Silos drawn along functional lines have always been a drag on collaboration and performance in large organisations. Although digital transformation is a foundation of modern business, established organizations often struggle with developing the new, customer-centric business models that are essential to successful transformation. The success of digitalisation efforts therefore hinge upon their abilities to acquire or develop specific functional competencies around digital skills, technologies and processes (or operating model), as most companies will struggle to hire several hundred new digitally skilled staff all at once. Customer satisfaction is likely to jump. A focus on customer needs rather than process and procedure, continuous customer feedback, comfort with testing and learning and hence with occasional failure, and collaboration—all are vital. In many industries (not just music), there has been a delay of about four or five years from the time a new digital … Executive buy-in will enable firms to make decisions quickly and gain buy-in for those decisions across the organisation as a whole. It is easy to launch change initiatives. We are in the second camp. People create and sustain change. Seven McKinsey charts on how Covid-19 is changing consumers. Insurers that pursue digital transformation will meet challenges. Never miss an insight. Sequencing with a view to quick returns is key to building scale fast. Financial and human resources are never unlimited, but they are scarcer and more precious now than at any time in a generation. 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. 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. Some see how digital technology will transform pieces of the business, but find it harder to envisage how the entire value chain and business model might change. They can start to create channel conflict, particularly if innovations threaten to cannibalise revenue streams. The power of a digital transformation strategy lies in its scope and objectives. McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. A company can be certain that if it does not match that benchmark soon, others will. Some executives might feel the reframing makes the challenges more daunting still, others that it makes the opportunities more exciting. This almost always means looking for ways to cut costs—a counterintuitive notion for many executives who tend to focus on digital technology’s growth potential. The other themes we examine are digital business models, digital operating models, and digital talent and skills.. The researchers elaborated, “The CEO cannot simply sanction a digital transformation; he or she must communicate a vision of what needs to be achieved, and why, in order to demonstrate that digital is an unquestionable priority, make other leaders accountable, and make it harder to back-track. An operating model is both an abstract and visual representation of how an organisation delivers value to its customers or beneficiaries as well as how an organisation actually runs itself. One way to meet the challenge is to start by hiring a renowned expert to serve as an anchor hire, who will help to attract others, on the basis that they will be drawn to him or her more than they would be to an insurer per se. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. 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. According to McKinsey’s consultants, “Such projects include customer services activities and the redesign of the claims process, from the moment a customer needs to file a claim to the moment of reimbursement. They are far enough advanced to know that each stage of the transformation will present challenges. It is hard to keep them afloat and spawn more. 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 (see “Modernizing IT for a strategic role”). It is hard to keep them afloat and spawn more. Digital transformation is a Trojan horse. More importantly, the 7S model ensures these seven factors are properly aligned in a way they support each other. The power of a digital transformation strategy lies in its scope and objectives. It is easy to launch change initiatives. On average, digital offerings have leapfrogged seven years of progress in a matter of months. They therefore content themselves with investing in a new sales channel, launching a service app, or automating a few processes. Digital transformation should not be handed off to consultants. These are McKinsey & Company’s ‘Four Ds’ of digital transformation outlined in a new report.. The first will occur at the outset, when the CEO must set the company on the right course for success. Typically, companies also struggle with cultural issues and challenges in recruiting new types of talent. It is partly about balancing old and new and integrating fresh talent with old, valued hands. No rule book will solve all of this. The opportunity for a smooth transition process and thus buy-in from the rest of the organisation can be lost without this. 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. 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 personalisation that will be achieved, and the number of campaigns that will be run each month.”. McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. They have therefore taken steps toward transforming their businesses. Global consultancy CGI has been delivering secure IT systems to the UK Ministry of Defence for over 40 years. Agile is a way of working that emerged out of a growing dissatisfaction with IT techniques used in the late 90s, such as the waterfall method in software development. Ok Some companies go further than hiring individuals and acquire agencies that specialize in design thinking. And they are keenly aware that digital can give birth to entirely new business models that shake up sectors, leaving companies that fail to adapt struggling to survive (newspapers are a case in point). Andrew Brem, chief digital officer of Aviva, says CEOs need to be “single-minded and aggressive” about driving the transformation. A digital transformation strategy is a plan of action to reposition a business in the digital economy. The thoughtful sequencing of subsequent initiatives is key to this. At the 18-month point, companies should be making good progress. Setting up a digital unit independently of the organization will promote new ways of working essential for digital success, such as agile product development, test-and-learn methods that speed progress while keeping the focus on customers, and cross-functional teams that pool specific types of expertise. 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. Moreover, transformation incurs costs at a time when competition is probably putting pressure on margins. To ensure early efforts thrive and build momentum, companies should consider carefully which projects to start with and support them with the necessary resources. The authors argued, “The importance of securing a high-calibre launch team, often under a CDO, cannot be overstated. Something went wrong. That statement seems almost glib, given how often CEO commitment is positioned as the solution to any major challenge. Importantly, companies will need to allocate investment both to improve the current business and to build new businesses as the insurance model evolves. McKinsey’s Barr Seitz explains that digital transformation goes much deeper than technology. McKinsey’s analysts explained, “Targets are needed for each source of value creation – cost savings, revenues, improved performance of agents, and satisfaction of employees and customers—and for new ways of working and the new capabilities required. UK digital transformation consultancy Step5 has joined TXM Group, a professional services group headquartered in Milton Keynes. cookies, McKinsey_Website_Accessibility@mckinsey.com. Digital strategies in the most mature organizations are developed with an eye on transforming the business. Experts at First Consulting reflect on the, Business war gaming an effective instrument for improved decision-making. Please use UP and DOWN arrow keys to review autocomplete results. Skills as well as systems will need to be boosted. Digital transformation … The frontline teams must also be clued into how close the group is to hitting its targets – providing a regular drumbeat with news and updates through channels such as newsletters, town hall meetings, and intranet articles. For example, rather than making decisions by considering the business case or what competitors are doing, insist that the starting point is “How does this create value for the customer?” Moreover, change can begin in areas where there are fewer risks—in marketing, for example, by testing messages and channels to find out what is most effective. Select topics and stay current with our latest insights. Firms should also look to rapidly up-skill the digital expertise of their workers, and deploy agile ways of working. Unleash their potential. McKinsey Global Institute ... s current digital state and the capabilities needed to advance its digital agenda are crucial for a successful transformation. Second, setting clear targets at the outset prevents back-sliding when the going gets tough. But it becomes clear to anyone who understands digital technology’s potential that what is afoot is less of a digital transformation and more of a fundamental rethink of the corporate model, for which digital technology is the catalyst. Six steps to include in digital transformation planning. But if a company struggles to hire 20 to 100 new people for the launch team, how should it go about hiring several hundred? There are some particular skills I’d call out. New ways to accelerate revenue growth will reveal themselves. In the latest McKinsey Global Survey on the topic, 1. The scarcity of elite data scientists, for example, has been a factor in some insurers’ acquisitions of cutting-edge artificial intelligence start-ups; $5 million to $10 million per employee can be commanded in these so-called “acquihire” deals. The importance of securing a high-caliber launch team, often under a CDO, cannot be overstated. No wonder McKinsey research has shown that 46 percent of financial services executives feel cultural or behavioral change is the biggest challenge they face in pursuing their digital strategies. 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. Four years after Bi-Modal IT - Is the model still relevant? That is why companies will have to lean away from a traditional matrix structure with rigid functional boundaries if the transformation is to succeed. Most insurers are responding to some degree, albeit often cautiously. McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. At the end of the nineteenth century, many companies employed a chief electricity officer to ensure supplies of what was a new industrial commodity. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. The more value a transformation captures as it progresses, the more it becomes self-funding and the greater the support it garners. While a digital start-up can disrupt the market, legacy companies shouldn’t undervalue their own competitive assets or make the mistake of thinking the disruptors have all the cards. Press enter to select and open the results on a new page. Key recruits to the launch team include designers to contemplate customers’ unmet needs and inform the creation of experiences, products, and services; data scientists; scrum masters to facilitate agile development; and developers who can work in the modern IT environment. 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. Concluding, the authors said, “Whatever structures a company chooses initially, it will reach the stage when only a fundamental organisational redesign will do. De-risk. And another would be data analytics, particularly on the customer side rather than risk.”. But the role of CDO is a temporary one. In fact, according to a recent study by McKinsey, roughly 70 percent of transformations fail. “There are relatively easy ways to kick-start change and gain support,” the authors argued. Digital McKinsey integra l’approccio strategico con le competenze specialistiche per accelerare la realizzazione di soluzioni digitali ad alto impatto. Roughly, an insurer with premiums worth more than $5 billion should expect to hire between 20 and 100 new specialists during the first 18 months of a transformation. Aug 8, 2019 - Explore Slidebooks Consulting's board "Digital Transformation Strategy & Plan Template", followed by 1265 people on Pinterest. We have touched upon how digital ways of working and thinking—fast, collaborative, empowered—will be the default mode of new recruits with digital skills. A company’s financial pressures will shape the sequencing to some degree. In the digital age, when companies need to reinvent the way they work on the fly, an inability to connect all parts of the organization to share data, expertise, and talent can be crippling. 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