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When implementing digital transformation programs, companies have focused predominately on e-commerce and mobile elements, said Naufal Khan, senior partner at management consulting firm McKinsey & Company. Making the necessary changes to sell to a digital customer is a critical element of digital transformation, but it is not the only re-engineering that companies must do, Khan said. To develop a successful digital business model, they need to take aim at internal operations and support functions.
During a video interview at the recent MIT Sloan CIO Symposium, Khan discussed digital business strategy and how digital is changing the CIO role. Here, Khan explains which areas of the enterprise are leading a charge in organizations' digital transformation programs and which areas are behind. The latter category includes areas like finance and HR that Khan says are ripe for change.
Editor's note: This transcript has been edited for clarity and length.
In your experience working with clients, which parts of the enterprise are leading the charge in digital transformation programs?
Naufal Khan: A lot of the focus has been mainly around the commercial element. So, how do we sell e-commerce? That has actually been the main focus for digital transformation so far. There is a lot more that needs to be done, but this is the one area that has been the primary focus for the last four to five years.
Why is that?
Khan: Because everybody follows the consumer. Consumers are looking at their mobile apps and they're looking for websites; they're looking for ways to engage. So, I think often, unfortunately, digital ends up getting defined as the e-commerce or as the mobile part. This is also the area that has been most mature because of the commerce element. So, I think it ends up being that, when people say digital companies, [they] are often talking about their e-commerce and their mobile [elements] and how they're engaging the customer. There's a lot [more] where they should go next.
What parts of the enterprise are less far along in digital transformation programs?
Khan: I think this is where the definition of digital becomes really important. It should include areas such as support functions. For example, automation in finance is a big untapped opportunity. Some of the organizations are going after it, but it often gets left out. I think everybody's talking about advanced analytics and [they're] excited about it. But that also ends up being very focused on the customer part. You can do advanced analytics, for example, in cybersecurity and have pattern recognition on how different types of break-ins happen. So, there's a whole bunch of areas, particularly around support functions like finance and HR, where there is a lot of opportunity in digital.
The second part of that is operations. Companies are starting to move, but they haven't quite moved toward digitizing that part of the enterprise either. Those are the two areas that I think are lagging behind right now.