Here is a brief excerpt from an article 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.
To learn more about the McKinsey Quarterly, please click here.
* * *
For the companies that are not yet digital reinventors, the survey results suggest three starting points for focusing digitization efforts
o Take a dual approach to business-model innovation.
To find success and sustain growth, incumbents must do two things at once: digitize their core businesses while also innovating with new digital ones. Making small changes to the edges of your business model is insufficient in an increasingly digital world. To digitize the core while developing new digital businesses, a company needs a strategy much more complicated than it would need focusing on a single path. Digital strategies must create a road map for continuing to invest in and energize the core, while finding both the mind share and capital resources to innovate with new business models. Success at this game requires a tight link between strategies and the overall operating model (including IT’s operating model) to ensure realistic investment projections and estimates of time to impact.
o Be bold in experimenting with new technologies.
To make sure they get the most out of digital investments, companies need to scale up their technology investments once they have been tested. To keep pace with digital change, companies will also benefit from being more proactive in seeking and evaluating new technologies and digital advances for potential use. This requires a partnership with IT at a strategic level and continual efforts to educate business-unit leaders on the fundamentals of the latest digital technologies, so they understand how to embed those technologies at scale into their businesses to capture the value of digital.
o Make decisive investments.
Companies that invest boldly and at scale do better than companies that are tentative. Therefore, the more hesitant companies (more specifically, the traditional incumbents) need to recraft their investment decision-making processes and their overall cultures. To make more decisive—and effective—digital moves that will drive the business forward and capture the benefits of digitization at scale, they can take a venture-capitalist approach to investing. This means moving faster to both fund and defund initiatives and being more comfortable with changes to the overall business portfolio. Since the culture of many companies is risk averse and relatively siloed,5 a bolder approach to investments will prove to be a significant challenge if traditional incumbents don’t address their culture directly. Incumbents must embrace a test-and-learn mind-set to help drive innovation and appropriate risk taking at all levels of the organization. Breaking down siloed mind-sets and behavior through more integrated, cross-functional teams — as well as a unified view of customers and what they need — can help foster a more agile culture, enabling companies to learn from experiments at a pace fast enough to respond to their rapidly changing markets.
* * *
Here is a direct link to the complete article.