McKinsey Global Survey Results: C-levels Bullish on Building Digital Enterprises

By Peter Bernstein August 19, 2013

C-levels around the world know that when McKinsey talks, people listen. Well, the internationally respected consulting firm has released the results of an online survey of a diverse group of 850 executives and for tech vendors there is good reading and good news.

 Conducted by Brad Brown, Johnson Sikes, and Paul Willmott, the survey, which ran from April 2 to April 12, 2013, found that it is not just IT professionals that worries about having state-of-the-art digital tools in place to improve operational efficiencies, the customer experience and enterprise security. Indeed, interest is across the top management spectrum.   As the authors point out, “C-levels say they are stepping up their own involvement in shaping and driving digital strategies. This is vital to the success of digital programs, as survey respondents most often cite a lack of senior-management interest as the reason for an initiative’s failure. Respondents also suggest that organizational alignment is critical to seeing real business impact from digital.”

Responding to five top digital-enterprise trends

Interviewees were asked about what McKinsey identifies as the five top digital-enterprise trends:

  • Big data and advanced analytics,
  • Digital engagement of customers,
  • Digital engagement of employees and external partners,
  • Automation, and
  • Digital innovation.

The survey is a follow-up to previous work by the company, and in spite of global economic issues, what the results reveal is that despite the organizational and talent challenges, executives remain optimistic about digital business.

The reason this can be characterized as encouraging news is that the survey found, for example, that companies are using digital technology more frequently to engage with customers and reach them through new channels. Respondents also reported that they are making digital marketing and customer engagement a high strategic priority. The authors note that, “Nevertheless, there is more work to do: most executives estimate that at best, their companies are one-quarter of the way toward realizing the end-state vision for their digital programs.”

McKinsey has generously shared its findings, the highlights of which are embedded in the slideshow below, with nice graphics on each of the five areas listed above.

The context for this from a methodological standpoint is that each executive said of the five digital trends that they are a strategic priority for their companies. In fact, more than 40 percent of respondents cite each of the five trends was a top 10 corporate priority or higher, and at least one in five said each trend is a top-three corporate priority. Interestingly, topping the list was that customer engagement was cited by 56 percent as a top-ten company priority, and on the whole respondents report notable progress since 2012 in this area.

Page 1 of 6

The digital engagement of customers accelerates

Page 2 of 6

The use of big-data applications has also grown

Page 3 of 6

CEOs are now more likely to sponsor digital initiatives than they were in 2012

Page 4 of 6

Digital outcomes rely on management and oversight

Page 5 of 6

Of the ways that companies can use digital, customer engagement promises the most potential value

Page 6 of 6

Across regions, companies’ investments in digital business vary

A quick summary of the various exhibits shows where we are and where improvement needs to be made.

Digital engagement of customers is not just a priority but is accelerating.  That is the good news. However, respondents also said their enterprises have been slower to adopt digital approaches to engaging their own employees, suppliers and external partners.  

The use of big-data applications has also grown. The value of big data and advanced analytics is recognized as critical and investments are being made therein. Areas of interest include: use of data to improve decision making, R&D processes and budgeting and forecasting with emphasis on efforts either to increase revenue or improve process quality; reducing costs tends to rank as a lower-level priority.

Companies are automating a wide range of functions. This is being done to improve the overall quality of processes (by removing breaks or errors, for example) or to build new digital capabilities (for example, remote monitoring) into the processes. Surprisingly, few said process automation was being implemented to replace labor.

CEOs are more involved. More good news is that CEOs are becoming more hands-on. 31 percent said their CEOs personally sponsor digital initiatives, a number that is up from 23 percent in 2012. Plus, 30 percent reported that they have a chief digital officer (CDO) on their companies’ executive teams, and those with a CDO  indicated significantly more progress toward their digital vision than those without one.

Organizational challenges continue. The picture is not totally rosy. As the authors note, “despite the host of technical challenges in implementing digital, respondents say the success (or failure) of these programs ultimately relies on organization and leadership, rather than technology considerations.” In fact, the absence of senior-management interest is the factor most often identified as contributing to an initiative’s failure.

Digital outcomes rely on management and oversight. The importance of management support as shown is critical to success. As in 2012, executives most often cited misaligned organizational structures as the biggest challenge their companies face in meeting digital goals. This is followed by insufficiently reworked business processes (to take advantage of the digital opportunities) and difficulty finding functional talent (such as data scientists or digital marketers).  There is some comfort in the fact that a lack of infrastructure and absence of good data are less pressing than they were last year.

Expectations are high and investment will continue. Bullishness is strong. 65 percent expect digital investments will increase their companies’ operating income over the next three years with CEOs more positive than executives in any other role. Also of note is that executives at business-to-business companies are more optimistic than their business-to-consumer peers.

Emphasis on customer engagement is a top priority for creating value. Special note should be made of the exhibit on why executives think investment in technologies that improve customer engagement have the most potential to create differentiated value.

There are regional variations.   Again, not surprisingly, the survey found regional variations. For instance, companies in North America, based on the responses, appear to be on a path to invest more than those in Europe. It is also noteworthy that only about one third of executives say their companies are spending the right amount on digital, and many worry about underinvesting.  

The last point about how much is or should be invested is a key finding. The authors state that the responses indicate that companies have a long way to go in accomplishing their digital-business agendas.  

One way of looking at this is to be woeful about the state of investment. After all, 57 percent  feel their  companies are up to one quarter of the way toward realizing their end-state visions for their digital programs, and just 40 percent say their organizations’ digital efforts have yielded a measurable business impact thus far. Another way of looking at this, however, is to consider the enormity of the opportunity for technology solutions providers. This means not just in the solutions themselves but in providing the proof cases to close deals. 

McKinsey’s look at the road ahead

McKinsey being a consultancy provided a few tips on what enterprises should be doing to accelerate meeting their digital strategy objectives. These include:

  • Find the right digital leaders. Leadership is the most decisive factor for a digital program’s success or failure. Increasing C-level involvement is a positive sign, and the creation of a CDO role seems to be a leading indicator for increasing the speed of advancement. These developments must continue if companies are to meet their high aspirations for digital.
  • Manage expectations. Just as important as finding the right leader is setting the right agenda and maintaining an aspirational vision without straying into over-exuberance for digital. Leaders will have to walk this line carefully, given executives’ reports of organizational, technical, and cultural challenges.
  • Prioritize talent. Not surprisingly, survey respondents indicate concerns about finding the talent their companies need to realize their digital goals. Technical, functional, and business skills are all critical for digital programs. We have seen some companies begin emulating the high-tech practice of “acqui-hiring” (that is, acquiring small companies largely for their employees rather than their products). But finding and hiring talent is only part of the solution; no matter where the talent comes from, development and retention are equally important in a sellers’ market.

Despite the fact the survey was about technology adoption, if you look at the list above they have one thing in common, people. All of the great technology that is available cannot help organizations optimize the value of technology without leadership at the top that can implement and execute a plan that is in line with organizational imperatives and expectations and where the right people are given the right tools for the right job. In this respect, some survey results really never change.

Edited by Rich Steeves
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