– by Paul Willmott
It may not be much longer before we’re referring to the annual World Economic Forum as “Digital Davos.” After spending almost a week there, it struck me how much technology—including the companies in attendance to the agenda topics—has become a core issue facing governments and industries.
In that light, I wanted to share some thoughts and observations from my four days there this year:
- Digital has moved from a hot topic to an ongoing priority. AI replaced Digital Industry 4.0 as the headline topic this year at Davos. Nevertheless, every executive I met commented on the importance of digital to their business, and many of them articulated detailed and thoughtful strategies. Some went further still, setting out an aspiration to become a fully digital company. As one US CEO put it, "Last year at Davos, digital was all about hype. This year it's all about getting practical."
- Companies and governments are increasingly aware of the societal impact of automation. In the context of falling median wages and rising populism, executives in Western markets are hoping to soften automation's impact on employment. One CEO asked, “How can I retrain and redeploy those colleagues who are displaced by automation into higher-value roles?” The flip side of this concern, however, was an undercurrent of optimism that automation would drive innovation, which in turn drives growth and job creation. This puts the onus on business and governments to sustain the pace of innovation and to translate that into both growth and employment. (You can read more about this in our article “Harnessing automation for a future that works.”)
- Execution is a source of frustration. CEOs have high aspirations for digital but some are becoming frustrated with the slow pace of execution. A CEO said, “I can see the investment we are making in digital, but I don't yet see value being created.” A number of executives cited regulation as a big blocker (“We are still required to get wet signatures!”) as well as poor staff capabilities.
- The soft stuff is the hard stuff. Many clients take a broad definition of digital, with aspirations to improve agility and innovation. To make this shift, clients are exploring new Spotify-like organizational models, and hiring and integrating talent from new sources. But each of these routes is challenging. One executive said, “I have lots of people who speak the language of business, and I have no problem finding software engineers who speak the language of technology, but I can't find translators who speak both languages.” Another said, “I would like to move to an agile organization, but a big bang is far too risky.” A retailer noted, “Finding a suitable CDO is harder than hunting a unicorn.”
- A few significant splits are emerging around digital risks. Few executives proactively raised cybersecurity as a major concern. That’s because management of cyber risk has become a day-to-day function. However, most recognize the potential for tail-risk events. Privacy concerns were also a topic of debate, with some leaders expecting a backlash while others were more sanguine. Adoption of public cloud infrastructure is also a topic that splits leaders, with some firms citing security concerns.
- The center of gravity for digital innovation is moving East. Leaders are searching globally, and outside of sector, for digital best practices. Silicon Valley is still seen an important source of insights, but leaders are also looking to Israel, China, and other innovation centers. Discussions in Davos suggest that every region and sector has innovations we can learn from. For example, India's move to create a national biometrics database has enabled innovative new fintech models.
- B2B is moving quickly by emulating B2C. B2B firms have more recently adopted digital as a core priority, but are moving faster by borrowing B2C tactics. One CEO said, “We established a strong position in China by beating our competitors to a partnership with a tech player.” Other B2B executives talked about borrowing B2C thinking for more advanced CRM.
- Digital and analytics reinforce each other. Few executives make a clean distinction between digital and advanced analytics, and many are realizing the importance of keeping the two agendas synchronized. As one insurance leader noted, “We are digitizing our entire business system, as we believe that is a prerequisite to becoming a truly data-driven company.”
Paul Willmott is a senior partner based in McKinsey’s London office and is co-leader of Digital McKinsey.
This was originally posted on LinkedIn.