• by Jack Loechner , Staff Writer, October 9, 2013

According to a recent McKinsey survey, as businesses continue to embrace digital tools and technologies, especially when engaging with customers, C-level executives are stepping up their own involvement in shaping and driving digital strategies. Companies are making digital marketing and customer engagement a high strategic priority, says the report, but most executives estimate that at best, their companies are one-quarter of the way toward realizing the end-state vision for their digital programs.

Executives say each of the five digital-enterprise trends considered in the study is a strategic priority for their companies, and 56% say digital engagement of customers is at least a top-ten company priority. Companies have made particularly big gains in their use of digital to position material consistently across channels and to make personalized or targeted offers available online.

Companies’ Use of Digital Customer Engagement Practices (% of Respondents; 2013)
Practice	Deployed Across Enterprise	Deployed To One Functional Unit	Selective/Isolated Deployment
Positioning & branding consistent online & offline	38%	33%	30%
Advanced customer targeting	30	33	37
Personalized or targeted offers online	29	36	36
Engaging customers thru social media	26	32	42
Creating branded aps and games for Web or mobile	24	33	43
Test messages & offers on Web	19	30	51
Source: McKinsey, October 2013

Notably, executives say their companies are using analytics to grow: the largest shares report focusing their analytics efforts on either increasing revenue or improving process quality; reducing costs tends to rank as a lower-level priority.

The Use Of Big-Data Applications to Improve or Enhance (% of Respondents; 2013)
Big Data/Analytics Use Across Enterprise	% of Respondents
Budgeting, forecasting, planning	46%
Performance management & transparency internally	39
Increase automation of straightforward decisions	37
Improve R&D	35
Improve ops, service delivery, supply chain management	31
New product strategies or new market segments	29
Enhance customer service or support	29
Improve customer insights, segmentation, targeting	26
Dynamic pricing strategies	24
Source: McKinsey, October 2013

Across most of the C-suite, larger shares of respondents report that their companies’ senior executives are now supporting and getting involved in digital initiatives. This year, 31% say their CEOs personally sponsor these initiatives, up from 23% who said so in 2012. This growth illustrates the importance of these new digital programs to corporate performance, as well as the conundrum that many organizations face: often, the CEO is the only executive who has the mandate and ability to drive such a cross-cutting program.

Level of Support  and Involvement in Digital Business Initiatives (% of Respondents by Role; 2013)
Role	Supportive & Sponsor	Supportive & Engaged	Supportive, Not Engaged
CEO	31%	24%	27%
CIO	26	37	10
CMO	26	28	16
Directors	14	11	33
CFO	13	24	33
Source: McKinsey, October 2013

Executives most often attribute the success of digital programs to managerial factors, and are less likely to cite any technical considerations. Interestingly, the absence of senior-management interest is the factor respondents most often identify as contributing to an initiative’s failure.

Top Three Factors of Success To Which Digital Oversight Contributes
Factor of Success	% of Respondents
Sr. Management interest or desire to change practices	32%
Internal leadership	30
Alignment of organizational structure and goals	21
Source: McKinsey, October 2013

Challenges aside, executives remain bullish on digital business, says the report. 65% say they expect these trends will increase their companies’ operating income over the next three years. CEOs are more positive than executives in any other role, with more than one in five saying they expect income from digital to increase by more than 30% in three years’ time.

Executives who expect an income boost from digital business attribute the largest part of that increase to digital customer engagement. Among those expecting a negative impact on company income, the largest share of respondents say it’s due to their inability to adequately respond to changing customer behavior and expectations.

Percent of Expected Income Increase in Income Related to Digital Business
Digital Model	% of Income Increase
Digital engagement of customers	31%
Digital innovation of products, operations or business model	20
Big data and advanced analytics	19
Digital engagement of employees, suppliers, business partners	16
Automation	15
Source: McKinsey, October 2013

Executives say their companies continue to invest heavily in their digital programs, and, on average, expect to spend more relative to last year’s results. But currently, only about one-third of executives say their companies are spending the right amount on digital, and many worry about under investing in these programs. Still, the responses indicate that companies have a long way to go in accomplishing their digital-business agendas, acknowledges the report.

57% say their companies are up to one-quarter of the way toward realizing their end-state visions for their digital programs, and just 40% say their organizations’ digital efforts have yielded a measurable business impact thus far. 60% of the executives who say their companies spend the right amount on digital are much likelier than average to report real business impact, as are the 56% who say their companies are at least halfway toward their end-state visions.

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