Here is a brief excerpt from an article written by Jürgen Meffert and Anand Swaminathan for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.
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Initial successes in a digital transformation often break down over time. Digital winners know what it takes to break through.
Legacy companies have made significant strides in digital innovation. You’d be hard-pressed to find a business that hasn’t launched an app, redesigned its website, piloted digital tools, or opened a Twitter account. Scaling all the benefits of digital is the next frontier, but it’s proving to be a significant barrier for many companies. While it’s possible to muscle your way through a single digital initiative, scaling them requires breaking through the gravitational pull that the legacy business exerts as it reverts to ways of working that have been successful for decades.
Breaking through that force field demands strength, conviction, and, in most cases, a trigger. CEOs need to create a sense of urgency, even fear, to spur their companies to embrace innovation and change at scale. Bosch CEO Volkmar Denner put it like this when he saw that his company faced a new level of competition: “Suddenly others are earning the money.” Denner initially invited the entire workforce to form “disruption discovery teams” to develop digital strategies that attacked the Bosch business model—and received 1,800 ideas in less than a week. Ideas are easy, but unless they address the core issues of the business, they often fail. Denner helped break through the old ways of doing business by institutionalizing these teams, which are now a core part of the Bosch training program and create a “disruption engine” that’s continually in motion.
So how do companies successfully break through the gravitational pull of their legacy businesses? That struck us as the key issue to address in a digital transformation. So we analyzed more than 50 case studies of companies that have made significant strides in scaling their digital transformations for our book Digital @ Scale.
We identified the following best practices:
[Here’s the first.]
1. Think big.
One of the biggest culprits that causes regression to the old ways of operating is incrementalism. When companies make only small changes, they rarely develop enough momentum to break through legacy habits. Instead, they need to be both bold and specific. President Kennedy didn’t say America should join the space race. He challenged the country to send a man to the moon and bring him back safely.
Have a bold plan: A holistic plan that scours the entire enterprise for digital opportunities is critical—even if those opportunities disrupt the legacy business. Instead of protecting established practices, digital companies play offense, building new ecosystems, modernizing the business architecture, and equipping the company for the challenges ahead. In 2009, Axel Springer CEO Mathias Döpfner articulated a crystal-clear ambition: “In ten years, we want to generate 50 percent of our revenues and earnings from digital.” With a clear goal, the company delivered. In 2016, digital media represented 67 percent of the company’s revenues and 72 percent of EBITDA.
Put the customer first: Companies should start by asking, “What would the optimal experience look like for our customers?” This point is crucial because having the customer as the focus for action makes it difficult for people to hide behind “That’s the way we’ve always done it.” One way to mine for this knowledge is by studying customer journeys and identifying every interaction and process aimed at customers.
Break down the functional silos: We’ve all heard this point before, but it requires real emphasis because it both fundamentally changes the organization and is usually met with resistance. Cross-functional teams only work when led by individuals who are held accountable and are empowered to drive the change and overcome institutional inertia. Some companies, for example, establish Digital Competence Centers. The centers house the Digital Transformation Office, which coordinates and manages the transformation, and the Digital Expertise Lab, a center for new digital talent.
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Here is a direct link to the complete article.
Jürgen Meffert is a senior partner in McKinsey’s Düsseldorf office, and Anand Swaminathan is a senior partner in the San Francisco office.