How companies become digital winners

This is the title of McKinsey podcast from the12th of January 2016 where they outline what they observe digital winners among large companies do. The first thing they point out is that incumbent companies should not try to mimic Uber, Netflix or any of the new digital only companies. The reason, they are few and they have very unique business models. Incumbent companies needs to leverage digital within their own context and as part of their business proposition.

What characterises the digital winners then? In short, four things:

  1. Alignment of strategy i.e. strategy includes digital
  2. Agile culture
  3. Capabilities
  4. Organisation, people and processes

Of these strategy comes first. Winners seams to organize their strategy around the following concerns:

  1. Who are my competitors in the new world? They might be others than what you are used to.
  2. How fast must we act? Understand the timing. Must we act bold and bravely or is a more slow response appropriate?
  3. Understand that digital is much more than online sales. You have to develop new value propositions, leverage data to use assets more efficiently and build new relationships with customers and partners.

Agile culture comes with something we might regard a paradox. Agility builds on a stable core processes. Its the stability that enables agility. This is also associated with the two-speed IT. One part focusing on stable core systems, the other on fast moving changes and experimentation.

When we come to capabilities there are four that stands out:

  1. Decision making, understanding that the least risky thing is to do something. Standstill is the most dangerous position. To often managers are seen acting too late.
  2. Connectivity, linking together products, goto market models and technology
  3. Radical cost reduction. Eliminate, simplify and automate processes.
  4. The two speed IT organisation, enabling new value prepositions

Finally we find the things digital winners don’t do. Firstly, they do not repurpose people. They seek external capabilities and they make decisions about what we should stop to do.

Secondly, they do not outsource, at least not the things they regard core. They hire and use mergers and & acquisitions to acquire competences and capabilities. They spinn of things that need to live on its own and they create incubation units when appropriate.

Thirdly, they experiment and mobilises behind winning models or approaches when they find them. Finally, there is no internal competition. In the cases that might be the case, the competing unit is spawn of and given an opportunity to prosper.

What we must remember; digitalisation is more than IT, its business.