Discover. Design. Deliver. De-risk. These are McKinsey & Company’s ‘Four Ds’ of digital transformation outlined in a new report.
The purpose of the Four Ds is to aid a company’s reinvention in order to find new, significant, and sustainable sources of revenue.
Incremental improvements or building something new outside the core business are good places to start but must be followed up by more profound changes — without rearchitecting how the business makes money the benefits of minor adjustments will be fleeting, the authors write.
“Simply taking an existing product line and putting it on an ecommerce site or digitising a customer experience is not a digital reinvention. Reinvention is a rethinking of the business itself,” the authors write.
To help address the challenges of reinvention, the consultants recommend taking a coordinated approach across the Four Ds:
- Discover what your digital ambition is (based on where the value is);
- Design programs that target profitable customer experience journeys;
- Deliver the change through an ecosystem of partners; and
- De-risk the proces by thoughtfully sequencing steps.
In the Discover phase, companies should develop a clear view of where value is being created and destroyed as the basis for developing a clear business strategy in both the short and long-term. They must also audit their own digital capabilities and resources. Once their strategic ambition is identified a detailed roap map is then developed which addresses capability gaps, and recruiting, developing, incentivising, and retaining the necessary talent. The goal is to develop a tight business case for change based on facts, the authors write.
The Design phase should involve the creating and prototyping of breakthrough experiences focusing on the customer journey. By defining journeys, pain points and potential missed connections the change team can then map out, screen by screen, models for a new interface. In this phase organisations should avoid getting caught in endless rounds of planning, McKinsey warns. Instead they should rapidly build prototypes, translating concepts into minimum viable products to test and iterate in the market before scaling.
To Deliver on the Design phase, businesses should develop a network of partners who can help them rapidly scale. Building an ecosystem of partners will enable the speed and scale necessary for reinvention, the authors write.
De-risking involves structuring the reinvention process to minimise risk. “One of the most common reasons digital transformations fail is that the organisation develops ‘change exhaustion’ and funds start to dry up,” the authors write. Avoid this by focusing on quick wins that build momentum and generate cost savings.