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13th November 2019

Reinventing your operating model for the digital age

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Consumers’ expectations are rapidly evolving, with more choices available to them then ever before

Attracting and retaining critical talent requires new approaches to career paths and working environments

Technology is at the core of organisation’s operations and exponentially accelerating change

1 2 3

The business landscape is evolving

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90

61

2518 15 12

20111935 20151958 1980 2027F

Half the S&P 500 will be replaced in the next decadeAverage tenure on the S&P 500 (years)

The pace of change in business is accelerating …

Source: ‘2018 Corporate Longevity Forecast: Creative Destruction is Accelerating’, Innosight

-83%“Change will never be this slow again”

“We’re not getting the benefit of IT/Tech investment”

“We need to upskill at scale”

“What if AI is the future of work?”

“My business is efficient but unable to innovate”

…bringing unprecedented challenges to CEOs

“We have the data but don’t know how to use it”

“We can’t collaborate”

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“Consumer expectations are evolving so rapidly that the future is more uncertain than ever”

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Amazon reset expectations around delivery: free and fast

Source: Amazon, Press, McKinsey

@ VG – Please replace with an image of either: Amazon logo Amazon delivery

truck A parcel on a

doorstep

1. eCommerce carries norms mirroring the catalog industry

Up to 10 days1

~8 days

~5 days

0

56

89

7

1

32

10

20102000 20051995 2015 2016

Amazon free delivery time

Free delivery expectations set by Amazon vs. typical eCommerce delivery time in days

4

Amazon founded in 1994

Introduction of Amazon Prime

Decentralization of warehouse/ fulfillment capacity drives downward shift

Prime Now: Free same-day delivery for Prime members

McKinsey & Company 6Source: Pew Research Centre

58

56

44

36

33

29

27

27

27

25

Meaningful work

Link to company purpose/leaders

Flexibility/autonomy

Fast advancement

Connecting/mentoring

Variety/challenge/mobility

Recognition/appreciation

Voice/seat at the table

Skills development

Constant, informal feedback

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A changing workforce has different prioritiesPercent of US millennials

By 2025, millennials will make up 75% of the global workforce

By 2025, millennials will make up 75% of the global workforce

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Technology is moving to the core of businesses

Source: World Economic Forum, McKinsey Global Institute

44ZB

92%

31%Average company revenues at risk from digitization over next three years if no action taken

Of company executives believe they need to digitize to remain viable

4.4ZB

The cumulative amount of data generated by humanity will grow 10x from 2013 to 2020

2013 2020

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It’s all mobile enabled

Source: Customer surveys; McKinsey iConsumer; McKinsey retail practice; Veryday

…and customers expect more

82%

7 out of 10 people are willing to spend more with companies who provide excellent service

75% Expect help within 5 minutes when shopping online

Turn to their smartphones to make purchase decisions

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Agile is emerging as a potential solution…

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European bank using an Agile digital factory quickly delivered 20-40 pts uplift in digital journey NPS

Customer centricity

Australian telco built a chatbot in 6 weeks instead of the 1 year originally planned

+30 NPSFaster to market

10 x speed

Sberbank in Russia quickly climbed to #1 desired employee after introducing full Agile and DevOps across business and IT

Engaged employees

ING Netherlands reduced opex in Tribes by 30% through fewer handovers, delayering and more focus

+ 30 eNPSProductivity improvement

30% savings

…delivering significant impact

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Agile is a shift to organising firms by what matters to customers

Souce: McKinsey Agile Domain

Top-down hierarchy

Detailedinstruction

Bureaucracy

Silos

Organisations as ‘machines’

Employees organised by functions

Eight levels of hierarchy

Manage for financial outcomes

Yearly planning

Leadership shows direction

and enables action

Boxes and lines less important, focus on action

Teams built around e2e accountabilityQuick changes,

flexible resources

Organisations as organic systems

Employees organised by end-to end outcomes

Three levels of hierarchy

Manage for value drivers

Quarterly planning (two week implementation cycles)

From traditional organisation… … to Agile organisation

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May Jun Jul Aug Sep Oct Nov Dec Jan FebApr Mar

Yearly budgetQuarterly Business Review

Sprint planning Stand-up (daily)

Team backlog refinement (continuous)

Sprint demoSprint retrospective

Tribe level demo (once every two weeks) Product owner sync (once every week)

Sprint 3 Sprint 5Sprint 2 Sprint 6Sprint 4

Mon Tue Wed Thu Fri Mon Tue Wed Thu Fri

Sprint 2 weeks

QBR 2 QBR 3 QBR 4QBR 1

Tribe planning (quarterly)

Sprint 1

Agile enables effective and dynamic resource reallocation…

Resources reallocated by Agile companies every quarter

5-10%

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…with significant rewards

Source: McKinsey Corporate Strategy research

6.1%

8.5%

10.0%

Dynamic (>49%)

Dormant (0-30%)

Drowsy (31-49%)

1. ROI = Return on Investment, CAGR = Compound Annual Growth Rate2.Share of CapEx that shifted between business units over the 20 years between 1990-2010. There are 505 dormant re-allocators, 498 drowsy re-allocators and 505 dynamic re-allocators. Median CAGR presented.

Companies that actively reallocate their resources have higher ROI1Total return to shareholders CAGR1

Degree of reallocation2

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Agile improves work quality…

Source: McKinsey research

% of time spent by employees at work, before and after transition to Agile

Meetings

Value-add work

30% 70%

30% 10%

“The fun came back”

“What I’m doing really makes a difference”

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1

2

4

3

6

57 key practical elements to have in place for a successful Agile implementation

7Agile Coaches Capability building

People evaluation

Interfaces Engagement model

Leadership alignment Structured governance (QBR/OKRs)

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The relationship between IT and the business is often one of unhealthy tension…

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…but in an Agile operating model both can work together collaboratively towards the same goals