Digital technology has become an inextricable part of our lives and is rapidly changing our economy and businesses. Every company has developed a digital strategy but many experience difficulties in the execution. McKinsey investigated why so many digital strategies are failing. The article can be found here. A brief summary:
Pitfall 1: Fuzzy definitions
Some leaders view digital as an upgraded term for what their IT-functions does. They should however have a broad holistic view of what digital really means for products and services, processes, business models, people and technology. Digital architecture is an essential instrument to design this holistic view.
Pitfall 2: Misunderstanding the economics of digital
Digital disruptions are happening way faster, more frequently and on a larger scale than ever before. Digital is driving winner-takes-all economics, with first movers gaining an advantage. So executives should not under estimate digital and need to learn quickly how to compete and create value for customers.
Pitfall 3: Overlooking ecosystems
Many companies develop a digital strategy solely in the context of the company’s industry. However, digital platforms that allow players to move easily across industry and sector borders are destroying the traditional business model with its familiar lines of sight. The best companies have the scale to reach a nearly limitless customer base, use artificial intelligence and other tools to engineer exquisite levels of service, and benefit from often frictionless supply lines.
Pitfall 4: Overindexing on the ‘usual suspects’
Often the digital natives with their disruptive business models get most of the attention. However, incumbents too are digitizing and shaking up competitive dynamics. Digitizing B2B players are lowering costs and improving the reach and quality of their offerings.. Robotic process automation (RPA) has quietly digitized 50 to 80 percent of back-office operations in some industries. Artificial intelligence and augmented reality are beginning to raise manufacturing yields and quality. Meanwhile, blockchain’s digitized verification of transactions promises to revolutionize complex and paper-intensive processes, with successful applications already popping up.
Pitfall 5: Missing the duality of digital
Some companies seem to think that disruptive competition can only be encountered by creating something completely new themselves. Yet for most companies, the pace of disruption is uneven, and they can’t just walk away from existing businesses. They need to digitize their current businesses and innovate new models.
Yet, strategy and execution can no longer be tackled separately or compartmentalized. The pressures of digital mean that you need to adapt both simultaneously and iteratively to succeed. Two broad principles apply to get the balance right: ‘bold aspiration’ and ‘highly adaptive’.
At Y Digital we can help you avoiding these pitfalls. We help leaders recognizing the challenge of digital transformation. We help to design a digital strategy that responds. We create and implement digital solutions for a purposeful and successful digital transformation. We put the Y into AI.