In this inaugural episode of the McKinsey Africa Podcast, Kerry Naidoo speaks with Shweta Juneja, an expert associate partner in our Johannesburg office, and Alex Sukharevsky, a senior partner in our Moscow office, about how CDOs can use digital to navigate the crisis and be ready for the next normal. An edited transcript of their conversation follows.
Driving digital change during a crisis: The chief digital officer and COVID-19
Kerry Naidoo: Welcome to the McKinsey Africa Podcast with me, Kerry Naidoo. This is a new podcast series designed to bring you conversations with leading experts working with actionable insights into the challenges and opportunities facing leaders and managers working on the continent. Today, I am talking to Shweta Juneja and Alex Sukharevsky on the topic of driving digital change during a crisis, and specifically looking at the role of the chief digital officer, a relatively new role in most organizations.
Shweta is an expert associate partner in the Johannesburg office. She leads McKinsey's digital labs in Africa and has over 10 years of experience in digital. Alex is a senior partner in the Moscow office. He's also the managing partner for McKinsey Digital in Eastern Europe, Middle East and Africa, and serves on McKinsey’s Global Technology Council.
Both Shweta and Alex have vast experience in helping businesses navigate crises and drive digital transformations, and have recently co-authored a paper on this topic, which you can find on the McKinsey website entitled Driving digital change during a crisis, the chief digital officer and COVID-19. Shweta and Alex, thanks for being here. Welcome to the inaugural McKinsey Africa Podcast.
Shweta Juneja: Glad to be here. Thank you, Kerry.
Alex Sukharevsky: Thanks, Kerry, for having us.
Kerry Naidoo: Months into the COVID-19 crisis and all its uncertainty, one thing is very clear, we are living in a much more digital world. We're shopping online, schooling online, doing business online. This new reality presents a unique challenge for business, particularly for chief digital officers who are charged with leading their digital transformations. Shweta, can you share a little bit about what this new digital reality looks like for businesses in Africa?
Shweta Juneja: Thanks, Kerry. Africa overall has the global highest internet usage and connectivity and a very, very young internet connected population. But the reality is also there is a huge digital divide. What I mean by that is millions of consumers and people in general in Africa still do not have access to affordable overall reliable internet and digital services. When we look at COVID and the international landscape, we've seen a huge increase in the online sales. For instance, there is a two times increase in the UK for online grocery sales. There's also a 500% increase in instant messaging platform globally.
What that means for us in Africa is also very similar. So online sales have soared overall in the continent and there are a huge surge of new digital activities from ordering groceries online to telemedicine, which is now becoming the standard behavior. What we also are seeing in countries like Nigeria, South Africa, and Uganda, that information and communication technologies have been at the forefront for ensuring and helping people actually practice social and physical distancing.
Other than that, all employees are mostly working from home, relying on technology and communication collaboration tools for making sort of their daily work in order. This also means there is a huge opportunity for us in the continent to be able to figure out how do we accelerate the transformation and bridge the gap between the digital divide that we widely see in the continent.
Kerry Naidoo: Alex, your thoughts.
Alex Sukharevsky: We have looked at many trends before COVID and what we can see today that fundamentally these trends are continue at the same direction. What COVID brought into the game on the one hand, significant acceleration of many of the technology and human trends we see before. On the other hand, it pretty much put the challenge in front of organization to reinvent their business model and think about how one can deliver even greater value at the fastest pace to their customers or other stakeholders.
We're also at the point where technology could be used to really reinvent the core of the business that was not necessarily possible in the past, but definitely the challenge today. And therefore, the notion of digital transformation or technology enablement becomes even more important these days in order to win in the future.
Kerry Naidoo: Can you define a little more closely what you mean by digital transformation?
Alex Sukharevsky: Sure. It's really about restructuring your business model and delivering even greater value to your customer at significantly faster pace using technology. The underlying assumption is really change of decision-making within the company, leveraging technology as well as update or upgrade in many cases of your technology stack. But more important, also, is very significant efforts around transforming the culture where working and capabilities within the organization.
Kerry Naidoo: You're both experts in driving digital transformation, and you've also spoken to many chief digital officers or CDOs since the onset of the COVID-19 pandemic. What do you think are some of the key challenges they are facing right now?
Alex Sukharevsky: Well, I think leading any organization in a time of crisis is one of the greatest challenges. And this CDOs we're talking to are actually facing this challenge on a daily basis. In many cases, these people have joined the organization either slightly before, or even during COVID and they are the most digital person in the organization that everybody looks up to. And on the one hand, it provides enormous opportunities for CDO. On the other hand, there are quite a few challenges. And I think the most significant challenge is getting to know the organization and the business of the organization, especially for ones who are coming from outside and being able to develop deep relationships, be it with your fellow management board members or be it the other managers within the organization to be able to drive change.
Second thing, what we have seen it's really about the resilience because in many cases, the CDO should lead quite significant organizational change as well as cultural change. And in many cases, the results are not going to come tomorrow despite of some quick wins. And therefore, the notion of being resilient and being able to draft pragmatic and realistic roadmap and the buy-in from the organization become more and more important for many of the CDOs that we are seeing today.
Kerry Naidoo: So if I was a CDO, what areas would I want to focus on at this point in time in the world?
Shweta Juneja: Look, we've spoken to, I think, hundreds of CDOs over the past few months and what we figured out that CDOs are really focusing on four important areas. And it's all about displaying resilient leadership, looking at your digital strategy and rebalancing the product roadmap, figuring out ways as to how you would effectively engage with your customers, and using agile practices to accelerate remote ways of working.
Kerry Naidoo: You mentioned resilient leadership. Resilience is a concept we hear a lot about at the moment. How does it take shape in this role and context?
Shweta Juneja: I think if we talk about digital transformation in general, or even during COVID times, I think in general, people think it's all about technology. But the reality is this is not about technology. At the end, it's all about people, it's people who are using technology to deliver results. So being resilient is all about putting your people first and has a very caring connotation to it. What I mean by that is CDOs can actually play a very strong role here in terms of really putting their people first and understanding how the changing times are impacting employees, because there is a lot here. Some of us are actually attending children at home. All of a sudden there is a need to take care of elderly people, your children. So it requires flexibility in schedule. It requires sensitivity that people may not be available at all the hours. So I think just having that caring angle to allow for flexibility and adapting to the availability of people, I think would be the first thing to start with.
Alex mentioned about incumbents, not to forget that there are many people who are working in a remote way for the very first time. So really, CDOs can play a vital role here again, in terms of pre-empting the adoption to the digital learning overall, making sure that employees, as they move towards the remote ways of working, they know how to use the technology. They are well equipped through training sessions, et cetera, to be able to really do their job properly. I think in general, the crisis has put an incredible pressure on people to be able to manage both personal lives and office lives. So in general, I think just having empathy that the team members of the CDO organization are not burned out, I think can be a very small step as to how the CDO can play the role effectively.
I think simple things. So touch base with your people, have one-on-ones with your team members to really understand what is working for them, what is not working for them. Having frequent retrospectives, team talks could be very, very small things, but would go a long way in building a caring organization for your people. In general, I think CDOs need to also effectively problem solve. How do you convert a lot of your water cooler chats into virtual coffee sessions so that people feel they still have enough connection to their organizations, to their leaders and that they're well taken care of?
Kerry Naidoo: You mentioned leaders, am I correct in thinking that this focus on connecting with people extends to the C-suite too? Alex, what are your views on this?
Alex Sukharevsky: Absolutely. You start from C-suite. And I think the first thing that we should all understand that CDO cannot generate the change by herself or himself. It starts from the top, depending on the organizational structure, it could be chairman or the CEO who really is inspired by driving the digital change. And then it also requires quite significant in most of the cases, upscaling of the top team, understanding what role digital could play within their business. And only once CDO gets a conviction and support from the top and from the top team, then you could start going through the different digital initiatives, organizational changes, capability building, address of the organization.
It's really about the full top team aligning behind the idea of digital transformation, about all 12 team members sharing the same passion about digital and seeing this exactly at the same way. And therefore the role of CDO is ensure such alignment because only with a broad alignment, one is able to move the organization into a successful digital transformation.
Kerry Naidoo: We know that the best performing companies have a digital strategy that's tightly aligned with the business's overall strategy. How does a CDO re-craft the digital strategy when there's just so much uncertainty?
Alex Sukharevsky: Yes, things are uncertain today, but there are a few things that are crystal clear, are needed to be done, irrespectively how the future will look like. Some has to do with really changing the operating system of the company to be able to react at the right pace with the right impact at the environment it operates. And here, I mean be it upgrade of legacy system, be it the data and analytics capabilities, be it a migration to cloud or some business services, one introduces in the company. So I think the operating system is extremely clear and should be put in place.
So I think the role of the CDO is really to help other team members think how the technology could help the organization to win in post-COVID world. What are the opportunities one is able to capture using the digital tools, all the latest technologists toward customers, towards suppliers? Also, I think what we have seen, especially at the most successful cases in the last few months is the ability of the management team to step back and through the guidance of CDO, think what is the new business model that we can create now using that technology we have under our belt and what are the business changes we should do to introduce this business model?
In many cases this were extremely disruptive business model that really changing their core business models and will bring them into the new reality. While the future is uncertain, there are quite a few things that any organization can do to succeed in this future. And some of these things are structural, meaning you need to do certain changes to your technology stack, your organization, your analytical capabilities in order to be able to have the right operating system that operates at the pace as well as with the required impact that the current reality requires from any organization to compete with others. I think these are non-regret moves.
There is also a strategic part that should be led by the CDO, whose role is to present the recent and the most relevant technology to rest of the organization. And then being able to align everybody around the greatest business ideas. Some of them are the most entrepreneurial or the most disruptive ideas that change the core of the business model in order to win in the future.
Kerry Naidoo: And what about rebalancing the product roadmap?
Alex Sukharevsky: So I think CDO should be working very closely with product leads. At the same time, she should be connected to the business and really shift priorities depending on what the organization is required to do today. And this mean, how do you digitalize interactions with your consumers? How do you help transition consumers from offline into omni-channel? How do you identify different back office stacks that could be automized? And I think it's really about working across two dimensions. One is more, what are the more basic infrastructure-related things that should be changed that might not bring quick results, but are absolutely necessary to win in the future? And on the other hand, what are the immediate changes and quick wins that organization should capture and therefore, how to prioritize these things or their other workload?
Kerry Naidoo: Shweta, earlier, you mentioned a third domain that CDOs need to pay attention to, and that is to connect with customers. Tell us more about this.
Shweta Juneja: Connecting with your customers has always been an essential part of the business. It was there before COVID and it's all the more important during the times of COVID. In the current environment, it means organizations need to have a very clear view of how customer habits and behaviors are changing. And as we all know, they're changing dramatically. CDOs can actually help here quite a lot. They can come up with creative ways as to how do we measure the consumer changes? How do we measure the consumer habits that are dynamically evolving? And they can actually seek to understand what changes are more likely to stick and what implications it would have for businesses in months to come.
Kerry Naidoo: Customer behaviors in the midst of a massive shift, as a consumer myself, I know that I am buying far more online than I have ever before for medicines and more recently to my groceries and other essentials. I'm guessing therefore that CDOs cannot rely on past routes.
Shweta Juneja: Exactly. I think what's important is putting practices in place, which allow a continuous re-evaluation of customer priorities. And this can be done in a very agile way. CDOs can help implement test and learn exercises, close monitoring and using some data analysis. A caring organization will also engage with customers for feedback beyond the usual channels. So implementing client surveys, conversations, social media, relying on online ads could be some of the ways as to how CDOs can help make that happen.
I also know CDOs for instance, who are reaching out to consumers for one-on-one follow-ups, for one-on-one conversations, through leading customer interviews and compiling analysis to better understand the challenges consumers are facing and how the consumer behavior is going to change in months. And then of course, you can use the power of data to also track and analyze, to see what's working, to see what's not working and also coming up with intervention plans based on that.
Kerry Naidoo: Another thing that has changed for many people in this time is that those that can, are working from home. That puts another element of digital transformation into the spotlight and that is agile working. For those not familiar with the term, Alex, can you give us a sense of what agile working means?
Alex Sukharevsky: Agile working, comparing to the classical waterfall approach is really about focusing around the concrete products that you are trying to develop and making sure that all required capabilities are working together around the end goal while having quite a few iterative sprints that as a result of its sprint, one shapes the product. And it's not really about some disorganized creative process, but rather very clearly defined end goal as well as very well-measured milestones around each milestone. One says, what was exactly the progress? What is the change in internal and external environment? What should be adjusted? What are the required resources to build in place? But things are done more in the real time as opposed to long-term planning that takes you quite a few months of plan and then quite a few months to deliver the project before any first results coming out and you could see them as tangible.
Kerry Naidoo: Alex, we've spoken about agile working, scaling agile is the last of the four dimensions a CDO needs to consider. What exactly does this mean and how does it link to working remotely?
Alex Sukharevsky: I think it's less about technology and less about working remotely, but first and foremost about the organizational processes, mindset and capabilities of the team members. And I think not everything should be scaled within the agile model. And there are quite a few operational processes that should not be touched with agile approach. At the same time processes that has to do with new product design, certain transformation where you roughly understand where you would like to end up, but the journey could be different, might require more agile approach. And therefore, when we come to the scaling question, it's really about how many people within the organization do understand the concept? How many enablers are adjusted toward the concept? And it could be from staffing, to budgeting, to IT system that might be huge road blocks at the way towards scaling agile.
But I think first and foremost, it's about the mindset and group of people and the way they see their profession that influences whether one can scale agile or it will remain a nice pilot within a bigger organization that works in a very different way.
Kerry Naidoo: Alex, are these tools scalable because they live on the cloud?
Alex Sukharevsky: I think cloud is part of the story, but as I said, it's more important to look at the human side of things and less about technology. At least the major success stories that we have seen in agile came first and foremost because of the human element, organizational element, the cultural element and capabilities rather than technology. Of course, cloud technology allows to do many interesting things and unlocks a lot of opportunities, but a first and foremost very human question when it goes to scaling.
Kerry Naidoo: And it's that learning culture that is so important to agility, isn't it? Any additional thoughts from you, Shweta?
Shweta Juneja: Through our analysis, what we have known is 70% of the digital transformations fail. And the reason 70% of these transformations fail is not about technology, it's because of culture change and not having an agile culture. And it really boils down to people at the end. So I do want to add that CDO has a critical role to play here to ensure that a culture of experimentation and creativity is maintained. The best learning comes from doing and trying something new irrespective of how many times you've failed. If people are afraid of failing, if they are being punished for failing, then they would stop experimenting, which would lead to an unsuccessful transformation anyhow.
And also, we need to accept that the nervousness for failing is likely to peak during the times of uncertainty. The CDO has a very strong role to play in celebrating the learnings based on failures and pointing out and almost celebrating his own personal failures and learnings from them and protecting people who are willing to experiment. In general, I think organizations need to celebrate failures much more what they are doing as of today.
Kerry Naidoo: Just before we wrap up, I'm curious, do you think the CDO role has longevity? And do you think it'll still be around in say 10 to 20 years?
Shweta Juneja: I don't think so. I think we discussed it's a relatively newer role, but one of the reason this role exists today is because organizations are embarking sort of the journey for transformation. In 10 to 20 years from now, I don't think so this role would exist also because digital would be fundamentally embedded in the organization. Each function, whether it's HR, finance, procurement, marketing, digital would be fundamentally embedded there. So this role eventually would become obsolete, in my opinion.
Kerry Naidoo: Alex, your thoughts?
Alex Sukharevsky: I think in a simple terms, no CDO will be a real sign of business successful digital transformation. At the same time, if we're to look few years down the road, we expect more and more chief executives, as well as board members are going to come from technological background and therefore they are going to be the CDOs by themselves. We might see that the technology function is going to expand and in any organization you will need chief technology officer, but the CDO, the current understanding and definition might disappear.
Kerry Naidoo: Thanks to you both for joining today and for sharing your expertise on the new and evolving role of the chief digital officer and the work that faces them in driving digital transformation. Any closing comments?
Shweta Juneja: I think there are really four key takeaways here, putting your people first, using agile practices to fully embrace the remote ways of working, communicate with your customers and understand how consumer behavior is changing. And lastly, use the evidence for consumer behavior to plan for your short term and long-term strategy.
Alex Sukharevsky: I think the world is changing and we could see ourselves between two cycles of innovation. The first one was around the front end and digitalize and consumer journeys. Well, today, because of the change of technology, as well as external environment, we're just about to start digitalizing the core of the businesses that have not been changed for many years. And I think that should be the focus for any organization to win in the future. If you would like to learn more, you are more than welcome to visit mckinsey.com to see more of our research around this, as well as other management and leadership topics. It was a great pleasure talking to you today and thank you again for having us.
Kerry Naidoo: Thank you, Shweta and Alex for sharing your perspectives and thanks to you, our listeners. We hope you enjoyed today's inaugural episode of our McKinsey Africa Podcast series. If you'd like to learn more about this particular report, we encourage you to visit our insights page on mckinsey.com/za, where you may also find links to our latest insights. We also encourage you to follow us on Twitter by searching our handle @McKinseyAfrica. Thanks again for listening and we hope you can join us again soon.