it. But as the authors point it, that’s only part of the problem: once they have the talent, they need to hold onto it, always difficult in a sellers’ market.

It will be interesting to see progress in a year’s time.

No comments yet.

Leave a Reply