CEOs taking up digital strategy role but organisational challenges remain

New McKinsey and Company report finds CEOs, CMOs and CIOs are all getting involved in digital strategy yet talent, legacy processes and lack of focus hinder progress

CEOs are becoming more actively involved in digital strategy than ever before yet many companies have not made the organisational-level changes necessary to embrace digitisation successfully, a new report claims.

The annual McKinsey and Company report, based on a survey of 850 c-level executives globally in April and released earlier this month, found 61 per cent of CEOs are either supporting, sponsoring or are directly engaged in digital business initiatives this year, up from 55 per cent in 2013 and 46 per cent in 2012. This compares to 61 per cent of CMOs, and 69 per cent of CIOs this year, increases of 7 per cent and 6 per cent, respectively.

In addition, 41 per cent of this year’s respondents said their CEO was responsible for their organisation’s overall digital agendas.

The report also makes plain the rising influence of the chief digital officer role. The 2014 survey found 30 per cent of respondents had a CDO directly engaged in or supporting digital business initiatives, up from 24 per cent last year.

The top three strategic priorities for digital this year are digital engagement of customers (69 per cent), digital innovation of products, operating or business models (64 per cent), and big data and advanced analytics (45 per cent). The top three digital trends as a share of overall digital budget spending are digital engagement of customers (62 per cent), digital innovation of products, operating or business models (60 per cent) and automation (44 per cent).

“It’s evident that digitisation has become a critical asset in many companies’ quest for growth,” the McKinsey and Company report authors stated. “More than three-quarters of executives say the strategic intent behind their digital programs is either to build competitive advantage in an existing business or to create new business and tap new profit pools.”

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Despite the growing realisation of digital’s core role, only 40 per cent of respondents said they have adequate accountability measures in place, such as targets, performance incentives or an executive ‘owner’ of digital programs. Just 7 per cent believed their organisations knew the exact value at stake from digital.

Only 4 per cent of respondents report high returns on their company’s current digital investments, McKinsey and Company stated.

The top hurdle listed to meeting priorities for digital programs is talent, both in terms of functional and technical skill sets, followed by inadequate organisational structure and inflexible business processes. Not surprisingly, it was larger companies of more than US$1 billion in annual revenue that were finding legacy processes to be a significant issue.

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Only one-third of executives said at least one in 10 of their employees are spending any time working on digital projects, and 44 per cent said analytics and data science skills were the biggest gap expected over the next 12 months.

Respondents were also asked for their growth expectations over the next three years. These were highest at organisations actively pursuing digital to create new business, McKinsey and Company stated, at 54 per cent. Across the board, one third of those surveyed see at least 15 per cent of their total growth in the next three years coming from digital investments.

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