McKinsey
Four myths about building a software business
Aaron Aboagye, Ani Mukkavilli, and Jeremy Schneider

Corporate digital transformation and corporate viability

The digital transformation of many non-digital companies have been accelerated after the Covid-19 crisis. Shifting to a digital business model may unlock significant value but process won´t be easy. In this article McKinsey shows “four common misconceptions that can send companies down the wrong path of digitalization”, providing some recommendation to try to avoid them.

The ambition to become digital has been accelerated during the pandemic as “nearly two-thirds of companies expect that the digitization of their core businesses will be (or already is) essential to remaining economically viable” and only about 8% of companies believe that their current business models will remain viable if they don’t digitize”.

The article provides some recommendations to avoid the 4 most common mistakes done by companies during digital transformation:

  1. Digital transformation is not just an investment in IT or software; it is a holistic transformation of the business and its operating model and culture. Product managers will have a broader role “bringing business and customer knowledge together with technical knowledge” and ensuring alignment with other functions such as marketing and engineering.
  2. Digital talent will be necessary but it is not just a question of hiring few executives from Top Tech Companies: Access to digital talent will be key but probably you will be more attractive as an employer hiring people from Tier 2 or Tier 3 digital companies than from Silicon Valley´s Top tech companies. A key element to attract digital talent will be the culture and purpose of your company.
  3. Gaining digital scale through acquiring small digital player’s won´t be easy. This strategy according to McKinsey has proven to be small accretive in terms of earnings and quite difficult in terms of operating and culture integration.
  4. Relying on your sales force and the strength of your relationship with the customer may not be enough to face a successful digital transformation. According to McKinsey, it should be considered to create a specific digital channel or “to turn to a parallel go-to-market approach with a lot of autonomy”.

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