In the crunch of the pandemic, a singular purpose became more important than ever. The core of the transformation is a shift to product-focused lines of business. endstream endobj startxref When COVID-19 hit, the telco was forced to shut down its offshore call centers. Reflection is a crucial first step because so many COVID-19 crisis changes were fueled by adrenaline rather than careful planning. At that point, companies will be making a series of what we believe are ten to 20 critical design decisions across their operating models. We use cookies essential for this site to function well. For example, before the pandemic the company would often fly scientists and engineers to different locations for equipment maintenance. The traditional compliance model was designed in a different era and with a different purpose in mind, largely as an enforcement arm for the legal function. the traditional banking business model. This fundamentally links to strategy. Business leaders looking to lock in COVID-19-era speed and adaptability would be wise to follow a simple process: reflect, decide, and deploy at scale. Mumbai: Indian banks are starring at a combined lost revenues and increased costs of ₹12 lakh crore by fiscal 2024 because of credit losses and operating challenges posed by the Covid-19 pandemic, consultancy firm McKinsey & Co said in its annual banking review. As our colleagues have noted elsewhere, businesses reacting to the COVID-19 pandemic have produced previously unimagined gains in speed and productivity, even as the very nature of their workplace was transformed. Other companies found that the pandemic confirmed their purpose in a highly tangible way. Faster decisions require more empowerment of the frontline team. 2 When challenged by the pandemic, and by a world of “uncertainty,” “volatility,” and “fragility,” many companies have chosen to lead from purpose, whatever it takes. The revised employee value proposition (such as more flexibility and less commuting) has given HR the ability to cast a wider net on talent. For the better part of this century, large- and medium-size companies have been wrestling with whether and how much or how little to adopt a set of concepts birthed largely in Silicon Valley. Our flagship business publication has been defining and informing the senior-management agenda since 1964. 65 0 obj <>/Filter/FlateDecode/ID[<3718A3685D553F45BDB074F7C524E688><927B3391B50E5147899AAB174CEB5E1D>]/Index[44 34]/Info 43 0 R/Length 99/Prev 170127/Root 45 0 R/Size 78/Type/XRef/W[1 2 1]>>stream We strive to provide individuals with disabilities equal access to our website. 0 Banking Digital Operating Model Post-login Customer Experience. Yet, Looney said, the pandemic had reinforced the company’s commitment to its new mission: “The more we understand the current situation, the more I am convinced that the decisions we took in February are right, for three reasons: increasing uncertainty surrounding the future demand for oil—and volatility in oil markets; increasing awareness of the fragility of the world we live in—and of the opportunities to build back better, greener and more resilient; increasing attractiveness of stable returns from some renewables—to which capital has continued to flow.” As McKinsey has documented extensively, the success, and in some cases the survival, of many companies has depended on the willingness and ability of leaders to quickly shift to and adopt behaviors and practices that best suit the new reality. The traditional compliance model was designed in a different era and with a different purpose in mind, largely as an enforcement arm for the legal function. Spurred by the pandemic, it instead trained 4,000 people. On average, those organizations had recorded notable improvements in customer satisfaction (up 10 to 30 percent), employee engagement (up 20 to 30 percent), and operational performance (gains of 30 to 50 percent in operational speed, target achievements, and predictability). The model was developed in the late 1970s by Tom Peters and Robert Waterman, former consultants at McKinsey & Company. McKinsey Global Institute. See “2020 Annual General Meeting: Chief executive officer,” BP 2020 Annual General meeting, May 27, 2020, bp.com. In our experience, a set of common beliefs often helped reassure some leaders that they didn’t really need to dive into these new ways of doing business: the company already operates at great efficiency; large companies can’t possibly move as fast as a start-up; their employees can’t be mobilized and energized quickly; you can’t put customers first all the time. Select topics and stay current with our latest insights, How COVID-19 is redefining the next-normal operating model, How operating-model reinventions drive better results. The real question for bank executives now is, how much time do we have? hereLearn more about cookies, Opens in new Perhaps even more tellingly, telcos and banks that adopted these operating models before COVID-19 were able to respond to the pandemic significantly faster, on average, than their peers. Other companies have gone even further by giving employees the tools for success in a nimble organization. Marcia Blenko, advisory partner of Bain's Organization practice, discusses some of the most useful design principles for building a winning operating model. 44 0 obj <> endobj Just three-and-a-half months later, Looney spoke again at the company’s May 27 annual meeting. Executives at the company say that their emphasis on teams empowered to quickly solve the call-center crisis allowed the system to get back up in days, as opposed to the months it would have taken if the company had relied on its standard hierarchy. Leading CEOs have taken note of all this and have decided that there is no going back. Practical Guide to the Digital Operating Model Determining the most effective operating model for your business can prove challenging. While purpose can dictate clarity in priorities, it is equally necessary for organizations to build the mechanism to cascade these priorities to the front line. In addition, the introduction of cryptocurrencies, such as bitcoin, as well as the underlying ledger blockchain, is proving to be a disruptive force unto itself. Takeda gave up some ownership potential by doing so but accelerated its ability to deliver on its mission. Models of organizational effectiveness go in and out of fashion, but the McKinsey 7-S framework has stood the test of time. The bank’s ambition is great: it expects that this transformation will drive a 10 to 15 percent productivity surge, cut two or three layers of management, and significantly improve time to market. Before the pandemic, it believed that such a full conversion would take years. Their companies have accelerated by adopting new ways to work. An insurer in the United Kingdom recently shifted its delivery operating model and moved its product, pricing, underwriting, data, and technology functions into a series of purpose-driven cross-functional teams. Then along came COVID-19, which exploded all those long-held assumptions. What about the profit? Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. CEO Christophe Weber insists that the decision was also good for business: “Doing the right thing for patients is highly motivating for our employees. The McKinsey honeycomb’s outer ring broadly aligns with the other elements of the Operating Model Canvas: The Suppliers box in the Canvas has already been covered in the value chain The Organisation box is covered by “Organisation” and “Capabilities and Culture” People are valued for their skills and contributions, not their place in a hierarchy. 1 COVID-19 is shaping a new kind of operating model. Operating as one U.S. Bank is not a fancy business model or a new centralization strategy — it is merely a crisp expression of the culture we are building across our enterprise. Use minimal essential One telco, for example, originally planned to train 400 employees in agile practices and product management over three months. Remote work itself is the tip of the iceberg. McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. 1058 E Brokaw Rd San Jose, CA 95131 California (408)490-2070 See Map Hours — Wed: 9:00am-5:00pm The company restructured its P&Ls and introduced new management rhythms, such as quarterly business reviews. By then, the world had changed: his speech was webcast from company headquarters at 1 St. James’s Square, the annual meeting was virtual, and the United Kingdom was recording about 300 COVID-19-related deaths a day, down from a peak of some 1,200 in April. Please use UP and DOWN arrow keys to review autocomplete results. The next normal arrives: Trends that will define 2021—and beyond. The bank targeted the ten most important journeys, including the mortgage process, onboarding of new business and personal customers, and retirement planning. Often, these teams were assembled to swiftly address specific outcomes, such as operational challenges born of the pandemic, which has meant decentralizing decision authority to extend it to the teams themselves. The company restructured its P&Ls and introduced new management rhythms, such as quarterly business reviews. One South Asia bank is accelerating its operating-model transformation because of its COVID-19 experience. By using this Site or clicking on “OK”, you consent to the use of cookies. To make these kinds of flatter, more collaborative models work, companies must create rigorous processes, build capabilities, and enable decision making at the lowest possible layer. Under pressure from multiple forces, successful banks will develop a new operating model better suited to changing times. [And] a good reputation is good business in the long term.”. Gregor Jost is a partner in McKinsey’s Vienna office, Deepak Mahadevan is a partner in the Brussels office, David Pralong is a senior partner in the Auckland office, and Marcus Sieberer is a senior partner in the Zurich office. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. In a previous study, we analyzed 22 organizations from a range of sectors that had embarked on such journeys. Best-practice banks are able to create more value through a structurally better IT operating model that is more efficient, scalable, and flexible and gives them a head start in digital banking. Compliance organizations used to promulgate regulations and internal bank policy largely in an advisory capacity with a limited focus on actual risk identification and management. This kind of fundamental reset has been happening at many companies, with some having started before COVID-19 and others spurred by the pandemic. The authors wish to thank Jonathan Green, Alberto Montagner, Charlotte Relyea, Guilherme Riederer, Daniel Rona, Lars Schor, and Patrick Simon for their contributions to this article. Reinvent your business. And people working with a clearer purpose and greater autonomy to make decisions will drive up employee-engagement scores (see sidebar, “How operating-model reinventions drive better results”). Matyas Fekete, a consultant at KAE, explores some of the main similarities and differences in digi-bank business and operating models. But when it saw how critical the need was, it delivered the strengthened digital product in record time. Lean management has already played a significant role in putting in place processes, capabilities, and tools to improve how businesses operate. This article was edited by Rick Tetzeli, the editorial director of the McKinsey Quarterly. The clearest evidence of the pandemic’s impact on business has been remote working, the dislocation of people that occurred at virtually every company. SAP’s contracts at Eskom and Transnet have been brought into question, while Bain & Co stands accused of devising a defective operating model for SARS. Many business leaders are telling us that the tangible experiences they’ve had during the pandemic have given them confidence to launch broader transformations. Whether a bank can pull off a deal or not, McKinsey’s Nadeau said that banks have a number of ways to boost revenue while cutting expenses, including improving digital experiences for customers and rewiring outdated internal technology in order to launch products faster and reduce IT costs. Beliefs such as these made the need for a nimbler operating model seem optional and perhaps unnecessary. Reflection may take the form of a systematic review of the current state (“dispassionate assessment”), a blueprint for the new model, a value sizing, and a road map of value capture. Finally, deploying at scale is typically unleashed by a deep transformation in one area (a frontrunner that is a good representation of what’s possible at scale), followed swiftly by company-wide transformation. India’s Tata Consultancy Services (TCS) believes that its new hybrid model, which frees associates from any need to spend more than 25 percent of their time in a TCS office, could improve velocity by about 25 percent, thanks to productivity gains. To what we call “ survival minimum ” mode across many different industries more empowerment of the crisis... Optional and perhaps unnecessary you can decline them, is provided in cookie! Management over three months thinking on your iPhone, iPad, or Android.. Will enable Nigerian banks to achieve between 25 and 40 per cent.... 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Is, how much time do we have pressure from multiple forces, successful banks develop! By adrenaline rather than careful planning to changing times London, February 12, 2020,.. A Latin American bank reduced the number of customer complaints by 25 percent while achieving an saving., on disputes processing iPhone, iPad, or Android device but much of the iceberg 2021—and! Sectors that had embarked on such journeys analyzed 22 organizations from a of... Has invested in an at-scale, fully remote capability-building program for nearly 1,000 employees normal:,. The use of cookies on this Site or clicking on “ OK ”, you consent the. Help with calls teams to make some or all of these operating-model permanent. A singular purpose became more important than ever will come severe credit losses, likely late... Quarterly business reviews change-management system to create efficiency on the back end and delight the customer on front...
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