Weekly Business Insights from Top Ten Business Magazines | Week 301 | Strategy & Business Model Section | 1

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 301 | June 16-22, 2023.

What is digital transformation?

McKinsey & Company | June 14, 2023

Listen to the Extractive Summary of the Article

Digital transformation is the fundamental rewiring of how an organization operates. The goal of a digital transformation, as outlined in the new McKinsey book Rewired: A McKinsey Guide to Outcompeting in the Age of Digital and AI (Wiley, June 20, 2023), should be to build a competitive advantage by continuously deploying tech at scale to improve customer experience and lower costs.

Like many commonly used phrases, “digital transformation” has devolved into a catchall term that means different things to different people. That’s a problem. Digital transformation is critical for organizations to not only compete but survive. If leaders can’t be clear about what a digital transformation is—and align their organization around a specific program—they can’t expect to be successful.

Digital transformations are different from regular business transformations, in both small and big ways. For one thing, business transformations usually end once a new behavior has been achieved. Digital transformations, on the other hand, are long-term efforts to rewire how an organization continuously improves and changes.  Successful digital transformations hinge less on how companies use digital and more on how they become digital.

Successful digital transformation requires a variety of coordinated actions. Rewired lays out six capabilities critical for successful digital transformation: the ability to craft a clear strategy focused on business value, a strong talent bench with in-house engineers, an operating model that can scale, distributed technology that allows teams to innovate independently, access to data that teams can use as needed, and strong adoption and change management.

Digital transformations have a much-improved probability for success when teams focus on changing entire domains (for example, a customer journey, process, or functional area) rather than only on use cases (a single step within the domain, such as answering a customer-service call). A focus on domains is conducive to effective change because it encompasses all related activities to deliver a complete solution. A domain should be large enough to be valuable and noticeable to the company but small enough to be transformed without relying too much on other parts of the business.

It can be surprisingly difficult to know how a digital transformation is going. Without properly tracking and measuring outcomes, leaders will struggle to manage performance and ensure that the changes happening are creating value.  Knowing what to measure is half the battle. In digital transformations, key performance indicators (KPIs) usually fall into three categories: value creation, team health and change management progress.

The good news is that successful digital transformations aren’t just the purview of the tech titans. Established companies of all kinds can be successful on their digital transformation journeys.

3 key takeaways from the article

1. Digital transformation is the fundamental rewiring of how an organization operates. The goal of a digital transformation should be to build a competitive advantage by continuously deploying tech at scale to improve customer experience and lower costs.
2. Successful digital transformation requires the following six capabilities: the ability to craft a clear strategy focused on business value, a strong talent bench with in-house engineers, an operating model that can scale, distributed technology that allows teams to innovate independently, access to data that teams can use as needed, and strong adoption and change management.  In digital transformations, key performance indicators (KPIs) usually fall into three categories: value creation, team health, and change management progress.
3. Digital transformations have a much-improved probability for success when teams focus on changing entire domains rather than only on use cases.

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Topics:  Technology, Transformation, Digital, Strategy