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The COVID-19 Recovery Will Be Digital The Next Normal The recovery will be digital Digitizing at speed and scale August 2020 Cover image: © Pobytov/Getty Images Copyright © 2020 McKinsey & Company. All rights reserved. This publication is not intended to be used as the basis for trading in the shares of any company or for undertaking any other complex or significant financial transaction without consulting appropriate professional advisers. No part of this publication may be copied or redistributed in any form without the prior written consent of McKinsey & Company. To request permission to republish an article, email [email protected]. The Next Normal The recovery will be digital Digitizing at speed and scale August 2020 Introduction Welcome to the “next normal”—the new reality emerging from the ongoing COVID-19 pandemic. How will life, public health, and business continue to change? We’ve chronicled our response in a wide-ranging series of publications—more than 500 articles and counting since the outbreak began. This volume is the first of five edited collections produced to accompany our multimedia series, airing on CNBC, examining the forces and themes shaping the next normal. This collection focuses on the vital role of digital in today’s businesses. Many organizations were already in the throes of digital transformations pre-pandemic, before COVID-19 accelerated the pace of business across the globe. Some sped up efforts already under way; others implemented digital capabilities for the first time—as a matter of survival. In these pages, we have collected some of the best insights we published during these hectic months— on how top executives have led on digital initiatives, what specific companies across industries have done differently, and the special challenge of cybersecurity. We have also included content that has resonated particularly powerfully on McKinsey.com, plus a number of articles authored by Kate Smaje, global leader of McKinsey Digital and anchor of the digital segment of our multimedia series on CNBC. We hope you find these insights useful as you continue to navigate your way into the evolving next normal. Over the next few months, look for additional collections to accompany this digital compendium and complement forthcoming segments on CNBC. Topics include organization, transformation, sustainability, and resilience. You can download this and other collections in this series as they become available at McKinsey.com/thenextnormal, where you will also find our entire collection of coronavirus-related insights. Raju Narisetti Publisher McKinsey Global Publishing 2 Contents Digital leadership The special challenge Articles by Kate Smaje through COVID-19 of cybersecurity 6 Three actions CEOs 58 COVID-19 crisis shifts 140 The digital-led recovery from can take to get value from cloud cybersecurity priorities and COVID-19: Five questions for computing budgets CEOs 11 Digital strategy in a time 66 Cybersecurity tactics for the 148 Driving digital change during a of crisis coronavirus pandemic crisis: The chief digital officer and COVID-19 20 The COVID-19 recovery 77 Cybersecurity’s dual mission will be digital: A plan for the first during the coronavirus crisis 154 ‘Transformer in chief’: The new 90 days chief digital officer 27 After the first wave: 160 Five habits for executives to How CIOs can weather the become more digital coronavirus crisis Most read on McKinsey.com 163 The seven traits of effective 33 How chief data officers digital enterprises can navigate the COVID-19 86 Where machines can replace response and beyond humans—and where they can’t (yet) 94 Why digital strategies fail How digital is driving industries 98 Blockchain beyond the hype: What is the strategic business 40 Building an e-commerce value? business: Lessons on moving fast 45 Preparing for the next normal via digital manufacturing’s scaling potential 55 Fashion’s digital transformation: Now or never 66 Restore and reimagine: Digital and analytics imperatives for insurers 70 Inside a mining company’s AI transformation 3 Digital leadership through 6 Three actions CEOs can take to get value from COVID-19 cloud computing 11 Digital strategy in a time of crisis 20 The COVID-19 recovery will be digital: A plan for the first 90 days 27 After the first wave: How CIOs can weather the coronavirus crisis 33 How chief data officers can navigate the COVID-19 response and beyond 4 5 © Mauricio Graiki/Getty Images Three actions CEOs can take to get value from cloud computing Leaders need to accelerate their journey to the cloud in order to digitize quickly and effectively in the wake of COVID-19. by Chhavi Arora, Tanguy Catlin, Will Forrest, James Kaplan, and Lars Vinter 6 If you are a CEO, you already know what the cloud 3. putting in place the HR, compensation, and can do for your business in a post-COVID-19 world. location policies required to attract and retain the You’ve probably even told your organization to get specialized engineering talent required to operate you there already. So why is your move to the cloud1 in the cloud coming along so slowly, even though you may have been talking about it for years? It might be because Together, these interventions will help the executive you and your management team have yet to take a team unite around a coherent point of view about sufficiently active role, or provide the air cover your the business-driven value that the cloud represents, chief information officer (CIO) and chief technology how to capture that value, and how to evolve the officer (CTO) need. company’s operating model accordingly. Without this perspective, your company may continue to CIOs and CTOs are on the front foot right now thanks move too slowly toward cloud computing3 for a to their crucial role during the COVID-19 pandemic. post-COVID-19 “next normal”—creating the risk of That makes this a good moment to further elevate disruption from nimbler attackers. top-team support for the cloud enablement needed to accelerate digital strategy, the digitization of the company, its channels of distribution, and its supply Invest for business value chains—all of which already needed to be moving During the past 20 years, IT organizations have more quickly than they were. adopted a range of innovations—for example, virtualization and Linux—that have made running The CEO’s role is crucial because no one else can business applications much cheaper and that have broker across the multiple parties involved, which required only modest investments. Cloud adoption include the CIO, CTO, CFO, chief human-resources has a different economic profile. While exploiting officer (CHRO), chief information security officer cloud requires investment in building capabilities and (CISO), and business-unit leads. As we explain in this migration applications, it’s more efficient in the long article, the transition to cloud computing represents term, sometimes markedly so for companies that a collective-action problem—one that requires a have not fully optimized their technology environment. coordinated effort across the team at the top of an organization. It’s a matter of orchestration, in other The biggest benefits accrue to the business from words, and only CEOs can wield the baton. faster time-to-market, simplified innovation, easier scalability, and reduced risk. Cloud platforms can To get to cloud more quickly, CEOs should ask their help deploy new digital customer experiences in CIO and CTO what support they need to lead the days rather than months and can support analytics organization on the journey. Chances are good that that would be uneconomical or simply impossible three interventions will emerge: with traditional technology platforms. 1. establishing a sustainable funding model to Unfortunately, technology-funding mechanisms support the investments required to get business can stymy cloud adoption—they prioritize features value from the cloud requested by the business now rather than critical infrastructure investments that will allow 2. developing a new business-technology operating companies to add functionality more quickly and model2 that exploits cloud for speed, agility, and easily in the future. Each new bit of tactical business efficient scalability functionality built without best-practice cloud 1 In this article, we use “cloud” to refer to the public cloud rather than companies’ private clouds, in which they attempt to create highly automated and virtualized application-hosting environments on premises. 2 An integrated operating model organizes technology teams around user-facing products and the underlying platforms that enable them. For more, see Ross Frazier, Naufal Khan, Gautam Lunawat, and Amit Rahul, “Products and platforms: Is your technology operating model ready?,” February 2020, McKinsey.com. 3 Nagendra Bommadevara, James Kaplan, and Irina Starikova, “Leaders and laggards in enterprise cloud infrastructure adoption,” October 2016, McKinsey.com. Three actions CEOs can take to get value from cloud computing 7 architectures adds to your technical debt4—and facing business domains to the public cloud could thus to the complexity of building and implementing enable much faster and less expensive entry into anything in the future. promising markets. Hosting these applications in the cloud meant that technology operations in a CEOs can help the senior team recognize that new country could be set up in a couple of weeks at infrastructure investments in cloud platforms a negligible cost, versus a couple of million dollars represent a source of competitive advantage rather of up-front investment for each country. A health- than a cost to be managed. Once the top team gets insurance carrier, meanwhile, examined its current that right, a lot else falls into place, including your project portfolio and found that it could speed up the technology-funding process, which begins shifting capture of several billion dollars in additional revenue toward products or platforms rather than projects. by adopting the cloud. Moving the systems that help Projects are one-time investments funded in a yearly the insurer interact with healthcare providers was boom-and-bust cycle.
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