McKinsey names industries that are falling behind in digitization

Entire sectors are failing to keep up, says a major management consultant.

McKinsey report leading industries and lagging industries digitization
Credit: Wikipedia

"The U.S. economy as a whole is only reaching 18% of its digital potential," McKinsey said in a new report.

The management consulting firm reckons that there's a massive disparity between sectors that have been digital adopters and those that haven't. Those that have adopted digitization are "maintaining a considerable lead over the rest of the U.S. economy," it thinks.

Enterprises that use digital tools account for more market share and take in larger profits, according to the report. In fact "some are reshaping entire industries to their own advantage," McKinsey says.

And not only are businesses getting an advantage by taking a digital route, employees who understand it, and who have gotten skilled in it, make more money.

Digitization adds to GDP

McKinsey estimates that Big Data, Internet of Things, and online talent platforms could add $2.2 trillion to the U.S. Gross Domestic Product (GDP) by 2025.

Growth could be even bigger than that, though, as the lagging sectors grasp the digitization idea.

Not great for all workers

One big problem, though, is just what happens to the employees whose jobs disappear with digitization. "Middle-skill" jobs could go.

That includes clerical, sales, and production jobs. I've written about some of the jobs one could see on the chopping block in "Even the CEO's job is susceptible to automation."

The rate of job displacement could "accelerate sharply," and the report reckons that this "displacement" could be "nearly twice the rate of recent decades."

However, for those in industries embracing the most digitization, workers will "enjoy wage growth that is twice the national average."

Who's got it?

So, just which industries have best embraced digitization?

Information and communications technology (ICT), the media sector, financial services, and professional services "are surging ahead," the study finds.

Other sectors need to catch up. Most sectors are less than 15% as digitized as the leading ones, McKinsey says.

Those in the lowest rung include healthcare, construction, and hospitality, as examples. Examples of medium digitization are advanced manufacturing, wholesale trade, and retail trade.

'Fueling the shift'

It isn't all ICT, MCKinsey clarifies. ICT is supplying the devices, software, and services that are "fueling the shift," McKinsey says.

But ICT is actually "only a sliver of a much broader phenomenon." Digitization is expanding beyond ICT, McKinsey reckons, and digitization is overturning "existing business models" through the connection of new kinds of digital assets.

Too risky

Some get it, but a problem for those sectors, such as construction, that haven't gone digital is that as much as they may like to, they can't ignore digital.

If you don't go digital, you run the risk of getting disrupted, McKinsey thinks.

One example of a disrupted industry could be ground transportation with the increasing adoption of shared mobility, such as Uber and Zipcar, or hospitality with crowd-sourced lodging brokered by Airbnb.

The least digitized

McKinsey is firing warning salvos. Get digitized now or forever hold your peace.

In construction, an example of disruption might be customized, pre-fabricated structures built off-site. Printed buildings, maybe.

"Companies are aiming at a moving target," the institute says. "But there is no opting out of the imperative to go digital. The opportunities and operational benefits are too great—and the biggest risk of all is being disrupted while sitting on the sidelines,"

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