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Karel Dörner Principal, McKinsey Digital
Digital Transformation @ Scale
LINKEDIN EXECUTIVE SUMMIT
MUNICH, 8 September 2016
McKinsey & Company 2
Digitization of everything Cybersecurity
threats
McKinsey & Company 3
More digitization to come as more technologies (mostly digital) continue to transform the economy
SOURCE: McKinsey Global Institute analysis
Disruptive Dozen – Selected for scope and scale of impact
(next 10 years)
Machines working for us
Advanced
robotics
Autonomous and
near-autonomous
vehicles
3D printing
Next-generation
genomics
Advanced materials
Changing the building
blocks of everything IT and how we use it
Mobile internet Cloud
technology
Internet of Things
(IoT)
AI, Machine-
learning
Automation of
knowledge work
Energy
storage
Rethinking energy comes of age
Advanced oil and
gas exploration
and recovery
Renewable energy
Blockchain/
Cryptocurrencies
Human-Computer
Interfaces (AR, VR etc)
Digital IDs/ Biometrics
Quantum Computing
…
More…
McKinsey & Company 4 SOURCE: McKinsey
Digital maturity
of the sector
Evolution over time
Digital is fundamentally affecting all industries – with varying speed and scope
Health Public
sector
Oil and gas
Chemicals and agriculture
Assembly
Retail distribution
High tech
Retail banking Telecoms
Media
Tourism
Automotive Winner takes
it all dynamics
McKinsey & Company 5
Between industries, a large gap between digital leaders and the rest
SOURCE: USDEC
An objective and
comprehensive
measure of digital
maturity
correlating with
financial
performance
What is the
Digital
Quotient?
Pharma/
Medical
Products
Distribution of Digital Quotient score by industry (global)
Points (out of 100)
32
49
Global average: 33
Insurance Banking Transport
And
Logistics
Media/
Entertain-
ment
Telecom Retail Travel/
Hospitality
28 31
35 36
37
42
McKinsey & Company 6 SOURCE: Forbes, McKinsey interview October 2015
Digital matters also for industrial companies
"Industrial companies
are in the information
business whether they
want to be or not." Jeff Immelt (CEO GE)
McKinsey & Company 7
Digital “haves” and “have-mores”
3 × faster profit and
margin growth
2 × faster wage growth Higher productivity
and innovation
Faster revenue
growth
SOURCE: McKinsey Global Institute analysis
McKinsey & Company 8
How do we get started? – We hear a lot of questions on this …
SOURCE: McKinsey Digital
With what digital field of action do I start?
Should I found a new venture?
Should I build a digital business unit?
What capabilities do I need?
Should I hire a Chief Digital Officer?
How should I adjust my organization?
How do I lead a digital enterprise?
How do I make it an holistic and effective
transformation?
How do I make a quick start?
McKinsey & Company 9
We see 6 patterns for success
SOURCE: McKinsey analysis
Define a clear
target picture
Follow and understand
the customer
Use Digital to unlock
big potential in internal
processes
Think "Quan"
and "Qual" together Organize for Digital
Get a Digital state
of mind
1 2 3
4 5 6
McKinsey & Company 10 SOURCE: McKinsey DOTMatrixTM
Digitization can disrupt industries when it changes the nature of supply, demand, or both Left: Undistort demand
▪Address unmet demand by unbundling
▪Make it easy and make it now
Right: Un-constrain supply
▪Uncover latent supply
(aka yield mgmt.)
▪Make capacity available in smaller
increments Middle: Make new markets
▪Find new ways to connect supply
and demand, eg., by lowering
transaction costs
Left: Create new VP
▪Enrich the product with information
▪Convert the product into a social
offering or a service
Right: Re-imagine BS
▪Change supply-side cost structure by
automating, virtualizing, or
disintermediating
Middle: Hyperscale platform
▪Create operating leverage through
process automation and network effects
▪Lock in customers and suppliers by
offering free access to information
Demand Supply
Degree of change in the nature of supply and demand Modest
Extreme
Make new markets
Unconstrain supply
Hyperscale platforms
Create new value pro-positions
Reimagine business systems
Undistort demand
1
McKinsey & Company 11
1 Average by category
SOURCE: McKinsey Channel Partner database, experts interview, press clippings
Amazon has a strong value position in B2C and B2B
Unbeatable assortment Local, segment-specific stores
2
B2C -
2,150 1
129 1
94%
B2B 900
10,000
- 91%
McKinsey & Company 12
Next generation Carrera-Bahn: Wanna play?
SOURCE: Anki OVERDRIVE
Do you know your
customers?
Creating customer
profiles through
▪Gaming behavior
▪Locations
▪Actions (in-app sales)
▪...
2
McKinsey & Company 13 SOURCE: McKinsey analysis
Artificial intelligence to transform service operations
Digitization of service ops:
>64% of enquiries in service center resolved by AI
3
McKinsey & Company 14
Think quantitative! Think qualitative!
Think both quan-
& qualitative!
Unleash your full potential – think "Quan" and "Qual" together 4
SOURCE: McKinsey analysis
McKinsey & Company 15
Spotify has achieved an agile structure and has become a role model for others
SOURCE: Scaling Agile @ Spotify, Oct. 2012 and May 2014, YOUSE
5
Overview of Spotify’s SW
development “organization”
YOUSE – Digital Insurance company built based
on the Spotify model
McKinsey & Company 16 SOURCE: Press research, McKinsey Digital
Hire a CDO – but get it right!
Digital transformation across functions and departments
Especially, marketing and
technology
Change agent, transform
traditional businesses into
digital world
What?
How? Extensive authority
Direct line to CEO
Disrupt functional silos
Needs business
responsibility or doomed to fail
5
McKinsey & Company 17
Six key attributes characterize a digital state of mind
SOURCE: McKinsey analysis
6
Openness &
transparency
Fail-fast
mentality
Quick
delivery
Experi-
mentation
Customer
centricity
Fact-based
decisions
McKinsey & Company 18
The insightful "eat" the HIPPO1
SOURCE: McKinsey
6
1 Highest paid person's opinion
McKinsey & Company 19
Winning together – successful cooperation between startups and corporates
SOURCE: McKinsey analysis
6
Startups leverage corporates‘
assets …
Distribution channels
Stable business processes
Network
Financial basis
… and corporates learn
from startups
Disruptive business
models
Flexibility
Agility
Scalability of software
solutions Photo:
Dimitri Daniloff
McKinsey & Company 20
Digital Transformation – It’s difficult, but it's feasible!
SOURCE: Press clipping
Thank you! McKinseyDigital.com
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