In an interview with McKinsey's David Schwartz, two digital experts outlined some of the things executives should be doing differently when it comes to digital innovation. They discussed the findings of their research into digital disruption, Facing up to digital disruption: Reinventing the core with bold business strategy.

Opportunities in the supply chain

The survey of over 2,000 CXOs and other business leaders looked at how different companies are dealing with digital technologies. They found that the supply chain is one area where few companies are fully exploiting new digital capabilities. Laura LaBerge, a senior expert at McKinsey, said this means there are a lot of interesting opportunities for companies to pursue in this area.

How should you do 'digital' differently?

Here are some findings from the research on how executives should be doing and thinking differently when it comes to digital innovation:

1. McKinsey's senior partner Paul Willmott said that 'fast following' might not be the best strategy when it comes to adopting new digital processes. He says: “Companies that are bold in their response to digitisation affecting their sector will outperform and, overall, do well. Those who are slower and less effective in responding may overall suffer a downturn in their performance as a result. The commonly held strategy of wait-and-see in this instance may not be viable.”
2. Many executives wait too long before taking digital seriously, but waiting until 10 or 20 per cent of sales are through a digital channel isn't the only indicator. Willmott says executives should think about the environment in which their company operates and consider whether digital sales channels could undermine the current business/distribution model. He gives the example of some companies losing business when digital channels (i.e., Internet sales) enable products to be sold directly from the manufacturer to the end-user, rather than through a distribution channel.
3. A clear strategy that is well thought through and grounded in economic reality is just as important as adopting digital processes.
4. Strategy is a key factor for companies that have successfully embraced digital technologies. LaBerge says that the most successful companies have very big, bold strategies that are connected to the core elements of the organisation.
5. Companies that successfully embrace digital transformation are able to transform their corporate culture and adopt three key organisational elements, which are strongly correlated with economic performance: having less risk aversion, avoiding siloed mind-sets and behaviours, and being more customer-centric.
6. Willmott emphasises that behaving as a cross-functional organisation (avoiding silos) can make companies more effective in responding to digital challenges and opportunities. He says: “For example, that might include bringing people from marketing, distribution, operations, manufacturing, and supply-chain functions all together to work out how data analytics and digitization can improve the end-to-end planning process.”
7. LaBerge also concludes that the companies with the biggest payouts from digital opportunities are those who align their digital programme with their overall business and corporate strategies.