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 | ESSENTIALS FOR LEADERS AND THOSE THEY LEAD | | | According to a popular meme, it isn’t the CEO or the CTO who is leading digital transformation at most companies—it’s COVID-19. The pandemic accelerated digital transformation at a speed once thought impossible: in a matter of months, companies worldwide adopted digital technologies that normally would have taken three to seven years to implement. By mid-2020, some organizations had sped up the development of digitally enhanced products and services by a stunning ten years. Although many companies adopted digital technologies in some form or other decades ago, only in recent years has digital transformation become a critical component of organizational health. The process can include anything from automating manual tasks to moving in-store sales online to delivering better customer experiences. It’s therefore important to become digitally savvy, no matter what your role is in a digital transformation effort. This week, let’s explore some best practices. | | | While technology alone can’t guarantee the success of a digital transformation, it is becoming a crucial competitive advantage. More than half of respondents to a McKinsey global survey say that their companies rely on technology to strategically differentiate themselves from competitors. Top performers are ahead of their peers on key digital-technology capabilities and are nearly twice as likely to have technology leaders who shape overall strategy and play a major role in innovation and product development. The best performers are more than twice as likely as the lowest performers to have at least seven top leaders overseeing the technology-related thinking for their organizations. The growing importance of digital signals an urgent need for all leaders in an organization to understand and engage with technology, even if their roles did not call for this in the past. | | | Many things can go wrong in a digital transformation, but these ten pitfalls are particularly damaging to its success. Not surprisingly, most of them have to do with fundamental strategic blunders, such as lack of discipline and focus, moving too slowly or too fast, underestimating the talent needed, and—a proven recipe for failure—not learning from mistakes. Once a digital transformation project is under way, it’s essential for senior leaders to monitor its progress by checking digital metrics, especially key markers such as return on investment, spending on technology, and time to market. And if the transformation stalls, improving its economic model can keep the momentum going. | | | That’s just one rule of thumb that McKinsey’s Rodney Zemmel offers up in this podcast on how leaders can assess the transformative value of a digital business. Don’t spread your efforts too thin; rather, increase your odds of success by limiting digital initiatives to a single area at first before extending them to other parts of the organization. Another rule of thumb is to make sure that the transformation is big enough: it may not have much value if its economic impact is less than 15 or 20 percent of an organization’s earnings before interest, taxes, depreciation, and amortization. “If you’re not targeting at least 15 or 20 percent, in our mind it’s hard to call that a transformation and to sustain the level of organizational focus around it,” Zemmel says. | | | “When it comes to seeing a digital transformation through, you have to be practical,” says Alain Bejjani, CEO of Majid Al Futtaim, a global retail and lifestyle conglomerate. “This means you need to have one eye on the telescope—an ambitious vision—and the other eye on the microscope, which are the short-term developments where you have to adapt as you go.” In this interview with McKinsey, Bejjani discusses the critical role that leaders play in achieving this balance. Although short-term results are important to management teams, leaders must take the long view and serve as role models, inspiring and motivating people by creating a learning culture, investing in skill development, and changing course as needed to meet long-term objectives. “It’s important to avoid ‘transformation fatigue,’” Bejjani says. “Sometimes the actions that have had transformative results in the past don’t work as well in the future, or at a larger scale.” | | | | | | — Edited by Rama Ramaswami, a senior editor in McKinsey’s Stamford, Connecticut, office | | | This email contains information about McKinsey’s research, insights, services, or events. By opening our emails or clicking on links, you agree to our use of cookies and web tracking technology. For more information on how we use and protect your information, please review our privacy policy. | | You received this email because you subscribed to the Leading Off newsletter. | | | | Copyright © 2022 | McKinsey & Company, 3 World Trade Center, 175 Greenwich Street, New York, NY 10007 | | | |
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