Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. cookies, precise predictive and prescriptive analytics, Healthcare records and genome sequences will be digitized, Operators will use predictive maintenance, How smart, connected products are transforming competition, How smart, connected products are transforming companies, will attempt to transform themselves digitally, Retiring Cisco CEO delivers dire prediction: 40 percent of companies will be dead in 10 years, Why Morgan Stanley is so bullish on Tesla and the Model 3, Amazon will make up 50 percent of all US e-commerce by 2021. Large-scale organizational changes, says the research firm, can be designed scientifically. Organization, in a digital transformation world, includes the work culture and the set of practices and attitudes that are key to executing digital transformations. McKinsey’s Smaje made one very important point during the conversation about the role of CFOs in the future — “A resurgent incumbent in your sector is significantly more damaging than many of the digital attackers”. Digital Transformation: McKinsey’s Take. “If I am not making you sweat,” he told an executive audience, “I should be.”6 6.Julie Bort, “Retiring Cisco CEO delivers dire prediction: 40 percent of companies will be dead in 10 years,” Business Insider, June 2015, businessinsider.com. As the world becomes more digital and more volatile, survival itself becomes less certain. Something that has been stable for a long period is suddenly disrupted radically—and then settles into a new equilibrium.1 1.See Stephen Jay Gould, Punctuated Equilibrium, Cambridge, MA: Harvard University Press, 2007. Use minimal essential A great example of that might be the filing of taxes or submission of customs documentation for imports/exports. Why a Digital Transformation Strategy Is More Crucial Than Ever. These are performance orientated benefits and show that digital transformation is proven to increase productivity and helps companies enhance customer experience. Hundreds of leading companies have formed the Industrial Internet Consortium to accelerate the adoption of “cyberphysical systems” in energy, healthcare, manufacturing, smart cities, and transportation. Michael Krigsman: I'm excellent. Something went wrong. Software evolved from bespoke custom programming to on-premises, packaged enterprise application software and then to software as a service (SaaS)—cloud-resident solutions. There are a plethora of definitions of digital transformation, and here are a few: Brian Solis’s definition of DT is entirely holistic, “[DT implies] the realignment of, or new investment in, technology, business models, and processes to drive new value for customers and employees.”. Historically, computation was performed on data samples, statistical methods were employed to draw inferences from those samples, and the inferences were in turn used to inform business decisions. 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. After the mass extinctions that have occurred several times across evolutionary eras, a minority of species survived and the voids in the ecosystem rapidly filled with massive speciation. Understanding digital transformation. It’s more important than ever to stay competitive and relevant in the digital world. Paige O’Neill, CMO of Sitecore, says: “It’s important to keep in mind that digital transformation is not a single project or change, but an organization-wide restructure that extends to the people, the operations and the technology.” Digital upends old models. Digital transformation is often used to boost agility and operational efficiency. (For more of McKinsey’s research on the success factors in broad business transformations, see “Why your next transformation should be ‘all in’” and “The numbers behind successful transformations.”) Our latest research shows that exceptionally effective digital transformations are distinguished mostly by … This means that economies of scale take on whole new proportions, which leads to the rise of ecosystems. Gould pointed out that fossil records show that species change does not advance gradually but often massively and disruptively. The experience of customers is at the heart of digital. Digital transformation is the process of exploiting digital technology to make business improvements, transform business processes, increase organizational effectiveness, or change the organization in some way. Digital transformation is vital to all businesses, regardless of size. Big data means we perform calculations on all the data; there is no sampling error. Previously, he founded Siebel Systems, serving as its CEO and chairman from 1993 until its acquisition by Oracle, in 2006. 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. Please try again later. SMBs know how important it is to start planning for digital transformation: More than 80% agree that technology is reshaping their industries, businesses and workplaces. Here are some of McKinsey’s most important ideas and concepts related to organizational transformation and change: Organizational transformation should be a science, not guesswork. They can then apply AI machine-learning algorithms to those data to optimize the operation of the grid, reduce the cost of operation, enhance resiliency, increase reliability, harden cybersecurity, enable a bidirectional power flow, and reduce greenhouse-gas emissions. The power of IoT, cloud computing, and AI spells the digital transformation of the utility industry. Digital transformation is about sweeping change. Why digital transformation should be a strategic priority for health insurers. Lift in customer engagement (75%) – One of the first and most important benefits of Digital Transformation is that it leads to a great lift in customer engagement and experience. Digital transformation can impact every area of business. Your business can unlock even more potential through digital transformation. Its share of the US e-commerce market is 34 percent and could increase to 50 percent by 2021.8 8.Phil Wahba, “Amazon will make up 50 percent of all US e-commerce by 2021,” Fortune, April 2017, fortune.com. The existential threat is exceeded only by the opportunity. 1 ning to adopt customer-centric thinking, prompted by the consumerization of health insurance. Something fundamentally important is happening, and it’s something that corporate leaders find highly motivating—and urgent. That is why it is so important to have a solid digital transformation plan. Leadership from the top is necessary to overcome the organizational resistance to change that can make a digital transformation difficult. This enables AI—a previously unattainable class of computation that uses machine and deep learning to develop self-learning algorithms—to perform precise predictive and prescriptive analytics. Building your digital transformation strategy: 7 steps to success. 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