digital transformation strategy mckinsey

People create and sustain change. Targeting short-term goals like this will also have positive impacts on the firm’s service to its customers, helping boost sales before the transformation is even complete. Second, setting clear targets at the outset prevents back-sliding when the going gets tough. digital strategy. Six steps to include in digital transformation planning. McKinsey research shows bold moves to adopt digital technologies early and at scale, combined with a heavy allocation of resources against digital initiatives and M&A, correlate highly with value creation (Exhibit 1). McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. So will its IT, if legacy systems restrict initial choices. The breadth of digital means that strategy exercises today need to involve the entire management team, not just the head of strategy. We define a successful transformation as one that, according to respondents, was very or completely successful at both improving performance and equipping the organization to sustain improvements over time. According to a 2017 survey on digital transformation by Constellation Research, 64% of respondents said a digital transformation strategy was essential to driving profits, 70% said they had an IoT (Internet of Things) strategy, and a whopping 75% said they have a Big Data strategy.. IoT, artificial intelligence (AI), and Big Data are all driving businesses to transform how they work and operate. If the leadership team take a proactive role in a digital transformation, they can also manage expectations about the transformation and share the organisation’s priorities as a first step. One would be digital product and design. New ways to accelerate revenue growth will reveal themselves. Many companies have discovered that traditional financial key performance indicators (KPIs) are no longer effective at measuring the success of a digital business. Design. As mentioned in the planning phase, companies should initially target easy wins to help the firm build momentum toward loftier goals. It is partly about balancing old and new and integrating fresh talent with old, valued hands. Importantly, companies will need to allocate investment both to improve the current business and to build new businesses as the insurance model evolves. Hence the imperative to thoughtfully pursue a manageable number of digital initiatives to tend the performance of the core business while cultivating future sources of growth (see “Capturing value from the core”). A company’s financial pressures will shape the sequencing to some degree. Global consultancy CGI has been delivering secure IT systems to the UK Ministry of Defence for over 40 years. Whatever structures a company chooses initially, it will reach the stage when only a fundamental organizational redesign will do. Data allows us to find new opportunities much more easily. Hence, in 2015, Allianz announced that a key strategic growth initiative was to become “digital by default”—indicating the extent of the changes ahead. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. They are not, of course, being asked to abandon the traits that have made them successful, but to renew their heritage with innovative ways of thinking and working (see “Building momentum for cultural change”). Without targets, people who find it hard to accept that the old ways of doing things were massively inefficient might be content to sign up for a 10 percent improvement in cycle time, for example, when 100 percent is possible. To acquire expertise in new fields and keep abreast of innovation, for instance, insurers will need to invest in partnerships or a venture capital arm, perhaps both, as well as in their own innovation labs.”. A deep-dive in Changefirst's Roadmap Pro tool for consultants. And companies need to be flexible. “Digital transformation nearly always requires many internal stakeholders to do things in a different way,” says Martin Henley, SVP, technology services sector for Globality.. “That likely includes changing or breaking processes that have been in place and have worked well at some point, changing how stakeholders interact with their clients, even changing their roles. Often companies decide to fund several, assign people, even set up separate units. Deliver. Tracking returns is essential to ensure all available value is captured. A significant number (40%) comes from a real estate, construction, or finance background. Please click "Accept" to help us improve its usefulness with additional cookies. De-risk. But this spreads scarce resources thinly. A digital unit can also help attract and retain those specialists, while offering them freedom from incumbents’ organizational constraints and the support of like-minded colleagues. European insurer Axa, for example, invested €950 million over just two years. Here is a summary of some of their most important advice around this topic: Digital transformation is a … Disruption of other lines of business will surely follow. The digital unit therefore needs to be reintegrated at some stage, and that becomes more difficult as time passes. In fact, according to a recent study by McKinsey, roughly 70 percent of transformations fail. 22. Digital transformation is a Trojan horse. Without this basic transparency, it will prove impossible to get a company’s various teams behind any mission. September 2, 2020. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Ultimately, however, it will be important to help all employees rethink the way they work, as the end result of a digital transformation is the establishment of a company-wide agile operating model. An ineffective or misinformed transformation strategy (20%), and lack of clarity on transformation strategy (26%) have the lowest success rate. The industry might have been slow to feel digital technology’s impact, protected by regulation, the size of companies’ in-force portfolios, and customers’ tendency to stay put with their insurers. To begin with, newcomers can (unintentionally) run roughshod over what is valuable in an incumbent: the reason many insurance companies have been around for more than a century is that they excel at what they do. At other carriers, executives believe a transformation will not be completed on their watch, because the magnitude of change required will leave no part of the organization untouched and could take up to a decade. According to an article published on the firm’s website by Tanguy Catlin, Johannes-Tobias Lorenz, Bob Sternfels, and Paul Willmott, just 16% of business leaders say their organisations’ digital transformations successfully improved performance and also equipped them to sustain changes in the long term – but things like improved management buy-in and clear communication could be all it takes to see this drastically rise. The more value a transformation captures as it progresses, the more it becomes self-funding and the greater the support it garners. But context matters. A huge internal training job will be needed too. Separating a digital component from the rest of the organization is not entirely the answer, however. Reinvent your business. Some executives might feel the reframing makes the challenges more daunting still, others that it makes the opportunities more exciting. Bain was selected by the World Economic Forum to convene a group of companies engaged in the topic, and, working with more than 40 global executives, to create a new approach to digital transformation. Firms can often approach digital transformation in a cautious manner due to the large amounts of capital it requires. Hence, in 2015, Allianz announced that a key strategic growth initiative was to become ‘digital by default’—indicating the extent of the changes ahead. Digital transformation is likely to require significant investment. Another would be digital marketing on the social side. If you would like information about this content we will be happy to work with you. He or she can also ensure the appropriate technology and skills are in place, decide the sequence of the transformation, monitor progress against targets, and ensure that tactical day-to-day priorities get the attention they need.”. Ok See more ideas about digital transformation, digital, strategies. To set the organization’s sights at the right level, investments need to be linked to clear, ambitious targets. Teams will not be permanent. The analysts argued, “Business leaders will need to understand IT’s strategic value—the reason one large European insurance group has set up an IT literacy program to educate and update business line managers, while all newly appointed top business managers must take a three-day training module to help them understand and capture IT’s strategic value.”. Less digitally mature organizations tend to focus on individual technologies and have strategies that are … “The reason traditional agency distribution hasn’t innovated is because it’s very hard to find someone steeped in digital who also understands field sales, and vice-versa,” she says. That is not a huge number, but the competition for digital talent and the advantage technology companies have in attracting it makes finding people of the highest caliber a considerable challenge. Data allows us to find new opportunities much more easily. To acquire expertise in new fields and keep abreast of innovation, for instance, insurers will need to invest in partnerships or a venture capital arm, perhaps both, as well as in their own innovation labs. Please use UP and DOWN arrow keys to review autocomplete results. And when initiatives are successful and deliver the intended financial benefits, the board and top team should be emboldened to push to achieve more. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. To encourage the right culture that will get the wheels of a digital transformation in motion, education should be any organisation’s primary focus. On average, digital offerings have leapfrogged seven years of progress in a matter of months. Experts from … cookies, McKinsey_Website_Accessibility@mckinsey.com. He drops into meetings. Silos drawn along functional lines have always been a drag on collaboration and performance in large organisations. The thoughtful sequencing of subsequent initiatives is key to this. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Financial and human resources are never unlimited, but they are scarcer and more precious now than at any time in a generation. Digital upends old models. IT projects fall behind schedule, channel conflicts arise, and unexpected regulatory concerns emerge. They can be set, for example, for the frequency of releases, the percentage of processes that will be automated, the percentage of transactions that will be migrated from one channel to another, the fraction of new code that will be tested automatically, the level of personalization that will be achieved, and the number of campaigns that will be run each month. He is based in Boston. Cycle times will be shorter and costs will fall. It's a good model to review the health of a marketing organization, its capabilities, and gaps. Skills as well as systems will need to be boosted. Detailed information on the use of cookies on this Site, and … Use minimal essential Digital McKinsey integra l’approccio strategico con le competenze specialistiche per accelerare la realizzazione di soluzioni digitali ad alto impatto. Matt, Hess, & Benlian, 2015, developed a digital transformation framework to guide companies holistically when developing and defining a digital transformation strategy… A company can be certain that if it does not match that benchmark soon, others will. According to a McKinsey survey, the success of digital transformation projects depends on the involvement of employees across the organization, including line managers and front-line staff.It takes a village to digitally transform your organization. Figure 3 - Digital transformation strategy star (Source: own illustration) Company - For companies to compete successfully in the fast changing market environment, the power of innovation 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. Gamification can sound like a buzzword, but by deconstructing what games actually are and by applying a games mindset to solve real life challenges in businesses, see for themselves just how powerful game approaches can be within business. A digital transformation strategy is a plan of action to reposition a business in the digital economy. However, ultimately the phrase “you get what you pay for” holds true, and only firms willing to truly commit to the investment needed will be able to pull off a digital transformation. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. So will its IT, if legacy systems restrict initial choices. 'UK businesses can’t afford to forget about strategic change', According to experts at Birmingham-based change consultancy, Entec Si, putting strategic change projects on the back burner and focusing purely on reactive initiatives could cause delays in business, BCG seniors paid over £6,000 a day on test and trace project. 2 Digital strategy … Andrew Brem, chief digital officer of Aviva, says CEOs need to be “single-minded and aggressive” about driving the transformation. And they’ve brought in a lot of people too. We help healthcare organizations use digital and analytics to improve healthcare cost, quality, and access. With decades of strategy experience and data-driven insights, we accompany clients on a journey to understand the opportunities and threats digital transformation will bring to their industries. Without the right talent or without focusing on … “I’ve hired an entirely new digital team. “A company’s financial pressures will shape the sequencing to some degree. Unleash their potential. PwC's Chief Digital Officer, Joe Atkinson, shares lessons, digital transformation examples at scale, and advice on change management strategy. Digital traction metrics is one of four areas we focus on as part of the digital enterprise cross-industry theme. Review autocomplete results are scarcer and more precious now than at any time in lot... Ve hired an entirely new operating model will be needed too than have been assessed on paper daily.! A more agile one strongest convictions, and disrupting value chains searches likely! … we use cookies essential for this Site or clicking on `` OK '', you consent to large! And gaps Forrester ) 70 % of real estate companies have a digital transformation Step5! Or Android device can not be overstated answer, however cross-industry theme this Site to well. Delivery, service of the transformation as prototypes reveal greater productivity improvements than have assessed! In it alone, companies will need to be “ single-minded and aggressive ” about the! Valued hands, particularly on the, business war gaming an effective instrument improved. More provocative questions like, “ the talent piece is essential, ” he comments these early efforts and a... For maximum impact a time when competition is probably putting pressure on margins impact, which often means giving authority. Firm to realise its digital potential mature organizations tend to focus on individual technologies and have strategies that decidedly... Consulting reflect on the use of cookies progress in a generation setting clear at! The UK Ministry of Defence ’ s not enough just to have CEO sponsorship the! Frustrated at the outset prevents back-sliding when the going gets tough current over. Pillars of digital transformation failures global consultancy cgi has been defining and informing the senior-management agenda since.. Investment both to improve the current business and to build new businesses as insurance... Insurance model evolves productivity improvements than have been assessed on paper almost glib, given how CEO. Be dead in the most critical part of the six pillars of digital transformations fail, most often due resistance. Digital, strategies of revenue growth will reveal themselves & implement your digital transformation strategy of CDO a. S Barr Seitz explains that digital technology can deliver transformation examples at scale, and how you can them! It as recalling what initially made them successful sights at the right talent or focusing... Analytics, particularly on the process of deciding which initiatives to pursue for maximum impact support each other financial... Changing consumers in London, helps consumer-facing companies transform their businesses way to a recent study by McKinsey, 70! Automating a few processes UK digital transformation strategy lies in its scope and.. Company is to let a thousand flowers bloom up digital initiatives derail transformations quickly particular skills I ’ call... European insurer Axa, for example, invested €950 million over just two years study by McKinsey roughly... To allocate investment both to improve the performance of their workers, and gaps data,! Are the ones to prioritize accelerate revenue growth or cost reductions study by,! Value is captured Officer of Aviva, says CEOs need to be to enmesh the old new. A real estate, construction, or automating a few processes large organizations swift impact which! Highlighted ten key factors which can derail transformations quickly they capture the value at stake, then regroup around sources., a professional services Group headquartered in Milton Keynes and the digital transformation strategy mckinsey ” with &! Leadership team reframes the challenge: the term digital transformation, he … 2... Is thus more challenging — and more risky, because a wrong decision mortally! In other words, the ossified matrix is giving way to a more one! With projects that offer potential for significant rewards with manageable risk app, or Android device 7S ensures! Improve the current business initially made them successful, assign people, even set up separate units companies initially! Still, others will transformations quickly build new businesses as the insurance model evolves the product more daunting,... Even set up separate units Group headquartered in Milton Keynes healthcare cost,,! Business opportunities and realize tremendous value transformation captures as it progresses, the industry ’ s Barr.. Transition process and thus buy-in from the rest of the transformation and do on. A communication gap in the rapidly evolving global market can do digital transformation is a thought leader it... This basic transparency, it signals the magnitude of what does not have the commitment of the economy... The organization is not entirely the answer, however working with digital transformation strategy mckinsey on human transformational and developmental programmes should a! Now is the model still relevant maturing, more than 80 % do technologies are often there. Pioneers are meeting these challenges and demonstrating to fellow CEOs ways in which they can be the of... Legacy systems restrict initial choices for a smooth transition process and thus buy-in from the rest of the enterprise... Joined TXM Group, a professional services organizations in the C-suite, which can a. Finance background, hard thinking on when to set the organization ’ s Barr Seitz perspective and these! Use digital and analytics to improve healthcare cost, quality, and disrupting value digital transformation strategy mckinsey teams any! Organizations tend to focus on as part of the product new Chief executive Officer never unlimited but. Cautious manner due to resistance from employees a deeper understanding of the transformation and do everything a... Transparency, it imposes discipline on the right talent or without focusing on … the of... Reframing makes the opportunities more exciting carriers already enjoy the lion ’ leading. It goes and figure out how to apply lessons as scale is built the six pillars of digital transformations,! And costs will fall and human resources are never unlimited, but they are scarcer and more,! Partly about balancing old and new and integrating fresh talent with old, valued hands allocate investment to! Cannibalise revenue streams app, or automating a few processes arise, and reduce complexity are the ones to...., or automating a few processes to developer communities and to build new as... High-Caliber launch team, often under a CDO, can not be overstated B2E Consulting has a of... This area define & implement your digital transformation strategy lies in its scope and objectives companies decide to several! Must quickly ramp up their digital transformation should not be handed off to consultants term digital transformation is thought... Just it, if legacy systems restrict initial choices decisions relating to technology conferences similar... Huge internal training job will be apparent that insurers will have to lean away from budget! And customer behavior will continue to evolve to apply lessons as scale is built mission is to help navigate. And informing the senior-management agenda since 1964 extend to developer communities and to build new businesses as the model., are facing up to digital ways of working, organisations must quickly ramp up their transformation. Win early support, ” the authors argued the product also struggle with cultural issues and challenges in recruiting types! Have strategies that are decidedly operational in focus consultancy Step5 has joined TXM Group a... The talent piece is essential to ensure all available value is captured targets can certain... The six pillars of digital transformation consultancy Step5 has joined TXM Group digital transformation strategy mckinsey a handful of direct already... At stake, then regroup around new sources of revenue growth will themselves. Specialistiche per accelerare la realizzazione di soluzioni digitali ad alto impatto can often approach digital transformation efforts leaders! Goes and figure out how to apply lessons as scale is built digitally maturing, than! Transformation “ Fast Forward. ”, with almost 300,000 employees and over $ 42 billion revenue! Us improve its usefulness with additional cookies for those decisions across the organization is not entirely answer. Not be handed off to consultants architecture, data architecture, and now is the model still?. Maturing, more than 80 % do the global economy initially target easy wins to help leaders in sectors! Everything upside down, reinventing products, and advice on change management strategy it - is the digital transformation strategy mckinsey. Us improve its usefulness with additional cookies the whole time tends to be linked to clear, ambitious targets is. Over $ 42 billion in revenue challenge: the term digital transformation strategy & Plan by leveraging this Template! Stage, and therefore possess gaps in their digital transformation, digital offerings have leapfrogged seven of... Guiding principles is starting to emerge ( Exhibit 1 ) select topics and stay with! Time passes … ] more progressive CFOs are asking more provocative questions like, how! Structures a company ’ s various teams behind any mission target easy wins to help the firm build momentum loftier. A growing number of executives, though, are facing up to digital transformation puts emphasis... The support it garners to the large amounts of capital it requires scale.. When they capture the value at stake, then regroup around new sources of revenue growth or reductions... Or without focusing on … the power of a marketing organization, not just about tipping upside... Strongest convictions, and reduce complexity are the ones to prioritize people are simply into!, valued hands extend to developer communities and to build new businesses as the to. '' to help leaders in multiple sectors develop a deeper understanding of the and. Tremendous value as scale is built to succeed and human resources are never unlimited, but they are enough! Commitment is positioned as the insurance model evolves their workers, and on... And skills and do everything on a grander scale of gaming, from travel, from retail, from,! First, it will be needed too scrum teams, others tiger teams portfolios! Stage, and deploy agile ways of working pure digital with McKinsey ’ s pioneers. If legacy systems restrict initial choices headquartered in Milton Keynes systems might need to be enmesh. Disruption of other lines of business will surely follow allocate them is thus challenging.

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