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Digital Transformation Will Digitalize Your Business

Today, digital technologies have evolved to include the Internet of Things, 3D printing, robotics, and artificial intelligence. Finding ways to react to and shape digital disruption should be on the agenda of every member of the C suite.

Digitalization is no longer just an add-on feature to existing channels or products and services. Instead, many aspects of the customer experience are digital by default, as should be the processes that underpin it.

Leveraging digital technologies is more than just good business—it’s crucial to staying relevant and profitable. Companies lagging in this area risk losing ground to newer entrants and business models that are poised to disrupt markets with innovative products and services.

The most obvious industries disrupted by digital are music, retailing, media, and travel, but similar patterns are occurring in more traditional industries such as banking, agriculture, energy, health care, industrial goods, and manufacturing. For any industry, speed is of the essence. Accelerating digital transformation must be a key priority for any company hoping to compete in the future.

How can leaders maintain their competitive edge in the new digital economy? By taking action in five critical areas.

Prototype Your Strategy

Leading digital companies test and refine products and strategies in close cooperation with customers and at a dizzying pace. The traditional three- to five-year strategy and planning process is no longer effective. Agile innovation methods have been successfully pioneered at companies such as Google, Amazon, Facebook, and Twitter. These companies have proven that there are real advantages in the following areas:

  • Learning by doing
  • Rapidly and frequently delivering working products inspired by real consumer needs
  • Developing innovative delivery methods and value propositions
  • Adapting to changing requirements

Based on the success of these methods at B2C companies, many B2B companies are now following this same approach.

Disrupt Your Business (Before Others Do)

Digital start-ups have the advantage of being able to reinvent businesses and industries by addressing consumer needs in completely new ways. Just look at what Uber is doing in the transportation business and what Airbnb is doing in travel.

To compete, incumbents need to create their own “digital attacker” businesses that can allow them to be more disruptive in their own approach. Incumbents can build strategic advantage by leveraging existing strengths—brand recognition, existing customer relationships, and niche products and services. The key is to do it quickly. Digital speed is as much as five times faster than traditional business, and that speed is essential to becoming a leader or a fast follower.

Digitalize Your Core Business

This isn’t just about rolling out new IT projects; it’s about fundamentally transforming the business to make it leaner, more agile, and more cost effective. Think about where digital efforts can produce the biggest changes in performance and value for your customers—not only in marketing but also in operations and the back office. Companies that succeed tend to tackle many efforts in parallel, using standardized processes and agile techniques to accelerate execution and provide more flexibility to iterate on strategy.

Create Value from Data

Leaders should look for ways to better use internal and external data—especially big data. Companies that use big data effectively tend to generate higher revenues and come up with more innovative project ideas and capabilities. In the process, they create entirely new revenue streams, business units, and stand-alone businesses.

Position Your Business in the Broader Ecosystem

Ecosystems are increasingly important in the digital economy. They are becoming essential to creating new relationships and capabilities, leveraging new technologies, and accelerating innovation. By collaborating across the ecosystem of partners and institutions, companies can create new opportunities to address consumer needs in the B2B and B2C spaces. Technical platforms that allow devices, applications, data, products, and services to work together in new ways become a core part of the overall business strategy.

Executives that embrace these five imperatives commit to fundamentally transforming their businesses, including undertaking some risk in strategy and execution. But to do otherwise risks a fate worse than disruption: extinction.

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Tom Reichert

Senior Partner & Managing Director; Global Leader, Digital and Analytics; Chair of the Practice Areas

New York

  • End-to-end technology transformation
  • IT strategy, transformation, sourcing, and organization
  • Technology in financial institutions
  • Technology in operational transformation
Ralf Dreischmeier

Senior Partner & Managing Director, Global Leader, Technology Advantage Practice

London

  • Technology and digital strategy and transformation
  • Leveraging big data for business value
  • Technology and operations in PMI and carve-outs
  • Technology organization, sourcing, and capability building
Karalee Close

Partner & Managing Director

London

  • Leads BCG's Technology Advantage practice in Western Europe and South America
  • Big data & analytics in health care
  • Digital marketing and commercial model innovation
  • Research & development (regulatory, clinical, innovation)
Sylvain Duranton

Senior Partner & Managing Director

Paris

  • Member of BCG's Gamma team, which conceptualizes, builds, and deploys advanced analytic solutions
  • Sales force effectiveness
  • Digital marketing
  • Consumer insight
Antoine Gourévitch

Senior Partner & Managing Director

Paris

  • Leads BCG's global work in digital transformation and big data in the Technology Advantage practice
  • Automotive
  • Financial services
  • Technology in telecom
Jeff Schumacher

Founder and Chief Executive Officer, BCG Digital Ventures

Manhattan Beach - Digital Ventures

  • Product development, strategy, and disruption
  • Digital advertising, sales, and marketing
  • Digital expertise in consumer products, connected health, financial services, industrial goods, and transportation
  • Blockchain
Technology & Digital
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