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Digitisation inches towards the mainstream

Clint Boulton | Feb. 28, 2017
Despite CIOs' claims of embracing digital capabilities, digitisation at most organizations remains a slow-moving process, McKinsey says.

Supply chain sits at the opposite end of the spectrum, with only 2 percent of respondents saying that their supply chains are the focus of their digital strategies. The McKinsey researchers question whether overlooking the supply chain may lead to some course correction and resource reallocation.

Digital giveth and digital taketh away

Digitization remains a double-edged sword. As much as digital can help companies more quickly and directly engage with consumers via online, mobile and social channels, the reduction in friction opens products and services companies up to competition from startups.

This scenario is playing out in the transportation sector, where Uber and Lyft have disrupted the taxi industry, and in media, where Facebook and other online destinations are capturing dollars typically spent on traditional advertising.

"Current levels of digitization have already taken out, on average, up to six points of annual revenue and 4.5 points of growth in earnings before interest and taxes," McKinsey says. "And there’s more pressure ahead as digital penetration deepens."

Digital winners avoid such losses, course-correcting their corporate strategies significantly to meet digital disruption head-on, while keeping a laser focus on their customers. That requires great strengths in organizational culture and the ability to steer clear of siloed mind-sets and behavior.

“A strong organizational culture… enhances the ability to perceive digital threats and opportunities, bolsters the scope of actions companies can take in response to digitization, and supports the coordinated execution of those actions across functions, departments and business units,” say the McKinsey researchers.

 

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