| This week, we look at how the cloud creates value—if everyone in the business understands how to use it. Plus, an interview with execs from Jardine Matheson on how the Hong Kong multinational handles innovation, and a new growth formula for Indian manufacturing. |
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| It’s time for companies to shift their computing power to the cloud. If it feels as though they have been saying that for years, it’s because they have. Yes, many enterprises have moved some data and computing tasks to the public cloud. But few have benefitted from the breadth of potential business gains, thanks to some big misconceptions about what it means to outsource computing muscle. |
| First, some data. Enterprises are more open than ever to cloud platforms, with more than 90 percent saying they use cloud technology in some way. Revenues of the big-three public-cloud providers (AWS, Microsoft Azure, and Google Cloud Platform) quintupled between 2015 and 2020. Still, around 80 percent of enterprises consider managing cloud spending a challenge. Around 30 percent of it is wasted, enterprises estimate. And despite past predictions that up to 16 percent of enterprise workloads would be in the cloud by 2019, the actual figure for the year was about half that: less than 9 percent. |
| Digging deeper into that disconnect, McKinsey recently identified seven common myths about cloud computing. Do cloud platforms pose greater security risks than in-house networks? Does pushing data or computing tasks to the cloud worsen computing delays? (No and no.) Another key misconception is that moving to the cloud is all about reducing IT costs. |
| Busted myth. In fact, cloud initiatives can improve almost every aspect of an organization’s products, services, or processes, with better analytics, faster time to market, and stronger innovation—potentially generating a greater incremental contribution than any IT cost reductions. A health-insurance carrier, for example, drew out several billion dollars of additional revenue by accelerating multiyear projects, completing them in just months through superior agility and computing power. And a financial-information provider found that its move to the cloud made it more agile in new markets, allowing it to enter and set up technology operations in new countries within weeks rather than months. |
| Why the C-suite is crucial. In these transitions, the CIO and CTO prove vital in helping companies bring new capabilities to market faster or automatically adding capacity to meet surge demands. Given the scale and scope of change required to exploit this opportunity, companies also need an engaged CEO to bring it all together and provide air cover. |
| Today’s context. The COVID-19 pandemic has only heightened the need for companies to adopt digital business models—with cloud platforms offering the necessary agility, scalability, and innovation. If companies are to succeed in a digital next normal, their CEOs must ensure that their management teams understand how cloud computing can raise their game and how those teams will rally to capture value. |
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| OFF THE CHARTS |
| A tough road for global petrochemicals |
| The global petrochemical industry was already entering a down cycle when the coronavirus pandemic erupted, with profits dropping by 44 percent going into 2019 because of overcapacity and falling demand. Continued adverse market conditions could depress the value pool until 2023. |
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| INTERVIEW |
| Managing innovation at the age of (almost) 200 |
| Anne O’Riordan and Michael Poon of Jardine Matheson, a Hong Kong multinational that got its start in 1832, talked with McKinsey recently about how their organization has managed relationships with start-ups to benefit its legacy businesses, invest in new markets, and form successful joint ventures. Jardines, as it is also known, operates in the property, retail, automotive, hospitality, construction, and energy sectors throughout Asia. “It all goes back to the basic innovation methodology of test and learn, right? What can we bring to the party? What can you bring to the party? That’s the essence of good partnership building,” O’Riordan says. |
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| MORE ON MCKINSEY.COM |
| A new growth formula for manufacturing in India | The nation’s manufacturing sector could become an engine for economic growth and jobs—if it can specialize. Here’s how 11 high-potential value chains could more than double India’s manufacturing GDP in a few years. |
| How machine learning can help capital markets | By enhancing crisis-challenged financial models with machine-learning techniques such as neural networks, banks can emerge stronger from the present crisis. |
| Will airline hubs recover from COVID-19? | Airlines’ connecting routes have been particularly hard hit by the coronavirus pandemic. We believe the hub model will remain relevant postcrisis, but airlines will need to update their operations and network strategies. |
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| FROM THE ARCHIVES |
| Lillian Dombrowski, trailblazer |
| Lillian Dombrowski joined McKinsey as an accountant in 1945, becoming the first woman to be hired as a professional. During her 35 years at the firm, she rose to become its first woman MBA, its controller and corporate secretary, and a trusted colleague for six of the firm’s global managing partners. In a 1986 oral history, she recalled perhaps the essential ingredient of her success: “I was good at figures. They’ve always come easily to me.” |
| In 1942, Dombrowski began a stint at General Motors, where she quickly received an offer to relocate for a bigger role, with cost-control responsibilities. But with servicemen returning from World War II, and GM starting to switch from wartime to peacetime production, Dombrowski felt that she needed to look for another job. When she saw an “intriguing” advertisement for an accountant, she thought, “Why don’t I go on an interview? That was McKinsey. I stayed for 35 years.” |
| She remembered how formal the work atmosphere was. “I wore a hat, I wore gloves. I was very proper.” |
| One of her first projects was a daunting reconciliation of the firm’s books. Recognizing her talent, Dombrowski’s manager gave her the freedom to make any changes she felt would improve McKinsey’s financial system. |
| But not everything was about numbers—she liked to have fun, too. In 1946, Dombrowski organized the first New York office holiday party (a task that will be familiar to many women today, as well). It was initially intended to be a small gathering of accounting- and art-department staff, but the consultants on the upper floor came down and crashed the party. “We kept on sending the boys out to buy more juice and more rum,” she recalled. |
| She soon began working directly with consultants, helping them with their own nonaccounting calculations. She was promoted to an expanded but ill-defined role of financial analyst. “I thought a lot about what would I want to know if this were my firm,” she said. “I knew these fellows were working very hard, so they needed facts, they needed figures.” |
| Dombrowski also took on projects including a survey on personnel administration, research into compensation rates, and an analysis of the firm’s client billings. The billings report had a great impact, leading to the creation of the Transportation and Insurance practices. |
| She was also deeply involved in other mid-1950s firm infrastructure milestones—the creation of profit-sharing and pension plans, and incorporation. “I found that kind of fun,” Dombrowski remembered. “I enjoyed it because it was very diversified, and I never knew what I was going to do.” |
| In the 1960s, Dombrowski became McKinsey’s corporate secretary and controller. She also played a subtle but key role in the firm’s partner-election process during that era. “I did the write-ups on these guys,” she said. “I wrote up the little sketches that were then sent around to each of the partners, who would study them and then vote on various accomplishments.” She also led a big project in the 1970s that migrated the client-engagement record-keeping process to computers. |
| One of Lillian’s very last projects before retiring in 1980, and perhaps her most lasting legacy, was collecting the firm’s historical records—Marvin Bower’s speeches and memos, client histories, and even the earliest international billings. Her long association with leaders and projects meant she knew what records to look for and where to find them. “If there is anything I hate, it’s files,” she recollected, before adding, in her matter-of-fact style, “I said, well, they did need doing, so I put a lot of things together.” —Paul Lasewicz, McKinsey archivist |
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| — Edited by Barbara Tierney |
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| BACKTALK |
| Have feedback or other ideas? We’d love to hear from you. |
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Copyright © 2021 | McKinsey & Company, 3 World Trade Center, 175 Greenwich Street, New York, NY 10007
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