Global survey of C-suite executives reveals that boards of high performing companies tend to be more involved than their peers in sponsoring digital initiatives.
Cracking the digital code: McKinsey Global Survey
McKinsey & Company, September 2015
Six building blocks for creating a high-performing digital enterprise
McKinsey & Company, September 2015
Strategy, not technology, drives digital transformation
MIT Sloan Management Review & Deloitte LLP, July 2015
A recent McKinsey & Company global survey of C-suite executives reveals that boards of high performing companies tend to be more involved than their peers in sponsoring digital initiatives.
The online survey compiled the responses of 987 C-suite executives from around the globe across a wide cross-section of industries and company sizes.
The survey revealed that 35% of high performing companies had boards which sponsored digital initiatives, compared to 16% of their peers.
The survey also revealed that two thirds of high performing companies had CEOs that personally sponsored digital initiatives, compared with 44% of their peers.
The survey defined “high performing” companies as those which had higher rates of organic growth than their competitors and which met the objectives of their digital programs “very effectively” over the past 3 years.
WHAT SEPARATES HIGH PERFORMING COMPANIES FROM THEIR PEERS IN TERMS OF DIGITAL?
McKinsey identifies five key areas or activities that differentiate high performing companies from their peers:
- A more active digital agenda: 75% of high performing companies reported more active digital agendas, compared with 34% of their peers.
- A greater risk-taking culture: Executives that cited organisational support for adopting risky digital initiatives were twice as likely to work for high performing companies. McKinsey encourages boards to “create the space for incentives that support bold, even risky decisions in digital”, citing a strong link between digital performance and risk-taking cultures.
- Allocating and reallocating resources to digital: 53% of high performing companies reviewed their corporate portfolios more frequently for digital opportunities compared with 35% of their peers. McKinsey suggests boards can help support executives by more frequently reviewing their company’s portfolio for opportunities and challenges caused by digital trends, including by “reallocating significant long-term resources to support digital initiatives, while fending off pressure against such investments from more established parts of the business.”
- Attracting and retaining digital talent: 48% of high performing companies had work cultures that encouraged morale among digital employees, compared with 32% of their peers. In addition, 47% of high performing companies considered they retained digital talent by providing cutting-edge digital work, compared with 27% of their peers. McKinsey recommends that “top digital talent” should be put in charge of integrating digital initiatives across the company (e.g. digital customer engagement, innovation, automation and advanced analytics.)
- Implementing digital initiatives faster: 43% of high performing companies say their companies take digital initiatives from idea to implementation in less than 6 months, compared with 17% of their peers. McKinsey suggests that companies should encourage stronger test-and-learn capabilities, continuous experimentation and data-based feedback loops to evolve strategies more rapidly.
- Leading from the top: The survey suggests that the most significant challenge for companies in meeting their digital priorities is a lack of leadership or digital talent. While CEO sponsorship of digital initiatives was found to have grown over the past three years (15% increase), board sponsorship of these initiatives has been relatively stagnant (only 3% increase). The results suggest that a lack of leadership may be occurring at the board level in lesser performing companies.
WHAT LESSONS CAN AUSTRALIAN BOARDS AND DIRECTORS TAKE FROM COMPANIES SUCCEEDING AT DIGITAL?
McKinsey’s survey results provide insight into how governance can be a means of improving organisational performance. Boards of “high performing” companies may factor digital initiatives into corporate strategy, support management’s digital initiatives, and promote an organisational culture that allows for the adoption of riskier digital initiatives.
In terms of organisational culture, interestingly, high performing companies were less likely than their peers (22% compared with 26% of their peers) to consider salary, benefits or other incentives as a means of attracting and retaining digital talent. On the other hand, high performing companies were more likely (18% compared with 8% of their peers) to consider career paths as a means of attracting and retaining digital talent.
This would suggest that high performing companies actively promote performance-focused work cultures by supporting skill development and rewarding digital talent with interesting work and career progression opportunities.
Another study that touches on how companies can improve their digital performance is a recent survey by MIT Sloan Management Review and Deloitte titled “Strategy, not technology, drives digital transformation”.
MIT / Deloitte surveyed more than 4,800 executives, managers and analysts from 129 countries and 27 industries and categorised respondents according to their stage of “digital maturity” as either “early”, “developing” or “maturing” enterprises.
The MIT / Deloitte survey revealed significant differences between “early-stage” and “digitally maturing” respondents relating to their organisation’s strategy, leadership, culture and talent development.
“What separates digital leaders from the rest is a clear digital strategy combined with a culture and leadership poised to drive the transformation”, suggests MIT Sloan / Deloitte.
“The difference has less to do with technology and more to do with business fundamentals. Digitally maturing organizations are committed to transformative strategies supported by collaborative cultures that are open to taking risk.”
McKinsey has also recently published an article titled “Six Building Blocks for creating a high-performing digital enterprise”, which provides boards and executives with a coherent framework for thinking through and managing large-scale digital programs.
Among other things, the article includes advice for companies on how to turn data outputs into business insights, increase revenue from high-value customer segments, enhance customer satisfaction rates and adopt more streamlined and automated business processes.
“Digitization is placing unprecedented pressure on organizations to evolve”, states McKinsey. “Nearly 50 percent of all business-to-business purchases will be made on digital platforms by the end of 2015.”
“Having a clear view of what we call a company’s Digital Quotient is a critical first step to pinpoint digital strengths and weaknesses and highlight those management practices that can bolster financial performance”, says McKinsey.
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