Incumbent companies face critical decisions when it comes to addressing digitization. Digitization is blurring the lines between sectors, placing fresh demands on both leadership and organizational strategy. Companies need to make several key decisions around how they’re going to address digital.

It’s true that companies have been using technology for many decades. But a few things have changed. First of all, customer expectations are very, very different now. We know that around 80 percent of purchases are researched online before a customer goes into a store.

The second thing that’s changed is that the cost of delivering high-end IT solutions is reducing all the time. Historically, it would have been very expensive, and a lengthy process, to deliver a highly functional technology solution that customers would want to use. That’s no longer the case—it can sometimes be done now in just weeks or months.

Digital is fundamentally shifting the competitive landscape in many sectors. It allows new entrants to come from unexpected places. We’re seeing banks get into the travel business in some countries. We’re seeing travel agents get into the insurance business. We’re seeing retailers go into the media business. So your competitor set is not what it used to be.

One thing that digital allows is what I call “plug and play dynamics”—meaning that companies can attack specific areas of the value chain rather than having to own the whole thing. This is because digital allows different services to be stitched together more quickly and cheaply.

Incumbents have many strengths that they can play on as they defend against digital attackers. They have, for example, a customer base. They have a brand. And they have data. The trick, however, is to make sure that all of those assets are leveraged and used equally well in the digital world.

It’s a do-or-die situation. And we work all the way with our clients on their Digital Agenda.

Ref: Mckinsey & Co

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