A Digital Business Strategy has a Seat at the Table


In our core business simulationAdvantexe Global Enterprise Simulation (AGES) participants take digital-business-strategy.jpgcontrol of a struggling company and try to turn it around by re-inventing the business strategy and executing the next strategy through distinct operational decisions that create differentiation.

The company that participants take over has a strategy called Stuck in the Middle. In other words, they are trying to be all things to their respective customers, but the only differentiation they achieve is that they have no value proposition to any customers.

In their marketing decisions, participants have the opportunity to create and execute a digital marketing strategy that goes beyond a web site to include search engine optimization(SEO), social marketing, non-personal promotion, networking, and direct selling.

This week, during a Business Acumen learning session, we engaged in a deep discussion about a digital business strategy and how important it has become. I shared with the group that today, it's not just something the IT or Marketing departments handles; rather the digital business strategy is being driven by the CEO and it definitely has an important seat at the table.

In order to share additional information with the group, I recalled to them information I read in a recent McKinsey & Company article on the topic. I consider the McKinsey thought leadership some of the best ideas in the world, so this blog is a summary of the article Bullish on digital: McKinsey Global Survey Results with my comments and application back to Business Acumen and Business Leadership training.

Over the past year, there has been a huge increase in the number of CEO's taking control of their company's digital strategies according to a global survey of senior executives by McKinsey & Company. The figure is up 50 percent, with CEOs now in the digital driving seat of one third of companies in the McKinsey survey.

In their though leader document called "Bullish on digital: McKinsey Global Survey Results", the authors, Brad Brown, Johnson Sikes and Paul Willmot attribute this leadership engagement in part to the fact that the CEO is the only executive with the mandate and ability to drive the digitization of business across the enterprise.

Respondents also suggest that organizational alignment is critical to seeing real business impact from digital.

As we typically discuss in our Business Leadership work, organizational and leadership alignment - rather than technology - are why organizations are successful and this is the case in the McKinsey article as well. Interestingly enough, the article cites the lack of senior management support as the reason why digital initiatives fail. So this is also about Change Leadership.

Executives most often attribute the success of digital programs to managerial factors senior management's interest and attention, internal leadership, good program management, and alignment between organizational structure and goals and are less likely to cite any technical considerations

According to the article, for the second year in a row unaligned organizational structures is identified as the biggest challenge companies face in meeting digital goals.

This is followed by insufficiently reworked business processes (to take advantage of the digital opportunities) and difficulty finding functional talent (such as data scientists or digital marketers).”

Despite the challenges, the authors say that CEOs are the most positive executives in the executive leadership team when it comes to digital. More than one in five expects revenue from digital to increase by more than 30 percent in three years time.

The Research also suggests that the digital journey is only just starting. Most executives believe their companies are only a quarter of the way toward realizing their digital vision.

The McKinsey research focused on five key trends: 

  1. Big data and advanced analytics
  2. Digital engagement of customers
  3. Digital engagement of employees and external partners
  4. Automation
  5. Digital innovation

From our perspective (working with many large global companies), big data looks like the real digital enabler in enterprise. Responses indicate growth in the company-wide use of big data and advanced analytics, matching our experience with companies of all stripes, where we are seeing executives consider analytics a critical priority and dedicate increasing attention to the deployment of new analytic tools. 

The article also identifies an increased use of data to¦ improve decision making, R&D processes, and budgeting and forecasting. What's more, executives say their companies are using analytics to grow: [The companies] report focusing their analytics efforts on either increasing revenue or improving process quality; reducing costs tends to rank as a lower-level priority. 

As you would expect, the Marketing function was the most advanced in terms of growth, probably a function of history since marketers were often the first in their companies to embrace the web as a new way of doing business. Of the five trends investigated customer engagement ranks highest with 56 percent of respondents identifying digital engagement of customers as a top-ten (and often higher) company priority.

But the study also suggests that many companies have yet to explore using digital channels to enable employee collaboration as a spur to innovation. The adoption of enterprise social networking tools remains light. In our experiences working with clients, we believe this to be true.

Take-Aways and Thoughts

Finally, the McKinsey paper offers three pieces of advice for C-suite executives:

Find the best digital thoughts leaders. Leadership is the most decisive factor for a digital program's success or failure. “Increasing C-level involvement is a positive sign, and the creation of a CDO role seems to be a leading indicator for increasing the speed of advancement.  Lead expectations. Set the right agenda and maintain an aspirational vision but stay clear of irrational digital exuberance. Leaders will have to walk this line carefully, given executives'reports of organizational, technical, and cultural challenges. 

Prioritize and manage talent. Technical, functional, and business acumen skills are all critical for digital programs, say the authors. We have seen some companies begin emulating the high-tech practice of (that is, acquiring small companies largely for their employees rather than their products). They also caution that acquiring and developing talent is only part of the solution. No matter where the talent comes from, development and retention are equally important in a sellers market.

why business acumen matters

Robert Brodo

About The Author

Robert Brodo is co-founder of Advantexe. He has more than 20 years of training and business simulation experience.