6 Steps To Create A Successful Digital Enterprise

by CXOtoday News Desk    Sep 09, 2015


Every business has to embark on the digital journey to become successful. A McKinsey research shows an average enterprise expects digital initiatives to deliver annual growth and cost efficiencies of 5 to 10 percent or more in the next three to five years. However, despite the substantial investments companies have made in digital initiatives, few see that kind of growth.

According to the McKinsey authors, companies that have successfully transitioned to become high-performing digital enterprises are able to orchestrate six steps including, strategy and innovation, the customer decision journey, process automation, organization, technology, and data and analytics.

1. Strategy and innovation

Digital strategy is intrinsic to business strategy today. In fact, 90 percent of digital leaders have fully integrated digital into their strategic-planning process. The best digital strategies don’t rely on past analyses, but instead start fresh and carve out a vision based on where they believe value is likely to shift over the next 3-5 years. They assess at a granular level where value is likely to be disrupted within their own business and market, and they isolate where and how they will compete.

Effective digital strategies prioritize a handful of interventions where the business can exploit significant opportunities and then craft a digitally enabled business model around them. That could mean creating a new way for customers to purchase a product, moving into new businesses, or exploiting competitive advantages such as proprietary data in new ways, state McKinsey authors.

2. Customer decision journey

McKinsey research shows that organizations able to understand and skillfully act on complete customer journeys can reap enormous rewards: increasing customer satisfaction by up to 20 percent and revenue growth by 10 to 15 percent, and lowering the cost to serve by 15 to 20 percent.

“Understanding those decision journeys and the fundamentally different ways that customers behave—from evaluating products to bonding with brands—is becoming the cornerstone for successful businesses. That ability is likely to become an increasingly important differentiator, since nearly 50 percent of all business-to-business purchases will be made on digital platforms by the end of 2015 and $2 trillion in retail sales will be influenced by digital by 2016,” say authors.

3. Process automation

Business-process automation can result in massive competitive advantage because initial investments, when well implemented, can scale quickly without substantial additional costs. Over time, cost performance can improve by as much as 90 percent as the automation effort scales across formerly siloed functions, reducing redundant processes. 

Digitizing processes has less to do with technology and more with how companies approach development. While there is often the assumption that process automation is a large project focused on a major platform, digital leaders in fact drive value quickly by focusing on a series of small but important solutions that target high-value customer journeys and expectations.

Automating processes at speed requires small teams employing agile development techniques to continuously build out elements of the product as prototypes, then testing and adapting them based on feedback, often within days or weeks. When well executed, digitizing processes can unlock significant value by compressing timelines and eliminating duplication or inefficiencies.

4. Organizational change

Companies know that rigid, slow-moving models no longer cut it. The challenge is to move toward a structure that is agile, flexible, and increasingly collaborative while keeping the rest of the business running smoothly. Successful incumbents become agile by simplifying. 

Many companies have set up incubators or centers of excellence during the early stages of a digital transformation to cultivate capabilities. To be successful, however, these capabilities need to be integrated into the main business. AT&T opened three AT&T Foundry innovation centers, in Dallas, Silicon Valley, and Tel Aviv, to serve as mobile-app and software incubators. Today, projects at these centers are completed three times faster than elsewhere within the company. Other companies, such as Nike, transform organically from within. With market-beating consumer experiences, Nike’s efforts have paid off with double-digit e-commerce revenue growth rates and annual web sales topping $1 billion in 2015.

5. Technology drivers

Most incumbents have been through waves of IT transformation in the past and understand that overhauling legacy architecture is a multiyear process. Yet today’s fluid marketplace requires technology that can drive innovation, automation, and personalization much more quickly. This typically means that high-speed IT teams are charged with rapidly iterating software, releasing updates in beta, fixing kinks and bugs in near-real time, then rereleasing, explain researchers. Their goal is to continually fuel an accelerated development infrastructure that can support near-instant cross-channel deployment and real-time decision making.

6. Data and analytics

Companies that make extensive use of customer analytics see a 126 percent profit improvement over competitors, say researchers. Companies that see that kind of return are adept at deciding which data to use, focusing the analytics on delivering on goals with clear and useful insights, and having the right capabilities and processes in place act on them, say the research authors. That requires people with the right kinds of skills — particularly “translators” who can articulate business goals and use cases with respect to analytics requirements and turn data output into business insights.

With the Internet of Things and new technology developments, analytics are opening new doors for growth. Analysts have predicted that the installed base for Internet of Things devices will grow from around 10 billion connected devices today to as many as 30 billion devices by 2020.

The research authors believe the digital revolution has given birth to an interconnected world that binds customers, employees, managers, and systems together in a network of unprecedented complexity and opportunity. Making sense of those connections and building value requires a new interdisciplinary model of work that is redefining how companies succeed today.