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Accelerating digital capabilities to recover from the COVID-19 crisis

The rapid migration to digital technologies driven by the pandemic is likely to continue. This McKinsey Live webinar covers the four elements of a digital agenda for recovery.

Three fundamental business changes brought on by COVID-19—new customer behavior and needs, unpredictable demand, and a huge spike in working remotely—have propelled a rapid migration to digital technologies in all industries and sectors. The speed of this change is unprecedented: for example, the penetration of e-commerce in the United States, previously forecast to reach 24 percent by 2024, moved from 17 percent to 33 percent in only two months.

Digital will be key to thriving during the economic recovery and the next normal that will follow. In this McKinsey Live webinar, senior partners Eric Lamarre and Kate Smaje outline a 90-day plan for accelerating an organization’s digital capabilities. The plan consists of these four concurrent efforts:

Refocus efforts for changing customer expectations. Many companies have already made quick changes in reaction to shifting customer demands. Advancing beyond the initial phase of digitization, however, requires a company to put its digital channels on par with, or ahead of, those of its competitors. Once the company has assessed its customers’ revised expectations, it needs to take a new look at its value chain and challenge every part of it. A reconceived value chain will release a surge of innovation likely to result in additional revenue and increase the sustainability of the company’s digital changes. To reduce the amount of friction involved in digital acceleration, companies can set up new distribution models, change the sales model, and rethink the customer safety experience.

Use AI and fresh data to improve business operations. Companies use models for planning, forecasting, and making important decisions. Many of the models in use before the pandemic are now out of whack. A company needs to identify the decision-support systems it can no longer rely on and build a data set that will aid the construction of new models for forecasting demand patterns, managing company assets, and optimizing business performance. More sophisticated models could also lead companies to automate lead generation and enhance their ability to handle much larger volumes.

Selectively modernize technology capabilities. By modernizing both its technology stack and its software delivery, a company can do more with less in a shorter time frame. A company must begin this effort by reassessing its IT cost structure and freeing up some resources to invest in hybrid architecture. While using its improved technology to automate processes and strengthen cybersecurity, the company must also expand its engineering talent. Talent building is a common roadblock to technology acceleration and also the most difficult process to address.

Speed up the organizational “drumbeat.” Velocity is the new killer app. First, company leadership needs to identify where in the organization greater velocity and reaction times would make the biggest difference. With new models deployed in those areas, the company can use agility and remote models to unleash new productivity. Overnight experiments with agile should be encouraged, to see what does and doesn’t work. Training people how to use the new tools and to work differently is essential to rewiring the organization for speed—and making it stick.

Questions and answers from the webinar

  1. How can companies manage the significant boom in e-commerce (much of it goods) and the current lack of transportation capacity while still delivering for their customers?

    Companies have had to rethink their fulfillment and delivery models to satisfy the increased demand. They have pursued innovative transportation partnerships to help with delivery of their goods, including adding capacity for short orders. They have made changes to their fulfillment model, such as incentivizing curbside pickup (which inherently has better economics). And they have helped smooth demand through personalization, such as by setting delivery times based on individual needs. This is a great opportunity to challenge everything and come up with new models that are more, not less, lucrative.

    For more on this topic, see “Jump-starting resilient and reimagined operations” and “The next normal in retail: Charting a path forward.”

  2. B2C customer behaviors and needs have indeed changed, with online sales increasing from 17 to 33 percent (of total retail sales) during the pandemic, but have we also observed this trend for B2B transactions? In B2B, is there a risk of losing relationships with customers while accelerating the move to e-commerce?

    The world of B2B has absolutely been affected by the pandemic, and, arguably, it will never be the same again. For example, consider the thousands of medtech reps, much like many others in the B2B sector, who are sitting at home, not expecting to be allowed back into hospitals anytime soon. So companies have had to think about how they can use technology to amplify and complement the customer relationship remotely, such as using it to provide the very best expertise and knowledge every time or to train reps to better negotiate. During the pandemic, we have seen digital sales interactions rise from 48 to 66 percent of all sales interactions.

    For more on this topic, see “How B2B sales have changed during COVID-19” and “A post–COVID-19 commercial-recovery strategy for B2B companies.”

  3. How are banks and financial-services companies thinking about data security and migration to the cloud?

    Most banks have already migrated part of their technology stack to the cloud, especially for new customer-facing applications and advanced analytics. But the “big surgery” of replacing core banking systems with cloud-based alternatives is still in very early stages. The cloud is essentially an enabling environment for driving much higher software development productivity and faster cycle time. But this requires more than just moving applications to the cloud. You also need to upskill talent, adopt software-automation practices, create a modular (application-programming-interface-enabled) architecture, and adopt agile practices. As part of this transition, it will be critically important to upskill users on cloud data security, particularly on managing configurations of and permissions for accessing cloud environments—where the vast majority of cloud data breaches have originated.

    For more on this topic, see “Next-gen technology transformation in financial services” and “Making a secure transition to the public cloud.”

  4. What does the current crisis tell us about the digital divide that already existed before the COVID-19 crisis? Are there any lessons?

    Companies that had “underlying conditions”—such as a lack of digitization, a weak balance sheet, and poor liquidity—before the COVID-19 crisis have been particularly susceptible to falling further behind. According to McKinsey China’s Nick Leung, the lesson so far from China is that those who were ahead on the digital curve before the pandemic are bouncing back faster and better.

    For more on this topic, see “Digital strategy in a time of crisis” and “The drumbeat of digital: How winning teams play.”

  5. Do you have a framework for choosing from a sea of digital investments?

    Organizations should choose digital investments that enable the company to achieve its goals and deliver value better, faster, and/or cheaper. But better happens only if you are obsessively focused on your areas of highest value and that support your broader strategy in the short and long term; faster happens only if you are faster as a company (its culture or metabolic rate); and cheaper happens only if you don’t overbuild or overcomplicate, and you really understand the talent-to-value equation.

    Companies should choose which of their strategic goals to support by assessing value and feasibility of use cases in those areas. Value can be measured by bottom-line impact, speed to value, ability to provide synergies (for example, investing in an area that provides a foundation of data and models to more easily digitize another value-adding area), and how much it improves customer or employee experience. Feasibility can be assessed by looking at data readiness, the level of technical complexity, business engagement and excitement, and the amount of change management required.

    For more on this topic, see “The recovery will be digital: A plan for the first 90 days” and “Five moves to make during a digital transformation.”

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