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Conducting a midyear tech review: A leader’s guide

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ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

Brought to you by Liz Hilton Segel, chief client officer and managing partner, global industry practices, & Homayoun Hatami, managing partner, global client capabilities

“Resolutions in technology are essential for companies looking to navigate the uncertainties of 2023,” we observed at the beginning of this year. Tech resolutions—and companies’ commitments to keeping them—may become even more important as disruptive technologies such as generative AI begin to reshape organizations. Leaders who may have put digital transformation on the back burner face a new urgency to deploy technology at scale to improve business performance. The year’s midpoint may be a good time for leaders to examine how their technology plans and actions are shaping up.

AN IDEA

An image linking to the web page “Technology’s generational moment with generative AI: A CIO and CTO guide” on McKinsey.com.

Nine ways to capture value from generative AI

There’s a reason this powerful technology dominates the news—besides its appeal to consumers, generative AI offers leaders in almost all industries a unique opportunity to reinvent their businesses. “But it’s worth remembering we’ve seen this movie before,” McKinsey experts caution. “New technologies emerged . . . that set off a melee of experiments and pilots, though significant business value often proved harder to come by.” Our latest research takes some of the guesswork out of generative-AI deployments: we’ve identified nine actions that tech leaders can take to mitigate risk and identify where the technology can create the most value. For example, one possibility may be to develop a “financial AI” capability to estimate the true costs and returns of generative AI. While all parts of an enterprise stand to gain from generative AI’s “superpowers,” our research shows that 75 percent of its value may lie in four functions: customer operations, marketing and sales, software engineering, and R&D.

A BIG NUMBER

That’s the number of critical practices that top-performing companies follow more frequently than others—becoming digital leaders as a result. At these organizations, “senior leaders take time to tune up their understanding of the digital tools and practices their businesses need to stay ahead,” note McKinsey senior partner Tanguy Catlin and coauthors in an update of earlier McKinsey research. Hands-on demos may appeal most to leaders who are pressed for time: for example, cross-functional teams at one company displayed the benefits of robotic process automation by sharing models, assumptions, and findings with business leaders at monthly meetings.

A QUOTE

“Many companies develop their business strategy, and then their technology strategy follows later. That does not work anymore.”

That’s McKinsey partner Gayatri Shenai on why technology needs to be integrated with business operations. “Boards and CEOs are increasingly realizing how technology can change the company’s performance trajectory,” says Shenai. CEOs may need to pay attention to three technology issues in particular: its role in business growth, how it is delivered, and whether its foundation is future-proof. “Make sure the decisions you make today help you advance versus hold you back,” suggests McKinsey senior partner Krish Krishnakanthan. “What can you do now with respect to the cloud or micro services, for example?”

A SPOTLIGHT INTERVIEW

An image linking to the web page “Constructing the tech future: Porsche Digital spearheads talent attraction” on McKinsey.com.

With the tech talent market in flux, hiring and retaining skilled people is a challenging task—one that mobility technology company Porsche Digital is meeting head on. “We see that people are motivated most by the job that they’re doing and the people that they are working with,” says Mattias Ulbrich, CEO of Porsche Digital and chief information officer of Porsche AG, in an episode of McKinsey’s Drivers of Disruption podcast. “We introduced agile ways of working several years ago, because you then can take more responsibility to the team and to each individual, and that can really affect the solution that they would like to develop.” Clear career paths, opportunities for professional development, and the ability to work with different technologies and in various roles are other motivators for Porsche Digital employees. The range of choices “makes working more attractive to more people within our company—to have mobility and not having to work for ten years at the same level on the same topics,” says Ulbrich.

CASH CRUNCH

An image linking to the web page “Staying ahead: How the best CEOs continually improve performance” on McKinsey.com.

Your organization may need to invest in technology immediately but may not want to pay for it right now. Concerned about a possible economic downturn later in the year, many companies (including some tech players ) are reducing their IT spending. Psychological barriers—such as the “hassle factor” of making the effort to invest in new technology—may also curtail IT investment. If your budget is tight, consider putting industry-specific needs first: for example, some asset managers are focusing on technologies that power growth, such as AI-enabled analytics, tools that support customized product building, and unified platforms that offer an integrated view of private and public holdings.

Lead with tech savvy.

— Edited by Rama Ramaswami, senior editor, New York

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 02:50 - 17 Jul 2023

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Conducting a midyear tech review: A leader’s guide

Nine ways to capture value from generative AI

“Many companies develop their business strategy, and then their technology strategy follows later. That does not work anymore.”

Out now: New issue of the McKinsey Quarterly