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The Reinvention of Digital Technology

By Federico Mazzella ,
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Despite the exponential leaps that digital technology has made, it has only recently started to truly penetrate industries.

The Case for Digital Reinvention, a recent McKinsey publication, reveals how digital technology has penetrated different industries and companies.

The findings of this study seek to shed light on the current state of affairs through statistical analyses so as to “understand the nature, extent, and top-management implications of the progress of digitization.”

How will economic performance change as digitization continues to advance? Which are the best performing companies? Which approach is most relevant as digitization progresses?

To answer these questions, the study looks at the effects of digitization on different dimensions: products and services, marketing and distribution channels, business processes, supply chains, and new operators in the entrepreneurial ecosystem.

Every day we see the rise of new markets, profits, changes, and technologies, so we would be forgiven for assuming that the digitization of the economy is already at an advanced stage. But a closer look reveals that “digital forces” have not yet become as widespread as we might think.

On average, industries that are in the process of digitization represent less than 40% of the total: 10% have not digitized at all, while around 24% are in the process of doing so and only 4% are fully digitized.

The study shows that as digitization penetrates more fully revenues and profit growth will decrease for those who do not speed up the digitization process. The main factor dividing these two groups is whether or not they use integrated digital strategies.

The study’s conclusions are clear: act decisively, whether by creating “new digital businesses or reinventing the core of today’s strategic, operational, and organizational approaches.”

We are only just beginning to see the impact of digitization on firms’ economic performance—the process is far from complete. As it continues to move forward, the benefits and opportunities will be enormous.

The Case for Digital Reinvention. McKinsey, 2017.

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