Six building blocks for creating a high-performing digital enterprise

Few companies need to be sold on the benefits of digitization. Companies that deliver next-generation digital experiences are likely to see as much as a 30 percent+ sales uplift, generate revenue growth rates that are up to10 percent higher than the industry average, and be 20-30 percent more profitable.

Managing digital orchestration is more than a means for beating competitors; it’s becoming a critical capability for survival.
For all the often-substantial investments companies have made in digital initiatives, however, few are seeing those kinds of returns. The main reason for the shortfall is that getting the engine in place to digitize at scale is uniquely complex. Since digital touches so many parts of the organization, any large digital program requires unprecedented levels of coordination across the business, with all the cross-functional teaming, process changes, and technologies that involves. A strategy to increase revenue from high-value customer segments, for example, requires analytics-based insights into which purchase journeys generate the most value, a clear vision and plan for how to capture that value, as well as technologies and tools to digitize interactions with customers. New capabilities and teams will also be needed to manage and coordinate the delivery of those journeys across the organization (for a deeper look at how companies can develop meaningful digital strategies and harness digital to drive business performance, see “Raising your Digital Quotient”).

Managing this level of digital orchestration is becoming more than a means for beating competitors; it’s becoming a critical capability for survival. S&P data shows that average corporate lifespans have fallen sharply, from 61 years in 1958, to 25 in 1980 to just 18 years in 2011. At the present rate, 75 percent of S&P 500 incumbents will be gone within 13 years.

Six building blocks
In our experience, companies that have successfully transitioned to digitally driven business models are able to successfully orchestrate six building blocks: strategy, customer journeys, process automation, organization, technology, and analytics.

Not every digital initiative will require each building block to be developed and used to the same degree. Some “blocks” will also serve as more natural starting points depending on a company’s circumstances—for instance, a company whose IT constraints make it hard to deliver a cutting-edge customer experience will naturally want to focus on the technology and process elements first.

In our experience, however, this six-block framework provides executives with a coherent structure for thinking through and managing large-scale digital programs.

  1. Strategy and innovation: Digital strategy is an intrinsic element of business strategy today, no longer something off to the side. In fact, 90 percent of digital leaders (vs. 60 percent on average) have fully integrated digital into their strategic planning process. The best digital strategies don’t rely on past analyses but instead start fresh and carve out a vision based on where they believe value is likely to shift over the next three to five years. They assess at a granular level where value is likely to be disrupted within their own business and market and isolate where and how they will compete. Effective digital strategies prioritize a handful of interventions where the business can significantly exploit significant opportunities —and divest or reduce exposure in markets where value is declining—then craft a digitally enabled business model around them. That could mean creating a new way for customers to purchase a product, moving into new businesses, or exploiting competitive advantages like proprietary data in new ways. One large retailer, for example, actively reviews its portfolio of businesses and decided to divest from its customer electronics business when it saw margins eroding. It then invested in an online retailer when it realized the strong growth trajectory of e-commerce in the sector.