When it comes to digital transformation, McKinsey has its fair share of opinions.
The well-known research firm taps top talent from a wide range of industries in order to provide its industry-leading advice.
In this article, we’ll explore some of McKinsey’s thoughts, research, and opinions around digital transformation.
Digital Transformation: McKinsey’s Take
McKinsey is a thought leader when it comes to digital transformation. Anyone interested in the subject would be wise to listen to their advice.
Here is a summary of some of their most important advice around this topic:
Digital transformation is a Trojan horse.
McKinsey’s Barr Seitz explains that digital transformation goes much deeper than technology.
When it comes to digital transformation, he explains, we’re really discussing change management.
Change, that is, that applies to:
- Organizational structure
- Products and services
- Operating models
Culture is the most difficult thing to change, he says.
However, with the right approach, change is possible.
Seitz advises a three-pronged approach:
- “Soft” signals can ease the process, such as changes in language, dress codes, and work environment
- Altering the KPIs used to measure progress
- Taking actions that move change forward
Seitz goes further, explaining that change is constant, requiring a culture focused on revolution.
And he explains that successful change requires complete organizational alignment – from the board to the entire organization.
Follow the roadmaps created by others.
Pioneers in digital transformation should be studied and their successes emulated.
McKinsey examined the insurance industry to demonstrate a roadmap that others can follow.
Based on their research, they developed 10 guiding principles – broken into 3 stages – for digital transformation:
- Define Value – Secure leadership’s commitment, set clear goals, and secure investment
- Launch and Accelerate – Start with lighthouse projects, appoint high-talent team members, promote and organize agile work methods, and build a digital culture
- Scale Up – Sequence initiatives to gain quick returns, build capabilities, and embrace a new operating model
These principles, as mentioned, were gleaned from a study of the insurance industry.
Insurance companies should be particularly interested in this information.
However, the same lessons can be adapted to other industries as well.
The concluding thought falls in line with Seitz’s observations – digital transformation is less about technology and more about a “fundamental rethink of the corporate model.”
CEOs are responsible for digital transformation.
The corporate world is undergoing mass disruption, akin to biological mass extinction:
- Since 2000, over 50% of Fortune 500 companies have merged, been acquired, or gone bankrupt
- A proliferation of new species have emerged in the corporate world – ones that thrive in the digital world, such as Amazon, Facebook, and Square
- The cause: digital transformation
In a world where AI, big data, and technology rules, entire value chains will be disrupted in core industries.
Oil and gas, manufacturing, and healthcare are used as examples to demonstrate this – technological breakthroughs will fundamentally alter the way these industries operate.
What this means is that digital transformation today is being controlled by CEOs.
The article emphasizes that not all digital transformations succeed – in fact, as McKinsey points out elsewhere, most don’t.
The most successful transformations are led by CEOs who do more than “tinker.”
To survive, CEOs must recognize that digital transformation represents an existential threat … whose magnitude is only exceeded by the opportunity for growth.
To succeed, be bold, ruthless, and adaptable.
In another article, McKinsey offers 5 ways to succeed in digital transformation.
The McKinsey team based these lessons on an online survey of more than 1,700 participants from a range of roles, business sizes, and industries.
The first takeaway is that most digital transformations don’t succeed.
Those that do, however, tend to follow a few steps:
- Ruthlessly focus on clear objectives – Focus on a few themes and high-level objectives, such as improving productivity
- Be bold – The scope should be organization-wide, embracing and implementing technology to its fullest extent
- Be adaptive – Adjustments should be made regularly, even monthly or weekly
- Be agile – Encourage risk-taking, innovation, collaboration, and other agile business approaches
- Be accountable – Make leadership, accountability, and responsibilities “crystal clear”
They concluded with a few principles that can help businesses survive and succeed during transformations:
- Strong leadership and commitment are key
- Create a clear plan that is flexible and has well-defined handoffs
- Fund only the most successful initiatives
Following these steps, says McKinsey, can keep companies on a path towards successful digital transformation.
Digital transformation, according to McKinsey’s research, is extraordinarily difficult.
Because the industry itself is undergoing a paradigm shift, businesses need to rethink the way they operate.
As the world becomes more digital and more volatile, survival itself becomes less certain.
To survive and succeed during the digital transformation revolution, organizations should think in Darwinian terms…
Only the fittest, strongest, and most adaptable survive.