What
DIGITAL really means
Everyone wants to go digital. The first step
is truly understanding what that is.
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,
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.
Creating value in core
businesses
Digital’s next element is rethinking how to
use new capabilities to improve how customers are served. This is grounded in
an obsession with understanding each step of a customer’s purchasing
journey—regardless of channel—and thinking about how digital capabilities can
design and deliver the best possible experience, across all parts of the
business. For example, the supply chain is critical to developing the
flexibility, efficiency, and speed to deliver the right product efficiently in
a way the customer wants. By the same token, data and metrics can focus on
delivering insights about customers that in turn drive marketing and sales
decisions.
Critically, digital isn’t about just working
to deliver a one-off customer journey. It’s about implementing a cyclical
dynamic where processes and capabilities are constantly evolving based on
inputs from the customer, fostering ongoing product or service loyalty. Making
this happen requires an interconnected set of four core capabilities:
Proactive decision
making. Relevance is the
currency of the digital age. This requires making decisions, based on
intelligence, that deliver content and experiences that are personalized and
relevant to the customer. Remembering customer preferences is a basic example
of this capability, but it also extends to personalizing and optimizing the
next step in the customer’s journey. Data providers such as ClickFox, for
example, blend data from multiple channels into one view of what customers are
doing and what happens as a result. In the back office, analytics and
intelligence provide near-real-time insights into customer needs and behaviors
that then determine the types of messages and offers to deliver to the
customer.
Contextual
interactivity. This means analyzing
how a consumer is interacting with a brand and modifying those interactions to
improve the customer experience. For example, the content and experience may
adapt as a customer shifts from a mobile phone to a laptop or from evaluating a
brand to making a purchasing decision. The rising number of customer
interactions generates a stream of intelligence that allows brands to make
better decisions about what their customers want. And the rapid rise of
wearable technology and the Internet of Things represents the latest wave of
touchpoints that will enable companies to blend digital and physical
experiences even more.
Real-time automation. To support this cyclical give-and-take
dynamic with customers and help them complete a task now requires extensive
automation. Automation of customer interactions can boost the number of
self-service options that help resolve problems quickly, personalize
communications to be more relevant, and deliver consistent customer journeys no
matter the channel, time, or device. Automating the supply chain and core
business processes can drive down costs, but it’s also crucial to providing
companies with more flexibility to respond to and anticipate customer demand.
Journey-focused
innovation. Serving customers
well gives companies permission to be innovative in how they interact with and
sell to them. That may include, for example, expanding existing customer
journeys into new businesses and services that extend the relationship with the
customer, ideally to the benefit of both parties. These innovations in turn
fuel more interactions, create more information, and increase the value of the
customer-brand relationship.
Building foundational
capabilities
The final element of our definition of digital
is about the technological and organizational processes that allow an
enterprise to be agile and fast. This foundation is made up of two elements:
Mind-sets. Being digital is about using data to make
better and faster decisions, devolving decision making to smaller teams, and
developing much more iterative and rapid ways of doing things. Thinking in this
way shouldn’t be limited to just a handful of functions. It should incorporate
a broad swath of how companies operate, including creatively partnering with
external companies to extend necessary capabilities. A digital mind-set
institutionalizes cross-functional collaboration, flattens hierarchies, and
builds environments to encourage the generation of new ideas. Incentives and
metrics are developed to support such decision-making agility.
System and data
architecture. Digital in the
context of IT is focused on creating a two-part environment that decouples
legacy systems—which support critical functions and run at a slower pace—from
those that support fast-moving, often customer-facing interactions. A key
feature of digitized IT is the commitment to building networks that connect
devices, objects, and people. This approach is embodied in a
continuous-delivery model where cross-functional IT teams automate systems and
optimize processes to be able to release and iterate on software quickly.
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.
byKarel Dörner and David Edelman
http://www.mckinsey.com/insights/high_tech_telecoms_internet/what_digital_really_means?cid=digital-eml-alt-mip-mck-oth-1
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