McKinsey Industrial Software Hub

Helping industrial companies create sustainable value and accelerate software-enabled revenue growth

With an operating margin of about 80 percent, software products and services have become increasingly critical to business growth, and industrial companies are well positioned to capture that value. In fact, 38 percent of industrial company leaders expect more than 50 percent of their revenue to come from digital solutions by 2023, according to a recent McKinsey survey.

The McKinsey Industrial Software Hub (MISH) helps businesses excel in three areas: value creation, software value assurance, and the creation and scale-up of dedicated software units.

Our experts leverage proprietary tools and data, including market models and benchmarks, allowing us to develop customized solutions. We have completed over 220 projects for industrial companies over the past five years.

30%

increase in productivity

30-50%

quality improvement

10-30%

cost reduction

What we do

Software strategy

Helping clients identify software opportunities, develop technology roadmaps, create capability-building strategies, identify potential M&A targets, and determine funding needs for software programs

Software operating models at scale

Working with large, complex companies to help align strategy with operations, define interfaces within the organization, including those between brands and business units, and define processes and governance for software initiatives

Software talent and footprint

Helping clients develop strategies to facilitate recruitment, define required profiles and competencies, and set guidelines for compensation, training, and other areas across the entire talent lifecycle

Validation and process compliance

Helping clients meet requirements of standards and regulations, including those for cybersecurity, by defining processes and methods to ensure compliance and improving efficiencies

Software development excellence

Identifying issues that interfere with software development and helping clients build the capabilities required to increase productivity and transform software-development processes; the firm has worked with clients to decrease time to market by over 40 percent

Software sourcing and procurement

Conducting fact-based assessments of software-development costs and benchmarking against best practices to evaluate make-versus-buy strategies, including vendor selection and management of supplier interfaces; through better software sourcing and procurement, we have helped clients de-risk development and improve quality

Software launch and project recovery

Helping mitigate risks and providing assistance along the critical launch path to keep software projects on track and avoid costly delays

Software business building

Helping clients grow by adjusting strategies, changing product roadmaps, upgrading organizational structures, and improving the approach to talent

Software go-to-market

Working with clients to enhance marketing and product-launch processes for software to help identify targeted offerings, facilitate product launch, improve customer satisfaction, and increase monetization of software solutions

Software pricing excellence

Helping clients develop the best strategies for capturing value, including development of "as-a-service" models, leading to higher margins and profitability

Digital twins

Digital Twin – Introduction

Digital twins serve as virtual replicas of products, factories, and processes, in their operating environments. In this video, learn how digital twins can optimize every stage of product development from portfolio feedback through maintenance, leading to better time to market, costs, quality, and revenue.

Digital Twin – A new way of working

Digital twins can help employees from various functions find new and more efficient ways to work. This video shows how one task—creating a product demo that meets client requirements—is much easier with a digital twin and model-based engineering tools.

Digital Twin – Architecture

One of the most important aspects of a digital twin is its target system architecture—a description of its target components, as well as their relationships and interactions. In this video, see the challenges that companies face when attempting to define and implement this architecture.

Examples of our work

Industrial-services business

Expanding to operational solutions

An industrial-services business wanted to expand its focus from hardware to operational solutions and accelerate the growth of its digital-products business. We worked with the company to improve its go-to-market strategy, streamline software-development activities, identify new offerings, and provide guidance on modernizing product architecture. These changes helped identify underperforming or misaligned products, which reduced costs by about 10 percent. Together, the cost reduction and go-to-market initiatives created the potential for the client to more than double revenues.

Turbine OEM

Reducing software development bottlenecks

A turbine OEM was experiencing delays in time-to-market because of bottlenecks related to embedded software development. We assisted with helping to identify problem areas and pinpoint root causes through interviews, project reviews, performance benchmarking, and other analyses. We also helped the company with reorganizing software teams, leading to greater productivity, and outlining plans for a multi-year transformation that helped the client become a market leader for the full value chain for turbine software.

Building-materials company

Creating a software suite of digital product offerings

A building-materials company had experienced strong growth but was struggling to develop digital products. We collaborated with the client to design and deliver a software suite that was ready for market in under a year. We also helped train sales, marketing, and country management globally and assisted with recruiting technical employees and finding strategic partners. The client’s software and service portfolio is expected to account for about 10 percent of revenue by 2025.

Automotive OEM

Building a standalone software unit

An automotive OEM wanted to create a dedicated software unit. We worked with the client to define the unit’s organization, including its scope and shared responsibilities, assisted with financial and budget planning, provided operational support, and developed a growth strategy. The unit now delivers core software to all of its brands.