Minding your digital business: McKinsey Global Survey results
Most C-level executives say the three key trends in digital business—namely, big data and analytics, digital marketing and social-media tools, and the use of new delivery platforms such as cloud computing and mobility—are strategic priorities at their companies,11. Sixty-five percent of respondents say big data and analytics is either a top corporate, top-three corporate, top-ten corporate, or top priority for one to two business units on their organizations’ strategic agendas; 68 percent say the same about digital marketing and social tools, and 56 percent about flexible delivery platforms. according to McKinsey’s first annual survey on the topic.22. The online survey was in the field from April 3 to April 13, 2012, and garnered responses from 1,469 C-level executives representing the full range of industries, regions, and company sizes; 8.5 percent of these executives have a specific technology focus. To adjust for differences in response rates, the data are weighted by the contribution of each respondent’s nation to global GDP. The survey asked executives in the C-suite about their companies’ adoption of these trends; the extent to which their companies are investing in new digital technologies; the value that they expect to reap from these investments; and the role the IT function plays in driving digital business initiatives forward.
These executives have high expectations for the potential value their companies can generate from the three trends, and one-third even expect digital business to increase operating income by more than 10 percent over the next three years. However, they also report some tough challenges. Nearly half of respondents say their companies’ investments in digital initiatives are too small to deliver on their goals. Many executives also cite overall organizational shortcomings and a lack of IT capabilities as barriers to meeting their companies’ technology priorities.
Prioritizing and investing in digital business
Of the three key business technology trends the survey asked about, just more than half of all respondents say their organizations have made two of them—big data and analytics,33. For more, see Brad Brown, Michael Chui, and James Manyika, “Are you ready for the era of ‘big data’?,” McKinsey Quarterly, 2011 Number 4; “Competing through data: Three experts offer their game plans,” McKinsey Quarterly, 2011 Number 4; Jacques Bughin, John Livingston, and Sam Marwaha, “Seizing the potential of ‘big data’,” McKinsey Quarterly, 2011 Number 4; and the full McKinsey Global Institute report, Big data: The next frontier for innovation, competition, and productivity, May 2011. and digital marketing and social tools44. For more, see Roxane Divol, David Edelman, and Hugo Sarrazin, “Demystifying social media,” McKinsey Quarterly, 2012 Number 2; David C. Edelman, “Four ways to get more value from digital marketing,” March 2010; and Jacques Bughin, Angela Hung Byers, and Michael Chui, “How social technologies are extending the organization,” November 2011. —at least a top-ten corporate priority on their strategic agendas (Exhibit 1). In fact, for each of the three trends, between 6 and 9 percent say it is their organizations’ top corporate priority.
Executives also say their companies view these digital business trends more as offensive strategic weapons than as defensive moves. About half of respondents indicate their organizations’ primary objective in addressing big data, digital marketing, or flexible platforms55. For more, see Jacques Bughin, Michael Chui, and James Manyika, “Clouds, big data, and smart assets: Ten tech-enabled business trends to watch,” McKinsey Quarterly, 2010 Number 4; Michael Chui, Markus Löffler, and Roger Roberts, “The Internet of Things,” McKinsey Quarterly, 2010 Number 2; and Bengi Korkmaz, Richard Lee, and Ickjin Park, “How new Internet standards will finally deliver a mobile revolution,” McKinsey Quarterly, 2011 Number 3. is using the technology to build a competitive advantage in their existing business. Some executives report even higher aspirations: between 27 and 30 percent say their organizations are looking to these trends to build a new business or tap into new profit pools.
The results indicate that companies are indeed supporting these priorities in their budgets: one-quarter of respondents expect their organizations to spend at least 3 percent of their total cost base on digital business initiatives this year (Exhibit 2). Across sectors, professional services, high tech, and health care and pharma companies are investing the most, with more than four out of ten respondents in those industries saying their organizations will spend at least 2 percent on digital business. Some interesting differences also emerge across roles: 40 percent of CEOs expect investments of at least 3 percent, while only 20 percent of CFOs and 12 percent of chief information officers (CIOs) say the same. The discrepancy suggests the management team may lack clarity or a consistent concept about the investments needed to support digital business.
Exhibit 1
Digital business ranks high on the agenda
Exhibit 2
Financial support for digital initiatives
Despite these heavy investments, only about one-third of respondents say they believe their companies are spending enough to build out these capabilities, with almost half saying their companies are underfunding these initiatives by 11 percent or more. Here, responses also diverge by role. Thirty-six percent of CEOs say investments are roughly at the right level, yet only about 30 percent of CFOs and chief operating officers (COOs) say the same; even fewer chief marketing officers (CMOs) and CIOs agree.
Uneven adoption, high expectations
For each of the trends, the pace at which respondents say their organizations are adopting different practices varies greatly. With big data, 49 percent say their companies are focusing their efforts on customer insights, segmentation, and targeting to improve overall performance; an even higher share say their companies should focus their efforts on using data and analytics to generate these insights (Exhibit 3). Yet just one-fifth say their organizations have fully deployed data and analytics to generate insights in one business unit or function; only 13 percent use data to generate insights across the company.
Most respondents say their companies use digital marketing techniques either to position and brand material across channels or to engage customers through social-media channels at least selectively, while the adoption of other practices is more modest (Exhibit 4). When asked about specific uses of social technologies, a slight majority say their companies use them to improve customer engagement, while fewer have deployed these tools internally or with business partners. And our experience suggests that companies are still building the foundations for new delivery platforms such as cloud or mobile; not surprisingly, respondents say their own organizations’ efforts are focused on the more basic functions in these areas. Forty-four percent report the deployment of mobile access for internal business applications, and 34 percent say their organizations use cloud computing. Fewer executives report the use of more advanced technologies, such as smart sensors to automate or control internal processes and systems, which only 16 percent say their companies have deployed at least selectively.
Exhibit 3
Focus on generating customer insights
Exhibit 4
Digital marketing used to cross channels
While their companies’ current use of digital technologies indicates substantial room for growth, executives are by and large optimistic about the future implications of these trends (Exhibit 5). Executives at privately owned companies report even higher expectations than their public-company counterparts: 39 percent at private companies expect income to increase by at least 10 percent, while only 24 percent at public companies say the same.
Exhibit 5
Income expectations are upbeat
The survey also asked respondents to compare the value they have generated from digital business at their own companies with that of their competitors (Exhibit 6). More executives say they have outperformed competitors in their use of big data and analytics than in applying any other trend. At the sector level, even larger shares of executives in health care and pharma (56 percent) and at business-to-consumer companies (50 percent) say the same about big data. Compared with their fellow executives, CIOs are more bearish across the board: only 30 percent expect their companies to generate more value than competitors from big data, for example, compared with 46 percent of CEOs.
Exhibit 6
Data and analytics generate more value
Tough challenges ahead
Despite their optimism, executives consistently cite two challenges in fulfilling the promise of digital technologies: organizational structures and shortcomings in their infrastructure and IT systems, which can be too inflexible or ill equipped to take advantage of a data-rich world (Exhibit 7). In part, the technology infrastructure challenge explains why the CIOs are much likelier than all other executives to believe more investment will be required to deliver on their organizations’ priorities.
The results also reveal some interesting findings about the role the CIO and the IT function play in moving digital initiatives forward. More than half of executives say their CIOs are supportive and directly engaged in these initiatives, though one-quarter say these executives are not engaged at all. Responses about the broader IT organization reveal even less involvement at the functional level: only 14 percent say their companies’ IT functions are spearheading new digital-business efforts. While 39 percent say their IT functions actively engage with or support these efforts, nearly one-third say the function is supportive but lacks the capabilities to deliver on goals.
Exhibit 7
Organizational and technological challenges
