| This week, how to combine operations with digital technologies for a next-gen approach to value, and an interview with Jane Sun, the CEO of Ctrip, China’s largest online travel agency. Plus, Jon Garcia, the founder of McKinsey’s RTS unit, answers questions about what organizational transformation really means. |
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| Today’s consumers have high expectations: efficient, even inspired, interactions with companies; convenient, reliable product deliveries, including real-time location tracking; and, of course, more bang for their buck. |
| So, how can companies consistently raise the bar? Making the shift to a next-generation operating model—which combines operations capabilities with digital technologies—can create value, lower costs, and improve customer experience, giving companies an edge in a highly competitive landscape. Transitioning to a next-gen model can pay off in big ways: for some, productivity gains of up to 50 percent, 80 percent reductions in turnaround time, and 20 to 25 percent improvements in growth. How are companies making the shift? |
| To design a next-gen operating model, leaders take two important steps. First, they zero in on two kinds of journeys: customer journeys (the interactions people have with a business, like a shopper buying a gift for his spouse online) and internal journeys, or end-to-end, in-house business processes. Once the companies have mapped these journeys, they apply technologies and operations capabilities in a coordinated way—moving beyond the silos that prevent many businesses from achieving maximum impact. |
| Here’s how this works in practice: one executive at a global financial-services company spoke to us earlier this year about the company’s digital transformation journey. The transformation began with an exercise where function by function, workers identified ways to make processes leaner. Leaders often left their offices to spend time with frontline workers in different functions, seeking to understand day-to-day procedures. |
| From the CEO on down, leaders modeled a commitment to optimizing processes to drive growth. As a result, the company has seen game-changing differences: in some cases, up to a 70 percent return on capacity. It’s been our experience that when companies make a continuous effort to improve the operating model, enterprise-wide change is possible. |
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| OFF THE CHARTS |
| Your car says it needs a checkup |
| Consumers spend about 15 hours buying a new car, but as many as 50 hours having it serviced. That’s not very convenient, is it? Our interactive shows what moving to a digitized service experience might look like (static version below). |
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| INTERVIEW |
| China’s Ctrip: From the web to the world |
| China is already the world’s largest outbound-travel market, and its increasingly adventurous overseas travelers are the world’s highest spenders per single trip. Propelled by rising incomes and an appetite for exploration, Chinese travelers took more than four billion domestic trips in 2017 and more than 100 million journeys overseas. That’s where Ctrip comes in. |
| The task of maintaining Ctrip’s status as China’s largest internet travel agency falls to CEO Jane Sun. “If you understand your customer very well, and also have a deep pool of products on your platform, you can use the technology—big data, data mining—to offer a perfect match,” she told McKinsey. “Customer satisfaction, efficiency, and conversion rates all increase as a result. That’s how we make sure we find the right product for our customers.” |
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| THREE QUESTIONS FOR
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| Jon Garcia |
| Jon Garcia, founder and chair of McKinsey’s RTS unit, talks about his experience leading large transformations and what it takes to make lasting improvements in corporate performance.
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| “Transformation” is used in many business contexts. What does it mean to you? |
| In our world, making incremental improvements to an individual function falls short of transformational impact. When we talk about transformation in RTS, we mean something quite specific: an enterprise-wide, step-change improvement in the health and capabilities of an organization, which underpins a rapid, large-scale, sustainable improvement in overall performance. |
| That’s a mouthful, I know, but each of the elements is important. By definition, transformational change tackles all available levers: cost, revenue, capital efficiency, capabilities, etc. It leaves the organization stronger and more resilient. And while it might sound odd, the experience of those who go through the process is also uplifting and empowering. |
| We feel strongly about this because the evidence suggests that the failure to act comprehensively can undermine the odds of success. There’s a broad body of research that suggests more than two-thirds of transformations ultimately fail. We created RTS to improve these odds, and we’ve seen dozens of companies reach their “full potential” through this kind of systematic approach. |
| You’ve coached dozens of CEOs through multiyear, enterprise-wide transformations. What’s a memorable coaching moment? |
| Coaching leaders with extraordinary aspirations is, without a doubt, the single greatest pleasure in my work. People forget that being a CEO can be a very lonely job. CEOs can’t always confide in a member of the team, particularly when they feel uncertain or have a concern. |
| I remember one instance of a client struggling with a personnel decision. The individual in question was hardworking, dedicated, and—most complicated—a friend of the CEO. Nonetheless, the individual was failing in his role and everyone on the top team could see that. The CEO simply needed someone to talk to about the decision, to remind him that whatever feelings of loyalty he might have, they couldn’t stand in the way of making the right call. |
| Personnel decisions are often among the most difficult for caring leaders. Making such decisions exacts a toll—mental and physical—but they are absolutely essential. It’s a tired but still true refrain that leaders seldom regret acting too soon on a personnel matter. |
| In your experience, what is the number one factor companies need to manage to ensure that a transformation succeeds? |
| If there’s one thing I’ve learned over the past ten years, it’s the importance of tackling individual mind-sets and capabilities. All organizations are made up of people, and the ability of an organization to effect and sustain large-scale change is almost entirely a function of whether those people want the change and are capable of driving it. In other words, performance is an outcome of the mind-sets and capabilities of the people who make up an organization. |
| This is the central reason leadership plays such an important role in all transformations. A very talented executive once said to me that leaders take people places they wouldn’t otherwise go. Leaders drive behavioral change, but to do so at scale, at pace, and sustainably, they have to address underlying mind-sets and capabilities. |
| How to do this is the secret sauce of successful transformations. While there is, of course, a place for formal, discrete efforts to address mind-sets and capabilities, our experience suggests that embedding new expectations and skill-building opportunities in day-to-day work is the most effective approach. In RTS transformations, we use McKinsey’s Organizational Health Index to comprehensively measure how an organization is “run” and to develop targeted actions to support long-term gains in performance. We also heavily invest in building capabilities in the organization, both through day-to-day coaching interactions with employees running the transformations and through formal learning programs. |
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| BACKTALK |
| Have feedback or other ideas? We’d love to hear from you. |
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Copyright © 2019 | McKinsey & Company, 55 East 52nd Street, New York, New York 10022
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