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Going digital is now a core strategy for many organizations around the world. Our new research sheds light on how digital is slicing across industries and the potential approaches companies can take to integrate digital where it makes the most sense for their business. In this episode of the McKinsey Podcast, McKinsey senior partner Paul Willmott and senior expert Laura LaBerge speak with McKinsey Publishing’s David Schwartz about ways companies can think about digitization within their sector and the potential impact of their digital strategies on the bottom line.
David Schwartz: Hello, and welcome to this edition of the McKinsey Podcast. I’m David Schwartz of McKinsey Publishing. Today we’re going to be talking about digital reinvention, starting with some new research that illuminates how far digital technologies have penetrated different industries and what companies can do to avoid being left behind. Joining me to discuss the issues are Laura LaBerge, a senior expert in our Stamford office, and Paul Willmott, a senior partner in our London office. Laura and Paul, thank you for joining us today.
Laura LaBerge: Thanks for having us.
Paul Willmott: You’re welcome.
David Schwartz: Paul, I’d like to start with definitions. People tend to use “digital” and “digitization” interchangeably. Do these terms mean the same thing?
Paul Willmott: For some people, the word “digital” tends to refer to a channel. So I interact with my bank digitally, meaning, I use an app or a website. We tend to use a much broader definition. And as we think about digital or digitization, we think about it in a number of different frames.
So firstly is the digitization of marketing and distribution, which is the channel but also all of the marketing around it. Secondly, products and services: so, for example, that would be taking a product and adding a digital service to it. Digitization of ecosystems—which is what we’re seeing going on with the likes of Amazon and Alibaba—aggregating many other businesses and creating ecosystems.
Digitization of processes—so replacing labor with software. There’s supply chains, which is thinking about different places to hitch your supply chain to. And in aggregate, these things lead to a complete picture of digitization. And we think it’s important to look at all of them.