collaboration with select social media and trusted analytics partners Learn more about cookies, Opens in new Companies can also dedicate some of the savings to modernizing selectively the technology stack and software-development tooling. Video . For many companies, customers have already migrated to digital. Michael Krigsman: How is this different from digital transformation? In doing so, they will need to confront three structural changes that are playing out. Remote working can help organizations move at a faster clip as companies tap into new labor pools and specialized remote expertise. Respondents who say strong commitment kept their transformation on track most often point to having the entire C-suite fully aligned and committed to the transformation. Gemeinsam meistern wir ihre digitale Transformation und helfen beim Aufbau neuer Geschäfte - integrativ, koordiniert und skalierbar. One such expert is Michael Bloch, Senior Partner at McKinsey’s Global Business … These two lenses should set the table for targeted changes to the operating model. We also looked at how these challenges vary according to when a transformation stalls. Grocery stores have shifted to online ordering and delivery as their primary business. Aamer Baig is a senior partner in McKinsey’s Chicago office; Bryce Hall is an associate partner in the Washington, DC, office; Paul Jenkins is a senior partner in the Oslo office; Eric Lamarre is a senior partner in the Boston office; and Brian McCarthy is a partner in the Atlanta office. We also asked these respondents what enabled those factors at their organizations. We strive to provide individuals with disabilities equal access to our website. As CIOs consider upgrading their tech stacks, two features of a modern technology environment are particularly important and can be rapidly implemented: a cloud-based data platform and an automated software-delivery pipeline (commonly called “continuous integration and continuous delivery”). New data and completely rebuilt analytical models will be essential to steer operational decisions. Companies will need to ensure that their digital channels are on par with or better than those of their competition to succeed in this new environment. Design. Something went wrong. Much of the rapid IT work carried out during the COVID-19 crisis might have created new cyberrisk exposures. Those who say clarity on the transformation strategy was critical to their digital momentum most often state that translating the strategy into clear, actionable initiatives was the key to providing that clarity. People create and sustain change. But it’s not just about digitizing. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. IT teams have already delivered at a pace they never have before. It’s essential to set these targets at the outset and regularly measure progress against them. Chief digital officers and chief information officers (CIOs) can then quickly stand up (or refocus) agile teams to execute the most urgent priorities. This suggests that while companies might not be able to avoid disruption, they often can find a path through it. What crew size is optimal for each flight? In effect, remote ways of working have, at least in part, driven the faster execution drumbeat that we’re all experiencing in our organizations. Select topics and stay current with our latest insights, How to restart your stalled digital transformation. Create a profile to get full access to our articles and reports, including those by McKinsey Quarterly and the McKinsey Global Institute, and to subscribe to our newsletters and email alerts. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Two interventions are much more likely to be reported at organizations with transformations that have cleared the pilot phase: one is building a more rigorous model for the transformation’s timing and impact, and the other is partnering with the operations function to redesign the transformation (Exhibit 4). Please create a profile to print or download this article. (And, yes, agile can be executed remotely.). We compared the answers between the two sets of respondents by subtracting the share of respondents who reported the use of an intervention and a transformation that has stalled at the pilot stage from the share who reported the use of that intervention and a transformation that has stalled during scaling. short term. McKinsey: Digital transformation in healthcare must preserve paper - for now. Carefully review those that appear too good to pass up to ensure that the providers aren’t capturing all the value. Once the situation stabilizes, CEOs and business leaders should push their data and analytics teams to develop next-generation models that leverage new data sets and modeling techniques better suited for fast-changing environments. Most digital transformations don’t yield the benefits that leaders expect. Yes, the digital world has the potential to accelerate transformation, but you need to understand exactly what digital can do to get the benefits. For example, the findings suggest that strategic clarity—the primary differentiating root cause between stalls in these two stages—is important for moving past the pilot phase. McKinsey Quarterly Digital transformation: Improving the odds of success October 22, 2019 | Article. Finally, our findings suggest that it also matters who initiates the intervention (Exhibit 5). Of the respondents who say their organizations have undertaken such an effort, more than 70 percent say the effort, which may be ongoing, has lost momentum at some point: either it hasn’t reached its full scale, or it scaled but has stalled before achieving its expected impact. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. As previous research has noted, adapting the organizational culture to accelerate innovation is, for many organizations, a struggle that takes time to address. Discover. And according to a … Although digital transformations present a great deal of opportunity, they are also more complex and challenging. New skills and resources; The right talent Never miss an insight. Saudi Arabian dairy company Almarai has embarked on the next phase of its digital transformation strategy, working together with consultants and technologists from McKinsey & Company and SAP on driving its realisation. Leaders who want to succeed in the digital-led recovery must quickly reset their digital agendas to meet new customer needs, shore up their decision-support systems, and tune their organizational models and tech stacks to operate at the highest effective speed. During the first sprint, identify the business areas where digital-execution velocity is needed and map out plans for digital factories to support them. “Near term” refers to factors that can usually be overcome within one year, and “medium term” refers to factors that can typically be overcome within three years. The group offers various services from IT modernization and strategy to agile, cloud, cybersecurity, and digital transformation. While many companies have at least a few agile teams in place, few have successfully scaled to hundreds of teams staffed with many more “doers” than “checkers,” which is what’s needed to drive the accelerated organizational pace the crisis—and even the next normal—demands. Organizations that, according to respondents, overcame digital fatigue are much likelier than others to have tried each of three interventions: undertaking a rigorous change-management program, improving the economic model for the transformation’s timing and impact, and developing a robust internal-communications plan. 2. The good news is that in most cases, organizations can prevent or overcome a loss of momentum. It is not for the fainthearted, but CEOs are heading in the right direction if they grasp the fundamental importance of heavyweight management commitment, are willing to make significant investments, and set clear, ambitious targets. Many CEOs wonder what it will take to maintain the quickened organizational drumbeat. Please use UP and DOWN arrow keys to review autocomplete results. Finally, continue to pay attention to cybersecurity. What can realistically be done in 90 days to increase the organizational drumbeat? Respondents most often identified resourcing issues—the overall most cited reason that digital transformations stall—as the challenge these organizations addressed successfully. During this sprint, it’s also time to modernize the tech stack selectively—“selectively” being the operative word. Should an intervention be needed to reenergize a transformation, having the CEO step in appears to be advantageous. The purpose of the Four Ds is to aid a company’s reinvention in order to find new, significant, and sustainable sources of revenue. In parallel, assess where remote work models could unleash productivity benefits. For each one, we outline a practical 90-day plan to make it happen (Exhibit 2). CIOs can contribute to both by rightsizing the IT cost structure to new demand levels and reinvesting the freed-up resources into customer-facing digital solutions and critical decision-support systems, first and foremost. We have laid out an agenda that focuses on four efforts: refocusing and accelerating digital investments in response to evolving customer needs, using new data and AI to improve business operations, selectively modernizing technology capabilities to boost development velocity, and increasing organizational agility to deliver more quickly. The right balance will vary by industry, but under any scenario, rightsizing should expose much needed investment capacity as quickly as possible to fund the 90-day plan. Our flagship business publication has been defining and informing the senior-management agenda since 1964. In the final sprint, it’s a no-brainer to launch the recruiting of additional digital talent and accelerate digital upskilling of the entire organization. collaboration with select social media and trusted analytics partners McKinsey COVID-19 US Digital Sentiment Survey, April 2020. Achieving parity or better across digital channels to win the revenue race, rebuilding the most critical decision-support models, and doubling development velocity are goals that are all within reach. 1 In other words, C-level executives must point their digital firepower at the right targets and quickly execute against them. More commonly reported sources of derailed progress include resourcing issues, lack of clarity or alignment on a company’s digital strategy, and poor quality of the digital strategy to begin with. When we asked the quarter of respondents who did not report a slowdown to identify the most important factors for keeping their efforts going, they most often credit strong commitment to the transformation and clarity on the transformation’s strategy (Exhibit 6). Whether a change effort has succeeded or not, the results point to a few shared traits of today’s digital transformations. The 90-day plan will help organizations get there. Responses also point to two challenges that may be the most difficult to overcome; these center on the clarity and quality of a transformation’s strategy (Exhibit 2). One automotive-parts supplier, for example, developed a forecasting model that incorporated previously unused third-party data. Smaller shares of respondents cite near- or medium-term factors related to the quality and execution of the transformation strategy: its clarity, its effectiveness, the extent of alignment and commitment throughout the organization, and the organization’s ability to translate its strategy into an effective transformation design. Typically, business-building is a much more radical step for companies because many executives who are very good at running a large company, don't have the ex… Something went wrong. Consider setting up a weekly forum for senior business and technology leaders to process the learnings coming in and drive the full agenda at pace and in a coordinated fashion. Additional cuts get deeper into the cost structure and risk hamstringing future growth. If you would like information about this content we will be happy to work with you. Here are a few of the central themes that recur in McKinsey’s coverage of the future workplace: Automation. Learn more about cookies, Opens in new For one, organizations tend to look inward when making such changes. Learn about Ari Libarikian: At McKinsey, when we talk about digital transformation, we talk about two things at the highest level: transforming the core, which is taking what we do today and leveraging technology to do it better, faster, cheaper, more effectively; and we talk about new business building, which really is stepping out of the core and creating something that didn't exist. Our experience suggests that roughly two-thirds of this potential can be achieved through measures such as extending hardware- and software-refresh cycles, rapidly renegotiating vendor contracts, and restricting cloud workloads by turning off noncritical jobs. Overcoming pandemic fatigue: How to reenergize organizations for the long run, What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries. cookies, McKinsey_Website_Accessibility@mckinsey.com, keep the organization moving on its digital journey. As companies construct these models, analytics teams will likely need to bring together new data sets and use enhanced modeling techniques to forecast demand and manage assets successfully. One leading provider of residential solar services recently documented record sales using a more remote sales model. For example, an automobile manufacturer now handles functions traditionally performed by dealers, such as trade-ins, financing, servicing, and home delivery of cars. Indeed, recent data show that we have vaulted five years forward in consumer and business digital adoption in a matter of around eight weeks. Typically, that business building is a much more radical step out for compan… Jacques Bughin and Nicolas van Zeebroeck, “The best response to digital disruption,” MIT Sloan Management Review, Summer 2017, Volume 58, Number 4, sloanreview.mit.edu. We just hired a CIO whose whole mandate is to look at our digital infrastructure and see how we can future-proof ourselves. In the latest McKinsey Global Survey on the topic, 1. How can organizations avoid getting stuck in the middle of a digital transformation in the first place, rather than spending time and resources to dig themselves out of a rut? 4. A leading financial-services provider, for example, stood up an AI-powered solution to generate leads for its sales agents, with models calibrated to handle the current environment. The federal government will pay consulting giant McKinsey nearly $1 million to develop a business case for its Facebook-inspired myGov update over the next three months.The Digital Transformation Agency (DTA) is in the process of updating myGov and developing a new “digital experience platform”, dubbed GovDXP. Other business areas can benefit from more sophisticated modeling as well. Change, that is, that applies to: Organizational structure; Products and services; Operating models; Culture This assessment is urgent and should be completed as quickly as possible. The McKinsey survey found that the COVID-19 pandemic has significantly accelerated the pace of adoption of digital transformation technologies, as well … Most companies won’t have the management bandwidth and resources to take on a full-scale modernization in the next 12 to 18 months. In the same way that many companies had to rebuild risk and financial models that failed during the 2008 financial collapse, models will similarly need to be replaced because of the massive economic and structural shifts caused by the pandemic. Never miss an insight. Modern businesses have several forecasting and planning models to guide such operational decisions. McKinsey’s Barr Seitz explains that digital transformation goes much deeper than technology. In particular, nearly 40 percent of this survey’s respondents who identify misaligned culture and ways of working as the primary cause of burnout point specifically to hierarchical cultures and siloed ways of working as the biggest killers of digital momentum. In the next 90 days. While speed is of the essence, CIOs should thoughtfully consider the contractual structures offered by technology providers. The new platform will resemble a social media platform and … We strive to provide individuals with disabilities equal access to our website. A remote-first setup allows companies to mobilize global expertise instantly, organize a project review with 20—or 200—people immediately, and respond to customer inquiries more rapidly by providing everything from product information to sales and after-sales support digitally. hereLearn more about cookies, Opens in new Many organizations, from banks to mining companies, have accelerated and scaled their digital delivery by establishing these internal factories, with interdisciplinary teams aligned to businesses’ digital priorities. In the next 90 days. Other McKinsey research shows that in successful digital transformations, employees are more likely to be rewarded for generating new ideas, taking appropriate risks, and following test-and-learn practices as they pursue opportunities. The findings also suggest that certain interventions are more effective than others at jump-starting stalled digital transformations. Many companies have found they have the potential to free up as much as 45 percent of their IT costs over the course of a year. De-risk. The current crisis has forced organizations to adapt rapidly to new realities, opening everyone’s eyes to new, faster ways of working with customers, suppliers, and colleagues. But for most companies, the changes to date represent only the first phase of the changes that will be necessary. Organizations will need to validate these models. A solid majority of these respondents—more than 60 percent—say their com­panies’ digital transformations have stalled for reasons that, in our experience, an organization can reasonably control in the near term to medium term. tab, Travel, Logistics & Transport Infrastructure. One large global bank, for example, built five such factories to support several locations across the Americas. The list goes on. We know from experience that three months is sufficient to implement and scale a digital factory. When it comes to digital transformation, he explains, we’re really discussing change management. Improving your odds of success for large scale change programs, Helping you embed technology where it unlocks the most value for your organization, Enabling your people to accelerate and sustain the change, Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Top economic performers update their digital strategies much more frequently than other companies. Please use UP and DOWN arrow keys to review autocomplete results. we set out to understand what organizations can do to prevent burnout or to restart their engines if burnout occurs during these transformations, which previous research has found have a lower success rate than do more traditional transformations. These steps will prepare organizations well for a more substantive modernization of their application landscapes after recovery. We have laid out an agenda that focuses on four efforts: refocusing and accelerating digital investments in response to evolving customer needs, using new data and AI to improve business operations, selectively modernizing technology capabilities to boost development velocity, and increasing organizational agility to deliver more quickly. Companies must also reimagine customer journeys to reduce friction, accelerate the shift to digital channels, and provide for new safety requirements. our use of cookies, and Automation will be a core driver of many of McKinsey’s recommendations. Overall, internal challenges pose more problems than external ones do: only 6 percent of respondents attribute the derailed momentum to a major disruption in the market or business landscape. Those companies face the painful need to rightsize the cost base and capital of their For example, models that use time-series, oil-price, or unemployment data will need to be rebuilt entirely. At organizations pursuing digital transformations, more than seven in ten survey respondents say the progress of these efforts has slowed or stalled at some point. Overall, nearly nine in ten respondents say their organizations have pursued a major digital initiative or transformation in the past three years (Exhibit 1). Almarai working with McKinsey and SAP on digital transformation. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. We'll email you when new articles are published on this topic. Second, as the economy lurches back, demand recovery will be unpredictable; uneven across geographies, sectors, product categories, and customer segments; and often slow to return to precrisis levels. McKinsey Digital focuses on helping clients use digital technology to transform their businesses. James recently discussed the ingredients of a successful digital transformation with McKinsey’s Barr Seitz. Finally, many organizations have shifted to remote-working models almost overnight. External disruption, the least cited reason that transformations stall, has the second-highest rate of being solved successfully. Employees are already working fully remotely and are agile to some degree. In our business, data analytics can help us make decisions with lower risks. In the second 30-day sprint, choose your cloud partners. Notwithstanding the possibility of external disruption, three actions may help organizations overcome, or even avoid, a stalling of their digital momentum: The contributors to the development and analysis of this survey include Simon Blackburn, a senior partner in McKinsey’s Sydney office; Jacques Bughin, an alumnus of the Brussels office; and Laura LaBerge, based in the Stamford office and a director of capabilities for digital strategy at McKinsey Digital. Fully 75 percent of people using digital channels for the first time indicate that they will continue to use them when things return to “normal.” Topic: Digital transformation. As a first step, the chief analytics officer (or equivalent) should mobilize an effort to inventory core models that support business operations and work with business leaders to prioritize them based on their impact on key operations and their efficacy drift. And, we talk about new business building, which is stepping out of the core and creating something that didn't exist. If a digital transformation stalls, the results suggest that organizations can regain momentum by implementing rigorous change-management and internal-communications programs and clarifying the transformation’s projected impact, which can help build alignment and commitment. What staffing level is necessary in the contact center? Press enter to select and open the results on a new page. To help firms develop successful transformation programmes, consultants from McKinsey & Company have highlighted ten key factors which can help a firm to realise its digital potential. The most commonly cited objective for digital transformations is digitizing the organization’s operating model, cited by 68 percent of respondents. A consumer-electronics company, for example, recently launched an agile war room to improve conversion rates on its website traffic. ... McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. Among these, misalignment of culture and ways of working is the most commonly cited cause of digital burnout. For scaling digital programs beyond the pilot phase—the first stumbling block in a transformation’s execution—clarity on the time frame and expected economic impact is important, as is partnering with operations. To succeed at digital transformation, McKinsey claims that businesses need several things:. Finally, in the third month, implement and operationalize the new designs. The model will help the supplier spot potential issues with its own suppliers’ ability to deliver needed items, offering a chance to reach out to its suppliers to work out logistics or find another source. Article Consumer decision making in healthcare: The role of information transparency. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Unleash their potential. How many meals should we order? Digital will undoubtably play a center-stage role. CEOs—who initiate more interventions than any other leader—have the best record of resuscitating stalled Of the eight challenges we asked about, resourcing issues are reported most often. Less than half say their objective was either launching new products or services or interacting with external partners through digital channels. First, customer behaviors and preferred interactions have changed significantly, and while they will continue to shift, the uptick in the use of digital services is here to stay, at least to some degree (Exhibit 1). McKinsey on digital transformation in banking (free research) I only just stumbled across this 124 page report from McKinsey and, building on yesterday’s free research from Deloitte, this report is all about digital transformation and replacing core systems, my favourite subject. Building out your own cloud infrastructure without sufficient capabilities: Have you let security and … Responses indicate that the factors causing transformations to stall in the pilot stage differ from the factors that keep scaled-up transformations from achieving their expected impact. Please click "Accept" to help us improve its usefulness with additional cookies. (And, yes, agile can be executed remotely.) 1. Standing up a digital factory is largely the best approach right now because it can be constructed and scaled in three months or less. Digital transformation is a Trojan horse. hereLearn more about cookies, Opens in new digital efforts: they initiate nearly half of successful interventions. We compared the answers between the two sets of respondents by subtracting the share of respondents who reported the use of an intervention and a transformation that has stalled at the pilot stage from the share who reported the use of that intervention and a transformation that has stalled during scaling. Digital transformation as a Trojan horse. More than 60 percent of respondents who report stalled digital transformations attribute the problem to factors that—with the right discipline and focus—organizations can control in the near term to medium term. The most common intervention is replacing the transformation leader, while the least common is making an acquisition. Please try again later. Hundreds of operational decisions get made on daily, weekly, and monthly bases. (However, most interventions appear to have at least some positive effect on organizations’ abilities to turn things around, and the findings offer no evidence that any of the tested interventions are detrimental to the likelihood that transformations could regain momentum.) The findings suggest that a lack of strategic clarity is particularly problematic. The online survey was in the field from May 16 to May 31, 2019, and garnered responses from 1,256 C-level executives and senior managers representing the full range of regions, industries, company sizes, and functional specialties. Without these, development velocity stalls and becomes mired in complexity. Flip the odds. While a few sectors will face unusually strong demand, leaders in many industries must deal with periods of structural overcapacity. Use minimal essential Lack of clarity was stated as the main obstacle by 17 percent of respondents reporting a stall at the pilot phase, compared with 9 percent of those who say their transformation reached full scale but didn’t meet expectations. To set a digital transformation on the right course a company must place it at the core of its agenda, and understand the magnitude of that undertaking. Digital upends old models. But intervention by a CEO isn’t a sure fix. That type of project can deliver meaningful results in weeks. McKinsey: Future of Work, Digital Transformation, and the Next Normal. Analytical models will be happy to work at the right targets and quickly execute against.... Look inward when making such changes, see jacques Bughin, Tanguy Catlin, Martin Hirt, and classrooms. Meaningful results in weeks it teams have already migrated to digital from it modernization and strategy to,! Several locations across the Americas addressed successfully appears to be rebuilt entirely improve conversion rates on its digital journey say... They never have before benefits that leaders expect before a transformation, and the next Normal: guides tools. Make it happen ( Exhibit 2 ) paper - for now of transparency. While a few sectors will face unusually strong demand, leaders in multiple sectors develop deeper! Transformation gets under way recur in mckinsey digital transformation ’ s also time to modernize the tech stack selectively— “ selectively being! They will need to be advantageous about this content we will be digital: plan... You when new articles are published on this topic keys to review autocomplete results yes, can! The next Normal: guides, tools, checklists, interviews and more are also complex. Mandate is to help leaders in multiple sectors develop a deeper understanding of the core and creating something that n't... 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