More than 30% of top 50 listed companies complete digital overhaul

The key building blocks of a successful digital transformation include the right organisational vision, creating structures across functions, and a mindset change

A little more than one third of the top 50 companies by market capitalisation have completed digital transformational processes with visible business impact, according to a research by McKinsey & Co. At least 32 per cent have started seeing results, 42 per cent of the sample set are getting started with transformation projects but haven’t yet seen substantial impact, while the remaining 26 per cent are at an early experimentation stage, says Kushe Bahl, partner with McKinsey Digital and leader of the McKinsey Analytics Practices in India. 

The key building blocks of a successful digital transformation include the right organisational vision, creating structures across functions, building capability among people, and a mindset change but that also required an executive position within an organisation to drive change forward via a “transformation office”. Transformation offices have either a chief transformation officer who is the chief programme manager and oversees all the different digital initiatives, a chief data officer (CDO) who serves to harness resource pools or a chief digital officer who builds an organisation from the outside with start-ups and tech vendors who provide support and service. 

The industries that are rapidly moving towards digital transformation are financial services, auto, telecom, and to a lesser degree, manufacturing. 

The State Bank of India’s digital banking platform Yono is the largest e-commerce platform outside of pure-play e-commerce firms, its officials have said. SBI has over a 100 partners and is engaged in large numbers of redirections to Amazon, Flipkart and IRCTC. 

The other example of digital transformation is Tata Steel, which was recently inducted in World Economic Forum's Global Lighthouse Network. Tata Steel's greenfield steel plant in Kalinganagar has improved time to market by 50 per cent, because of investments in digital and analytics solutions, as well as capability-building to develop the digital skills junior resources.  

In the recent past, automotive manufacturer Ashok Leyland was identified digital as a critical strategy to tap the fragmented Rs 60,000-crore aftermarket. On an average, the distance between garages run by original equipment manufacturers (OEM) and service stations is 100 km, while local garages are at every 3 km. The firm has mapped 20,000 mechanics for its digital initiative. Bahl says a transformation office can vary in size from five to six people and be as large as 150 people. “Artificial Intelligence (AI) is much part of the agenda and a powerful tool when used for transformations,” Bahl says. What does that cost? A full IT overhaul to digital for a large corporation can easily run into hundreds of crores over many years. However, most enterprises already have quality tech that can be easily upgraded with a lower-cost technology approach that augments as opposed to replaces.  

The return on investment (ROI) on a digital capex is also higher at around 300 per cent, Bahl says. “Earlier, there was talk of how old would be disrupted by new and how legacy companies would die but today, AI gives companies the chance to optimise their processes. Take steel, for example. It will always be about selling steel but you can get better at selling it and making it.”

Most large firms already have a CDO in place. Uma Talreja, chief marketing and customer officer, overseeing digital functions for Shoppers Stop, says the key to following ROI after a digital transformation is to not just record and tabulate digital or e-commerce sales only but to see how the entire top-line is growing. “The thing about digital is that it is also a huge influence in growing overall business,” Talreja says. Shoppers Stop started its digital journey two and a half years ago. Talreja says it takes three-five years to see absolute returns on digital overhauls kick in.