Creating Value by Digital Transformation

 Mckinsey writes how Boards can create value via Digital Transformation.

Digital transformations aren’t about being digital; they’re about creating value. That aligns with the board’s most important mandate, and the board can be particularly helpful in assessing value across three vectors: 
  • Scale. The typical aspirations of digital transformations often lead to changes at the margins (5–10 percent increases over the previous year). This is fueled by an insufficient understanding of what digital can do. As a rule of thumb, digital initiatives should have the potential to change at least 20 percent of operating profits. Boards can push their CEOs to shoot higher. 
  • Source. Technology is often an efficiency conversation about cost savings. But the greater value of tech is in its ability to build value. Recent McKinsey research into cloud economics, for example, has shown that as much as 75 percent of the $1 trillion at stake in cloud will come from business innovation. Directors can make sure that management is exploring ways to tap tech to create new sources of value. 
  • Scope. Short-term pressures can overtake any business, especially when the market is volatile. Digital transformations, however, require long-term commitments to reap the full rewards they can deliver. Boards can press their CEOs to make sufficient expenditures for long-term initiative

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