Kate Smaje: Why businesses must act faster than ever on digitization

Throughout the pandemic, we've been talking about how COVID-19 will transform the future of business at large, as well as industries from food, insurance, and hospital care to parcel delivery and packaging.

Now, we are expanding that conversation by serving as the presenting partner of CNBC’s new franchise, “Our New Future.”

The series explores the lasting effects of COVID-19 and the new business landscape it presents. A core piece of the partnership for us is the ability to share insights on five areas of opportunity we believe are critical for leading in The Next Normal: digital, transformation, organization, resilience, and sustainability.

The partnership kicked off this week with the first of these topics—digital—as Kate Smaje, a senior partner who co-leads McKinsey Digital, explained how COVID-19 has been the greatest impetus for behavioral change in our lifetime. We spoke to Kate about why businesses must act faster than ever before, creating the cultural shifts required to enable truly digital organizations, and her work leading digital transformations—for clients and our firm alike.

In the future, the next normal will be digital

How six companies are using technology and data to transform themselves

Why is digital absolutely critical for business leaders to understand on the path to The Next Normal?

Kate: It’s really hard to join any company board meeting right now and not talk about how important technology is—as both an opportunity and a threat—in reshaping their business system. The impact of COVID-19 has only made this more relevant as companies have surged in serving their customers (whether B2B or B2C) through digital channels and undergone their own massive, overnight experiment in agile, and remote ways of working. Leaders have to make high-stakes decisions fast to ensure the resilience of their operations as these shifts have happened, so the importance of good, accessible data has never been higher. It’s hard to believe the way for businesses to come out of this stronger is to revert back on all of this, so digital, technology, data are only going to become more important.

COVID-19 has only made digital more relevant as companies...have undergone their own massive, overnight experiment in agile, and remote ways of working.

You note our research finds one or two companies in each sector are significantly outpacing competitors. Why is that the case?

Kate: Digital business models often bring together huge volumes of customer data to get momentum going. They are able to tempt customers earlier with a great experience, then learn more and faster about what customers really want to make it better, and then use that information to identify looming threats and the best partners in defending value chains under digital pressure. It’s a virtuous cycle and hard to break. Take, for example, how you buy your groceries digitally: once you’ve done it a couple of times with one brand—you’ve saved your shopping lists and set up your credit card—it’s hard to imagine why you’d go somewhere else, unless someone is paying you to do so through a discount voucher or another incentive. So if a digital business has managed to lock in a great customer experience from the start, it snowballs.

What are telltale signs that an organization is ready for a digital transformation?

Kate: I’ll give you some questions I’d ask the CEO. First, can they see an opportunity to create more value in their industry than the way in which they currently do—or are they perhaps concerned someone is going to do that to them? Second, are they on a digital journey where some things are going well, but nothing is really scaling, or in other words, are they in pilot purgatory? This is a common sign that they may have already started a digital transformation by name, but are not really transforming the core of the company so need to reset. Similarly, is the digital team doing really great work, but facing organ rejection in the rest of the company because you haven’t made the cultural shift required to become a digital-enabled organization? A final point: if you as a CEO are constantly hearing, “We couldn't do X because of IT,” it means you haven’t managed to modernize the way technology architecture and teams work in your organization.

If you as a CEO are constantly hearing, 'We couldn't do X because of IT,' it means you haven’t managed to modernize the way technology architecture and teams work in your organization.

What advice do you give to CEOs to drive that cultural shift you’re talking about?

Kate: As a CEO you have to have a laser focus on where the value is going to be created in your industry; not necessarily how it’s created today, but how that’s going to shift over time. Once you have that north star vision, you have to be able to tell that story and genuinely excite your team. The minute I hear a CEO say, “I have to convince my organization,” something’s wrong. You don’t need to convince them—you have to excite them and then empower them to do things differently. Then, you’ve got to figure out how to rewire the way your organization works so it can make better decisions faster. And keep in mind: there are always going to be naysayers who don’t believe in digital or that it’s going to make your organization better. You can spend a majority of your time changing their minds. But I’ve found that if you can find the little fires of excitement burning elsewhere, it’s more effective to find a way to help them burn brighter, whether through funding or resources, or frankly, confidence. Some of the naysayers will come along, and others never will—and that’s okay, too.

You’ve not only led digital transformations for clients, but for our firm. Tell us about that experience and your journey at McKinsey.

Kate: I started my career at an investment bank before I came to the firm in the heart of the tech bubble. We used to have lunch and learns at the bank, and one day, I was listening to a colleague talk about their recapitalization work with a cable company. As a throw away comment, he mentioned McKinsey was there looking at how the business was going to grow again. And I thought, ‘Well that sounds more interesting than what we do.’ So I sent off a CV and the rest is history.

Learning about how businesses work was infectious. Early on, I worked with retail clients just as digital was really transforming e-commerce. Later on, as a partner, I was seconded as a chief digital officer for a consumer client that was embarking on an end-to-end digital transformation, and I helped them think through the people they needed to hire, the technology they needed to build, and the processes they needed to change as a part of that journey. When I came back to McKinsey, our former global managing partner Dominic Barton asked me to do the same for the firm and lead our fantastic internal technology and digital teams—to think about what it would mean to serve clients in five to ten years’ time and how technology would be at the heart of that change, rethink our own data and technology architecture to better match our colleagues’ expertise and knowledge to client challenges, and create a happier and healthier colleague experience through technology.

Now as co-leader of McKinsey Digital, I’m passionate about helping clients with similarly bold, outrageous aspirations to really reshape their organizations—and their industries.

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