Here is a brief excerpt from an article written by Karel Dörner, and David Edelman for the McKinsey Quarterly, published by McKinsey & Company. They focus on the fact that everyone wants to go digital and suggest that the first step should be truly understanding what that is…and isn’t. 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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Companies today are rushing headlong to become more digital. But what does digital really mean?

For some executives, it’s about technology. For others, digital is a new way of engaging with customers. And for others still, it represents an entirely new way of doing business. None of these definitions is necessarily incorrect. But such diverse perspectives often trip up leadership teams because they reflect a lack of alignment and common vision about where the business needs to go. This often results in piecemeal initiatives or misguided efforts that lead to missed opportunities, sluggish performance, or false starts.

Even as CEOs push forward with their digital agendas, it’s worth pausing to clarify vocabulary and sharpen language. Business leaders must have a clear and common understanding of exactly what digital means to them and, as a result, what it means to their business (for a deeper look at how companies can develop meaningful digital strategies and drive business performance, see “Raising your Digital Quotient”).

It’s tempting to look for simple definitions, but to be meaningful and sustainable, we believe that digital should be seen less as a thing and more a way of doing things. To help make this definition more concrete, we’ve broken it down into three attributes: creating value at the new frontiers of the business world, creating value in the processes that execute a vision of customer experiences, and building foundational capabilities that support the entire structure.

Creating value at new frontiers

Being digital requires being open to reexamining your entire way of doing business and understanding where the new frontiers of value are. For some companies, capturing new frontiers may be about developing entirely new businesses in adjacent categories; for others, it may be about identifying and going after new value pools in existing sectors.

Unlocking value from emerging growth sectors requires a commitment to understanding the implications of developments in the marketplace and evaluating how they may present opportunities or threats. The Internet of Things, for example, is starting to open opportunities for disrupters to use unprecedented levels of data precision to identify flaws in existing value chains. In the automotive industry, cars connected to the outside world have expanded the frontiers for self-navigation and in-car entertainment. In the logistics industry, the use of sensors, big data, and analytics has enabled companies to improve the efficiency of their supply-chain operations.

At the same time, being digital means being closely attuned to how customer decision journeys are evolving in the broadest sense. That means understanding how customer behaviors and expectations are developing inside and outside your business, as well as outside your sector, which is crucial to getting ahead of trends that can deliver or destroy value.

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Digital is about unlocking growth now. How companies might interpret or act on that definition will vary, but having a clear understanding of what digital means allows business leaders to develop a shared vision of how it can be used to capture value.

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Here is a direct link to the complete article.

Karel Dörner is a principal in McKinsey’s Munich office, and David Edelman is a principal in the Boston office.