Helping the world’s largest organizations in digital transformation processes McKinsey & Company (2018)—arguably the world’s leading management consulting firm—have defined a system of six shifts for digital adoption which they use in their work to help their clients to digitize their most important customer experiences “at scale, at speed, in a consistent way and with consistent resources to produce consistent results.” This post presents McKinsey system (Desmet, Markovitch and Paquette, 2015) and discusses how it benefits, not only large and mature organizations with significant resources (staff and money), but also small organizations and even boot-strapped start-ups.
As noted by Windpassinger (2017), Narasimhan and Chundury (2018) organizations of all sizes and in almost all lines of business are digitizing their core organizational structures to the web. Traditional marketing channels (print, radio and TV etc.) also are losing ground to new advertising models and channels, including AdWords, Social Media and Augmented Reality (Holiday, 2015).
While launching a website, an e-commerce platform, or a mobile app has become cheap and easy by the many marketplaces offering web- and app templates such as ThemeForest (2018) and WooCommerce (2018); the problem facing many organizations digitizing their assets are siloed IT-structures with unconnected digital assets (corporate websites, CRM-systems and/or analytics platforms etc.)—resulting in error-prone, costly and complex management processes (Schwab, 2017).
To cope with many of the problems that come with digital adoption, McKinsey has developed a system to help organizations implement, scale and accelerate digital transformation (Desmet, Markovitch and Paquette, 2015). The system is built around the notion that digital transformational processes should start with identifying horizontal business-process management layers to form the basis for a digital backbone/administration platform connecting core digital assets (internal and external) into one coherent and connected IT-infrastructure.
In the following sections, the McKinsey system for digital transformation is presented together with a discussion about how each of its six shifts can be adapted to small organizations with limited resources.
McKINSEY’S SIX SHIFTS FOR DIGITAL TRANSFORMATION
- 1. Start with your story
- McKinsey first shift emphasizes that a digital transformation process needs to be grounded in an “enterprise customer experience story” which should guide the transformation with practical guidelines, and which also should define what customers should experience across all journeys they may undertake with the organization. As the key to succeeding in any transformational process always begins with a strategy communicated, rationalized and agreed upon by the people it depends on—this first shift of McKinsey’s system applies to any organization going through a transformational change—no matter size, line of business, or if the organization a commercial entity or an NGO.
- 2. Sequence your transformation
- In the second shift, McKinsey emphasizes the importance of connecting all parts of an IT-architecture (websites, apps, analytics, CRM etc.) into a coherent and linked system enabling more control, simpler processes and reduced costs. Common methods for sequencing digital assets within an organization include developing websites, apps and e-commerce platforms—and notably also implementing API-platforms such as Apigee, (2018), 3scale (2018) or Appian (2018) to allow all digital assets in the IT-structure (websites, blogs, CRMs, apps, marketing automation platforms, analytics etc.) to be administrated in one coherent and connected back-end system.
Many small and medium-sized organizations embarking a digital transformation journey might not be aware of the concepts of APIs and BPM-platforms—or might be of the notion that such technologies only adhere to large organizations. This, in my experience often results from developers working within or as external partners (agencies/freelancers) connected to the organization has not cared to keep their skill-set up to date with current development methodologies and to a great extent rely their work on commercial web templates, and consequently are reluctant to any change outside their skill-set.
Considering the significant winnings that come with BPM and API-platforms, all organizations should consider using these technologies as a foundation for their IT-structure. The fact that most of these platforms also are easy to learn in a few days, in addition to also offering “start” packages for a cost less than a monthly gym membership, there is no reason why not even a small five-person start-up should consider using them.
- 3. Turn, shift, accelerate, and repeat
- While the Lean methodology of project management has its roots in Toyota as far back as 1948, Goldratt’s 1984 best-seller ‘The Goal’ made ‘lean thinking’ known to a wider audience—a book which most certainly also inspired Jeff Sutherland, Ken Schwaber, Jim Highsmith, Alistar Cockburn and Bob Martig to publish the Agile Manifesto (2001) that form the basis for much of today’s principal ideas how to run projects and organizations successfully.
It was, however, Eric Ries 2011 book ‘The Lean Startup’ that really catapulted the Lean methodology to become widely accepted in which he also launched the idea of MVPs (minimal viable products); a strategy built around the notion that companies instead of aiming for creating perfect products which might take years to develop before ready to be launched, instead should focus on launching fast and often, listen to feedback by real customers, and quickly adapting their products and services to this feedback and then quickly launch again in a perpetuating circle. This, as shown by Ries and the thousands of organizations who have adopted his methodology, can be achieved by identifying and focusing on developing only core features that matter the most for the preponderance of customers, and de-prioritizing non-important features.
McKinsey’s third shift state that organizations should adopt Agile workflows and the ideas presented in ‘The Lean Startup.’ As Reis book and the thousands of start-ups using his methodology clearly show, these methodologies are relevant for multinational corporations as well as small start-ups.
- 4. Build talent—and your digital “factory.”
- McKinsey’s fourth shift is about adapting all parts of an organization so it can move quickly, innovate, and adapt to an environment of continuously changing requirements. For large organizations, this might be achieved by, for example, building a core team of project managers, developers and designers which are proficient in “day-to-day” work, and to build a network of freelancers and agencies to work within areas demanding niche competence. McKinsey also borrows the idea of “Work Cells” from the Six Sigma model of supply management (Pyzdek and Keller, 2015; Liker, 2013; Nicholas, 2011) which in McKinsey’s system is translated to groups of internal co-workers from different departments (sales, credit analysis, development etc.) whom work together to solve a specific problem after which the work cell is dissolved.
Building an in-house production strategy for small organizations, as also illustrated well by Ducker in his 2014 bestseller ‘Virtual Freedom,’ rarely make sense from an economic- or production efficiency stand-point, and for small organizations working with external co-workers (freelancers and agencies) might be the only viable alternative which also is especially true if the organization has adopted Agile workflows. Making sure that the organizations shared Rolodex always is updated with talent, thereby, always should constitute a key priority by leadership—no matter organizational size.
- 5. Creative a game plan
- The fifth shift of McKinsey’s model borrows the idea of ‘Agile project charters’ (Agile Alliance, 2018), and emphasizes that organizations should make a game-plan guiding project work based on probing questions instead of explicit compliance steps and which constantly should evolve to reflect current requirements and situational needs.
As the key to succeeding with non-fixed people management structures regardless organizational size, always is to make sure that everyone in a team understands what is expected of them; what the goals of the project are; quality requirements; operational guidelines; working processes and governance steps—a project charter or game plan is the key to success in any transformational process.
- 6. Track it all the way
- McKinsey’s sixth shift emphasizes the importance of defining long-term over short-term organizational and individual OKRs (objectives and key results) in transitional processes to make sure that innovation, collaboration, and long-term growth is the prime focus—and not short-term revenue. To make sure that leaders know where to prioritize investments, a rapid reporting structure also should be implemented, and McKinsey recommends that digital dashboards to be developed which in real-time report on primary KPIs, which also is a key function of all BMP-platforms as discussed in section two of this post.
While a small organization might not see the need for live-reporting; all organizations should have clearly defined OKRs related to all their investments and all supporting KPIs tracking each OKR communicated in a format, and at a frequency, agreed upon by all key constituents of the organization to make sure that investments deliver according to plan.
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In a typical “McKinseyeskt Operandi;” the six shifts for digital transformation presented in this article is an amalgam of established methodologies and models which the company ruthlessly has repackaged under their own brand without referencing the sources.
While the fact that McKinsey consistently fail to reference sources of the theories forming the basis for their work is both immoral and indefensible, especially for a company of this size, they should have credit for having established a solid system for digital adoption and organizational growth based on leading business strategies into a logic system; which, as shown in this article, also can be adapted to fit organizations of almost any size.
What should be noted, though, is that McKinsey and much of the leading business literature which McKinsey steal their ideas from fail to consider, is the fact that Agile workflows, digitization and outsourcing competence are not a ‘one-size-fits-all solution’. While for many of the authors topping Amazon’s best-seller list of business management literature—of which a large majority also have strong roots in tech and from companies with growth as a fundamental guiding principle—it might be incomprehensible that an organization might be perfectly happy with a current status quo of returns and to have their projects managed through a simple list of tasks on a whiteboard. Even more surprising for these technocrats might be that many “analogue” organizations do extremely well, maybe best embodied in 360.000 employee Berkshire Hathaway; a company which for the last fifty years have managed to outperform most Wall Street investment firms and which is led by Warren Buffet, one of the world’s richest men who runs his company without using email and whose desk lacks a computer (The Economic Times, 2017).
Fifteen years ago when embarking my journey as an Agile practitioner after reading the Agile Manifesto (Agilemanifesto.org, 2001) the first time I felt I had an enlightenment, and the first few years after, in all my work, I pushed every client and company I worked with to embrace “working Lean”, many times failing terribly by the simple reason that it didn’t always make sense for people to change to my “better” way of doing things when everyone was perfectly happy with the current way things were done. What I learned from this is that organizational change never should be a mean in itself, and that processes of organisational change only can succeed if everyone within an organization can see the benefits it will lead to.
If your organization has recognized that to stay competitive, a digitization of your business processes and core customer resources is necessary, then no matter organizational size you should take time to learn more about the McKinsey system of digital transformation and the theories which it is built upon referenced in this article. This system summarizes much of today’s leading business theories, and the fact that McKinsey uses it as a base for their own work, one can assume that the system has been tested, refined and verified in possibly hundreds or even a thousand McKinsey projects.
However; if your organization is doing great with a reporting structure based on sharing excel files through email, if you manage your projects using simple task lists on a whiteboard, if key members of your management team not even use a computer, and if co-workers, leadership and customers are perfectly content with your current status-quo—then who am I, McKinsey, or any best-selling author to say that you are wrong?