Citing McKinsey again, an earlier survey that also looked at digital transformation found less than one-third of … This way of working will create capacity for designers to focus on more intellectually challenging problems, such as reviewing and refining generative designs, for which engineering brainpower is irreplaceable. Digital transformation Insurance digital transformation myths vs. reality: McKinsey By Sanjay Kaniyar , Krish Krishnakanthan July 13, 2020, 1:01 p.m. EDT McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. This might involve observing site works and tracking downtime before and after implementing a use case. The result is a proliferation of subscale, often competing tools within a single company. Limited R&D budgets prevent E&C businesses from spending as much on digital as companies in other sectors do. With more people contributing to the project and invested in its success, the chances of failure significantly reduce as well. Digital upends old models. Broadly, a digital transformation involves two types of change: business-model innovation, whereby companies introduce digitally enabled products and services, and operational improvement, whereby companies apply advanced technologies and ways of working to enhance the development and delivery of projects. In this article, we offer a closer look at how E&C companies can realize benefits like these. Such a change requires that designers adopt a new mindset, using their experience to validate model results and to look for opportunities for standardization and repetition. Most companies fail to achieve the aim of their digital transformations. Misunderstanding what “Digital Transformation” means, coupled with poor internal alignment, is often why digital efforts fail. We often see E&C companies deploy cutting-edge technology tools before they have figured out whether and how those tools can improve their operations. ... McKinsey Quarterly Why digital transformation … Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Learn more about cookies, Opens in new By digitizing and standardizing element data, the company gained an enterprise-wide view of element volumes, which allowed it to standardize specifications and aggregate purchase orders to obtain savings. People create and sustain change. Something went wrong. Digital transformation can mean different things to different stakeholders, so starting with a shared definition can help executives and managers to agree on a transformation’s goals. The McKinsey survey found that the COVID-19 pandemic has significantly accelerated the pace of adoption of digital transformation technologies, as well as other speeding up other business … Applying these new techniques requires designers not only to learn technical skills but also to design in new ways. For example, one contractor developed an app to allow supervisors to sign completion certificates digitally. One company achieved an enterprise-wide 1 But developing narrowly targeted use cases usually means that E&C companies miss out on a valuable opportunity: stemming the large efficiency losses that can occur because information isn’t transmitted effectively during handoffs between trades and functions. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. In more traditional industries, including pharmaceuticals and healthcare, success rates of digital transformation fall between 4-11%. As technology leaders, we have a tremendous challenge before us. The supplier monitored defect reports in the CDE, then ran root-cause analyses with its factory team to diagnose and reduce defects. ... today’s competitor may turn out to be a partner or “frenemy.” Failure to grasp this means that you will miss opportunities and underplay threats. The company saw an opportunity to correct the problem by improving the mechanism for passing feedback between the site team and the supplier. NOBODY said digital transformation will be easy. Those that do stand to realize a significant productivity payoff. Financial Services technology is currently in the midst of a profound transformation… Companies in all industries report that digital transformations often fall short of expectations. According to a recent whitepaper from McKinsey’s operations practice, consultants suggest that leaders should consider going against conventional wisdom and bet on massive projects that cut across business units and functions and engage a substantial share of the workforce instead of focusing on one small project after another. The creation of use cases is an ongoing effort, and new opportunities for improvement often emerge once first-wave use cases are in place. They aren’t alone. When they did send feedback, it was anecdotal, unstructured, and difficult to act on. Focus on fixing pain points, not installing IT solutions. It requires foundational investments in skills, projects, infrastructure, and, often, in cleaning up IT systems. Problems aligning communication between IT and business teams is cited as the central issue for implementation failure, with legacy integration and talent earmarked as other major bottlenecks. 40% of all technology spending will go toward digital transformation, … We call these sprints or phases. For E&C companies that have struggled to do more than experiment with tech solutions, the time to redouble their efforts is now. In fact, according to a 2019 study by consulting firm Gartner Inc., “Through 2021, digital transformation initiatives will take large traditional enterprises, on average, twice as long and cost twice as much as anticipated.” How can your organization avoid a digital transformation failure? In one McKinsey survey, just 16 percent of respondents said their organizations’ digital transformations had delivered sustainable performance improvements. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. This unplanned rework increased labor costs and caused delays. McKinsey reports that less than 30% of companies enjoy true digital transformation success, and only 16% realize improved performance and sustainable changes. 2. A good process-centered use case should specify three things: a process change, the required enablers (data and technology tools, capabilities, changes in mandates and responsibilities, legal and contractual requirements, and others), and the expected benefit. One contractor’s experience showed why it is so important to implement digital solutions that promote and support collaboration among different parties. Outside individual major projects, few construction companies have fully digitized their operations. For those companies that didn’t fail outright, only 16% saw improvements in their performance and ability to sustain change over the long haul. Knowing how much downtime is created will help inform future adjustments to resource levels and schedules. ~70% of digital transformation projects fail according to Mckinsey. How to avoid this digital transformation failure. Leveraging technology and changing an organization’s mindset, … For more on cross-industry challenges, see Jacques Bughin, Tanguy Catlin, Martin Hirt, and Paul Willmott, “Why digital strategies fail,” January 2018; “Unlocking success in digital transformations,” October 2018; “How the implementation of organizational change is evolving,” February 2018; and “Can IT rise to the digital challenge?,” October 2018. That is a lot of wasted time, money and unmet … What is more, E&C companies that scale up their digital transformations before their rivals do stand to reap the most gains: McKinsey research on digital competition shows that companies that are first to make bold moves, or quickly follow the leads of those that do, create advantages that slower-acting companies find it difficult to overcome. This will often be after it has scaled the project-level use cases developed in the first pilots and stabilized them across the business. For example, organizations with high transformation competency looking at projects with low complexity in the environment or ecosystem should take a “big bang” approach to implementation and look at a project duration of 24 to 32 weeks. Reskill and restructure engineering teams. Since the whitepaper was created by the think tank’s operations practice, there’s a greater emphasis on helping business leaders understand the scope of such projects in that specific area. Ultimately, the message is that organizations need to re-think their digital transformation strategy. We'll email you when new articles are published on this topic. Most E&C companies have embraced the idea of implementing digital technologies and are determined to see their efforts bear fruit. Jan Koeleman is a partner in McKinsey’s Amsterdam office, Maria João Ribeirinho is a partner in the Lisbon and Madrid Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Implement digital use cases that promote collaboration. Digital Transformation may be a trending topic today, but the concept of digitizing business processes, products, and services was introduced way back in the early 90s and the 2000s. Digital Transformation Is About People. Deliver. Projects vary greatly, so E&C companies often struggle to develop tools and methods they can apply repeatedly. But if the labor force isn’t streamlined or reassigned to other activities, then workers will end up waiting during the time they would have spent on rework, and the costs will still accrue. Digital transformation (DX) encompasses how … After spending five years and countless sums on trialing new software platforms and ways of working, the executive team at a large contractor was nearly ready to call an end to its digital-transformation program. © 2020 Tech Wire Asia | All Rights Reserved, McKinsey says digital transformation needs to be holistic, not piecemeal, Apple app store labels a win for data privacy culture, After Facebook, China cracks down on big tech under antitrust laws, Long live advertising? Why Digital Transformations Fail Scenarios such as this remain all too common in the engineering and construction (E&C) sector, which is one of the world’s least digitized. McKinsey found out in a survey of more than 1700 C-suite execs that the average digital transformation stands a 45% likelihood of … The think tank believes that organizations must assess their own transformation competency and environmental complexity before making a decision. In more traditional industries, including pharmaceuticals and healthcare, success rates of digital transformation … Digital Transformation: McKinsey’s Take. Mehr als 1.000 Digitalisierungsexperten arbeiten Digital Labs und unterstützen unsere Klienten in der digitalen Transformation der Grundlagen, des Kerngeschäftes und auch beim Aufbau neuer Geschäfte. But despite good intentions and determined efforts to embed digital technologies in operations, E&C companies rank among some of the least digitized businesses. Dr. Jacques Bughin Shares New Research Insights about the Success and Failure of Digital Transformation Worldwide. It is not for the fainthearted, but CEOs are heading in the right direction if they grasp the fundamental importance of heavyweight management commitment, are willing to make significant investments, and set clear, ambitious targets. Dozens of attempts to streamline projects with digital solutions, such as 5D BIM, had failed to deliver. McKinsey has devised a recipe to support transformations by reverse engineering the failures and taking out bad behaviors. In effecting such changes, engineering and construction executives must recognize that digital transformation is about more than adopting tech solutions. cookies, Research by the McKinsey Global Institute, Unlocking success in digital transformations, How the implementation of organizational change is evolving, bottom-line benefit from digital use cases. Company saw an opportunity to correct the problem by improving the mechanism for passing feedback between the site team the! 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