Tag Archives: Digital transformation

Updates from McKinsey

How to build a data architecture to drive innovation—today and tomorrow
Yesterday’s data architecture can’t meet today’s need for speed, flexibility, and innovation. The key to a successful upgrade—and significant potential rewards—is agility.
By Antonio Castro, Jorge Machado, Matthias Roggendorf, and Henning Soller – Over the past several years, organizations have had to move quickly to deploy new data technologies alongside legacy infrastructure to drive market-driven innovations such as personalized offers, real-time alerts, and predictive maintenance.

However, these technical additions—from data lakes to customer analytics platforms to stream processing—have increased the complexity of data architectures enormously, often significantly hampering an organization’s ongoing ability to deliver new capabilities, maintain existing infrastructures, and ensure the integrity of artificial intelligence (AI) models.

Current market dynamics don’t allow for such slowdowns. Leaders such as Amazon and Google have been making use of technological innovations in AI to upend traditional business models, requiring laggards to reimagine aspects of their own business to keep up. Cloud providers have launched cutting-edge offerings, such as serverless data platforms that can be deployed instantly, enabling adopters to enjoy a faster time to market and greater agility. Analytics users are demanding more seamless tools, such as automated model-deployment platforms, so they can more quickly make use of new models. Many organizations have adopted application programming interfaces (APIs) to expose data from disparate systems to their data lakes and rapidly integrate insights directly into front-end applications. Now, as companies navigate the unprecedented humanitarian crisis caused by the COVID-19 pandemic and prepare for the next normal, the need for flexibility and speed has only amplified.

For companies to build a competitive edge—or even to maintain parity, they will need a new approach to defining, implementing, and integrating their data stacks, leveraging both cloud (beyond infrastructure as a service) and new concepts and components. more>

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Updates from McKinsey

Will ‘ship, then fix’ become obsolete in the next normal?
COVID-19 will likely accelerate remote working and the need for companies to speed up their efforts to digitize support functions—improving efficiency and user experience without increasing cost.
By Hiren Chheda, Jonathan Silver, Samir Singh, and Amit Vashisht – Faced with ever-growing pressures to optimize costs and improve performance, most companies have taken steps to increase the efficiency of their support functions. An estimated 80 percent of Fortune 500 companies report using some form of a centralized shared-services operating model—but most companies have only scratched the surface of the potential value available. Worse, many have wasted significant time debating the right approach. Should they focus on centralizing processes and functions to increase efficiency, or automate processes through digital technology?

The COVID-19 pandemic has forced companies to act fast. It has also created a window for companies to reimagine the way support functions operate. In the next normal, we believe that the answer to long-debated question is ‘yes’ to both. Companies that centralize processes and functions first are still likely to find that they need to automate them—the “ship then fix” approach. Conversely, other companies may make faster progress by automating processes first and then centralizing them—“fix then ship.”

The right sequence depends on the organization’s starting point and its unique combination of circumstances and needs. And, regardless of the path a company chooses, there are a set of foundational measures that will lead to better results. Rather than continuing to debate, companies can take action now to capture value that otherwise may slip away.

For companies improving their support functions, ship-then-fix has been the default option for several reasons—starting with the fact that historically it offered the fastest path to value. Centralizing functions through a shared-services model typically requires far less upfront investment than trying to digitize processes first, and therefore offers a more straightforward business case. Because many organizations have used this approach to reduce costs and increase efficiencies, the approach is perceived (with some reason) as relatively low-risk: the changes are often self-funding, with the savings then available for reallocation toward digitizing select processes. more>

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Updates from McKinsey

Digital strategy in a time of crisis
Now is the time for bold learning at scale.
By Simon Blackburn, Laura LaBerge, Clayton O’Toole, and Jeremy Schneider – If the pace of the pre-coronavirus world was already fast, the luxury of time now seems to have disappeared completely. Businesses that once mapped digital strategy in one- to three-year phases must now scale their initiatives in a matter of days or weeks.

In one European survey, about 70 percent of executives from Austria, Germany, and Switzerland said the pandemic is likely to accelerate the pace of their digital transformation. The quickening is evident already across sectors and geographies. Consider how Asian banks have swiftly migrated physical channels online. How healthcare providers have moved rapidly into telehealth, insurers into self-service claims assessment, and retailers into contactless shopping and delivery.

The COVID-19 crisis seemingly provides a sudden glimpse into a future world, one in which digital has become central to every interaction, forcing both organizations and individuals further up the adoption curve almost overnight. A world in which digital channels become the primary (and, in some cases, sole) customer-engagement model, and automated processes become a primary driver of productivity—and the basis of flexible, transparent, and stable supply chains. A world in which agile ways of working are a prerequisite to meeting seemingly daily changes to customer behavior.

If a silver lining can be found, it might be in the falling barriers to improvisation and experimentation that have emerged among customers, markets, regulators, and organizations. In this unique moment, companies can learn and progress more quickly than ever before. The ways they learn from and adjust to today’s crisis will deeply influence their performance in tomorrow’s changed world, providing the opportunity to retain greater agility as well as closer ties with customers, employees, and suppliers. Those that are successfully able to make gains “stick” will likely be more successful during recovery and beyond. more>

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Updates from McKinsey

Innovating from necessity: The business-building imperative in the current crisis
The coronavirus crisis is a world-changing event. Here are early solutions and concrete steps leaders can consider as they plan and build new businesses for the next normal.
By Jason Bello, Shaun Collins, Ralf Dreischmeier, and Ari Libarikian – The rapid, global spread of COVID-19 has unleashed what is possibly the biggest shock to our lives and livelihoods in nearly a century. While COVID-19 is above all a humanitarian crisis, businesses have also suffered as economies skid to a near halt. But already, there are signs of creative business building, as companies respond to the crisis with innovative solutions born of necessity. They are throwing out the old assumptions that govern how they do business, as they rethink how to interact with customers and employees, are required to build more resilient supply chains, and reexamine attitudes toward privacy and data sharing.

That ability to envision new ways of operating will be crucial to weathering the crisis. Those that succeed will set the tone for the next normal that will follow and define the subsequent generation of paradigms for consumer and corporate behavior. These will become the operating structure for the next decade. Companies that hope to lead in this world should ask themselves some fundamental questions:

  • How will your customer needs change as we head into a post-crisis “new normal”?
  • How will you create human-like interactions with customers you will never meet?
  • How will you repair devices you can’t touch or hold?
  • How will you find your next digital star employee who sits across the globe and is in a different industry?
  • How will you create resilience in your supply chain, without tying up more capital?
  • How will you shift your costs and operations to variable structures to handle an increasingly volatile and dynamic world?
  • How will you bring out digital products in days or weeks, as your competitors are trying to do?

These questions are second nature to disruptive business builders, who are used to overturning assumptions and innovating in the space left when an old assumption is removed. They know that a crisis of this scale brings seismic shifts, changing the expectations for business and creating new opportunities to innovate. They are formulating new solutions to both help resolve the crisis and reimagine their industries in the aftermath. We know there is no going back to the way things were. The goal now is to define the best possible next normal for when the crisis subsides. This article will look at some of the early solutions and outline concrete steps leaders can take to begin their own journeys.

The extraordinary constraints and imperatives brought on by the COVID-19 crisis have rapidly thrust businesses into challenges they could never have envisioned. Many have had to innovate new capabilities for remote operation almost overnight, complete digital transformations in weeks rather than months or years, and launch new products in a matter of days.

We believe the COVID-19 crisis will be a period of substantial business building and innovation. more>

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It’s not a digital transformation without a digital culture

By Erol User – Digital transformation is sweeping the business landscape. Leaders are embracing it wholeheartedly because they recognize its power. But as companies advance from pilot programs to wide-scale adoption, they often run into an unexpected obstacle: culture clash.

Being a digital organization means not only having digital products, services, and customer interactions but also powering core operations with technology. Becoming one, therefore, requires a tectonic change in the activities employees perform as well as in their individual behaviors and the ways they interact with others inside and outside the organization. Although it should come as no surprise that the traditional ways of working are incompatible with the new ways, it often does.

Leaders need to acknowledge digital transformation as the fundamental, strategic paradigm shift that it is. Like any major transformation, a digital transformation requires instilling a culture that supports the change while enabling the company’s overarching strategy.

Nearly 80% of the companies that focused on culture sustained strong performance. Culture comprises the values and characteristic set of behaviors that define how things get done in an organization. A healthy culture provides the guidelines—the tacit code of conduct—that steer individuals to act appropriately and make choices that advance the organization’s goals and strategy.

Digital organizations move faster than traditional ones, and their flatter hierarchy helps speed decision making. A digital culture serves as a code of conduct that gives employees the latitude to make judgment calls and on-the-spot decisions.

A healthy digital culture is a type of high-performance culture. To understand the essential elements of a digital culture, it helps to be aware of the three critical attributes of a high-performance culture.

First, employees and teams are engaged to achieve results: they are committed to their work and to the organization’s purpose and goals, and they are willing to go the extra mile. Second, individuals and teams work in ways that will advance the organization’s strategy. Third, the organizational environment, or “context”—including leadership, organization design, performance management, people-development practices, resources and tools, vision and values, and informal interactions—is set up to foster engagement and encourage behaviors that will advance the organization’s strategy.

Just as there is no universal strategy, there is no standard digital culture. Still, a digital culture typically has five defining elements:

  1. It promotes an external, rather than an internal, orientation
  2. It prizes delegation over control
  3. It encourages boldness over caution
  4. It emphasizes more action and less planning
  5. It values collaboration more than individual effort

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Updates from McKinsey

How to restart your stalled digital transformation
Most digital initiatives sputter before they take full effect. A new survey finds that organizations stand a good chance of recovering lost momentum because slowdowns typically happen for reasons within their control.
McKinsey – 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. In the latest McKinsey Global Survey on the topic, 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. The good news is that in most cases, organizations can prevent or overcome a loss of momentum.

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. This finding runs counter to widespread assumptions that external pressures, such as market disruptions or regulatory changes, pose the biggest threats to digital initiatives. 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.

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. 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. Should an intervention be needed to reenergize a transformation, having the CEO step in appears to be advantageous. Further lessons come from respondents at companies that avoid stalling in the first place. They often say their organizations maintain momentum by obtaining strong alignment and strategic clarity before a transformation gets under way. more>

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Updates from Siemens

Digitalizing Energy
By John Lusty – Digitalization is transforming the global Energy & Utilities (E&U) industry, and the most exciting part is that it’s happening so differently in each industry sector depending on their unique plans and priorities. That’s because each organization has a slightly different digital legacy and is executing a different business model that is making them a leader in their respective sectors of the market. It’s also because E&U businesses are inherently non-uniform due to mergers and acquisitions, project mindsets, boom and bust business cycles, breakthroughs in technology, and sudden societal or geopolitical shifts that ripple through the global energy economy at the speed of light.

This blog is the first in a new series from Siemens Digital Industries Software, where we’ll discuss trends in digitalization that relate to the Energy & Utilities industry.  At Siemens, we have the privilege of working closely with industry leaders and people from an extensive range of manufacturing sectors with different degrees of digital maturity.  That lets us see what’s working great as well as some things that didn’t go quite as planned.

We’re also the software business unit within Siemens AG, a mega-enterprise of close to 400,000 colleagues that acts as a massive internal customer for our solutions. People usually look at us a little differently, knowing that as a global engineering and manufacturing organization that relies extensively on our software solutions, we truly have “skin in the game” as our supplier.

Much work has been done across the E&U industry to assemble and apply the “digital twin” of assets, projects and facilities to be more efficient, profitable, and operationally excellent. In this blog, we’ll review examples of excellence in these areas and speak with some of the people who made them happen. more>

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Updates from McKinsey

How Gulf companies can overcome the five biggest challenges to their digital transformation
By Dany Karam, Christian Kunz, Jigar Patel, and Joydeep Sengupta – By now, most companies in the Gulf region understand the necessity of going digital. After all, 82 percent of the region’s population already owns smartphones.

Yet despite this awareness, progress on digital transformations among companies in the Gulf Cooperation Council (GCC) has been limited, at best.

Some companies have tested the waters, while others have moved more aggressively but haven’t scaled their programs. Many companies, however, are still sitting on the sidelines wondering how to move from strategy to action.

Almost no GCC companies have reached the end goal where analytics drives everything they do, agile operations and a culture of failing fast are the norm, and a mature and flexible technology stack is available to continually evolve offerings.

Regardless of where a company stands now, Gulf executives need to act quickly to move their organizations to the next level. Based on our work with incumbents in the Middle East and across the globe, we have identified five of the most common challenges GCC companies face when trying to go digital, as well as strategies for overcoming them and dramatically increasing the chances of success.

It’s understandable that Gulf executives would be reluctant to hit the go button on digital transformations. These efforts are largely new to the region, require considerable capital expenditures, and can lead to very different ways of working. You can’t transform only a little. Leading financial-services companies, for example, spend more than 4 percent of their revenues on digital transformations (with some spending as much as 9 to 12 percent). And digital transformations can go on for at least five years, with a breakeven point that can be one to four years away. more>

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Updates from McKinsey

Why isn’t your transformation showing up in the bottom line?
The success rates of large change programs vary widely. Finance teams can make a big difference in the outcome of these initiatives by articulating and validating the link between transformation efforts and long-term value.
By Ryan Davies, Douglas Huey, and David Kennedy – “Transformation” is the buzzword of the day for companies in most industries, but for many it carries an asterisk: studies show wide variation in companies’ rates of success with organizational transformations—whether they are changing how they go to market, updating back-office processes, automating production systems, or otherwise making significant changes in how their businesses are structured and run.

In some cases, this variation exists because executives propose fundamental changes in how the business operates but don’t go through the hard process of setting commensurate performance targets. They often set targets too low, aiming for incremental change. When they do set their sights appropriately high, they often fail to adequately make clear to key stakeholders who owns the goals and responsibilities associated with various elements of the transformation. As a result, value can end up “leaking” even from good initiatives, which can sap companies’ efforts to meet bottom-line targets, drain momentum from good investments, and impede buy-in for change efforts generally.

CFOs and finance teams have a critical role to play in not only setting ambitious targets but also providing the discipline to mitigate value leakage and fully deliver transformational benefits to the bottom line. more>

Updates from McKinsey

Digital transformation: Improving the odds of success
By Jacques Bughin, Jonathan Deakin, and Barbara O’Beirne – or established companies, the pressure to digitize business models and products has reached new intensity. McKinsey research shows that the best-performing decile of digitized incumbents earns as much as 80 percent of the digital revenues generated in their industries.

Ascending to that elite group is far from easy. In a new survey of more than 1,700 C-suite executives, we learned that the average digital transformation—an effort to enable existing business models by integrating advanced technologies—stands a 45 percent chance of delivering less profit than expected. The likelihood of surpassing profit expectations, on average, is just one in ten.

The good news is that executives can decisively increase the chance that a transformation focused on digital enablement will beat performance expectations.

Our latest research shows that exceptionally effective digital transformations are distinguished mostly by the practices that executives choose to follow. Adhering to a well-defined set of transformation practices lifts the likelihood of exceeding profit expectations to more than 50 percent—about five times better than transformations that involve none of these practices. What’s more, the same combination of practices works for every type of digital-enablement effort that our survey covered. more>