(Source: BCG)

A lot of ink has been spilled telling the stories of companies felled by digital disruption— think Kodak or Blockbuster. What gets far less attention is the way traditional incumbents are winning at the digital game. For companies like Starbucks, John Deere, and Unilever, digital is driving new sources of competitive advantage, growth, and value creation. Incumbents have huge advantages—resources, customer relationships, and global scale, to name just a few—that when tied to the right digital strategy give them the edge over smaller rivals.

In our experience, successful digital transformation must rest on a foundation of smart digital strategy. And smart digital strategy, like traditional business strategy, is about making wise investment choices to maximize competitive advantage, growth, profit, and value—and then implementing with discipline.

(Source: BCG)

Budget constraints are a fact of life for chief information officers, and they have coped in the past by leveraging digital capabilities to operate more efficiently and lower headcount. But today those budget constraints are amplified by the need to modernize the IT environment. The dilemma that many CIOs find themselves in is how, under these budget constraints, to pay for vital modernization initiatives and avoid further headcount reductions.

The answer, we believe, is to transform the organization and change the ways of working by adopting a platform-based IT organization. This new setup promotes the agile collaboration of functional and technical experts so they can align on and implement business solutions, increasing speed to market and productivity by two to four times. These improvements can fuel the budget to modernize IT while accelerating value generation and maximizing customer/user satisfaction. With this in mind, we have identified five principles to make platform-based IT organizations work: semiautonomous decision making, client and user centricity, advanced IT and data capabilities, highly skilled teams, and agile at scale.

(Source: BCG)

Incumbent businesses are right to be paranoid about the expanding impact of technological disruption. Of the top ten global companies by market capitalization a decade ago, only two have maintained their positions; many of the rest were replaced by digital natives. And we expect the list ten years from now to be at least as different from today’s: we know that only one-third of companies faced with industry disruption thrive, while the remaining two-thirds languish or fail. It is not surprising, then, that incumbents in many sectors are engaged in extensive digital transformation efforts in an attempt to inoculate themselves against the threat of disruption.