McKinsey

January 25, 2019

Our best ideas, quick and curated

This week, we look at how successful companies run defense against disruption. Scroll down for blockchain’s Occam problem and reading picks from consumer expert and senior partner Greg Kelly. Subscribe to get the Shortlist in your inbox on Fridays.

Digital sits high on the agendas of boards and executive teams, and with good reason: technology disruption could shrink corporate profits by $600 billion to $700 billion. But certain established companies withstand disruption better than others. What sets the winners apart?

First, speed. Top performers adopt new technologies and innovations early. They set, execute, and adjust their digital strategies fast. And they’re nimbler with digital talent: they reallocate employees nearly twice as frequently as do their peers.

By accelerating their digital efforts, these leaders capture sizable shares of digital revenues before start-ups swoop in. Established companies in the cosmetics business, for example, face intense pressure from born-digital brands, which account for 10 percent of the market and are growing almost four times as fast as legacy companies.

Staying focused matters too. With the prospect of digital attackers looming, executives sometimes pour resources into new businesses—and inadvertently neglect existing ones that might remain viable for years.

Leaders who avoid this strategic pitfall recognize the “duality of digital”: the twin imperatives to digitize legacy businesses and create new ones. They often use a portfolio approach to size up companies business by business, anticipating competition and deciding whether to divest or digitize in hopes of prolonging a business’s life span. And of course, where they see opportunities, they determine what investments to make in digital ventures.

With a digital strategy laid out, leaders can begin pushing for change. Full-on transformation requires a multitude of tech solutions, built in-house with users’ guidance and enabled by a modern IT environment. Little wonder, then, that digitally reinvented incumbents spend more on digital and are more likely to use cutting-edge approaches like artificial intelligence and design thinking. Or that companies with strong IT organizations are more likely to say they’re effective at the most important digital activities.

One more thing to keep in mind: digital transformation means reworking behaviors and processes as well as technology. Plugging in a new solution isn’t the end of a transformation initiative; it’s the beginning of rounds of operational improvements. Yet another reason to get a fast start and concentrate on solutions that will create the biggest advantages.

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WHAT WE’RE READING | Greg Kelly

Greg Kelly, a senior partner in Atlanta, is the global leader of McKinsey’s consumer goods and retail practices.

My reading list has always been a mix of fun, renewal, and learning. My kids have picked up on my habits and have given me great books as gifts. One of my daughters, an avid runner, gave me Eat & Run: My Journey to Ultramarathon Greatness, by the great ultramarathoner Scott Jurek. Scott shares what it takes to be a world leader in endurance and resilience, and also refers to one of the greatest ultra-races of all time, which was witnessed by very few people. That inspired me to read Born to Run: A Hidden Tribe, Superathletes, and the Greatest Race the World Has Never Seen, by Christopher McDougall.

Another one of my daughters, who finds inspiration in yoga, gave me The Power of Now: A Guide to Spiritual Enlightenment by Eckhart Tolle. This bestseller was released more than a decade ago, but its message is timeless: focusing on the present and being fully present are the keys to personal growth and spirituality.

My son, who works at Apple, gave me Walter Isaacson’s biography, Steve Jobs, a few years back. That compelling read convinced me to pick up Isaacson’s newest biography, Leonardo da Vinci, an equally fascinating look at an earlier creative genius.

I also recently read two books by my colleagues: Talent Wins, by Dominic Barton, Ram Charan, and Dennis Carey, which offers a framework for hiring and deploying talent, and Strategy Beyond the Hockey Stick, by Chris Bradley, Martin Hirt, and Sven Smit, which brings a contemporary big data approach to understanding what works in setting strategy.

Finally, I just started The Content Trap: A Strategist’s Guide to Digital Change, by Bharat Anand of Harvard Business School. He focuses on how companies need to connect with audiences and consumers—an increasingly crucial topic for retailers and consumer goods companies, which is where I focus my time professionally.

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