The company restructured its P&Ls and introduced new management rhythms, such as quarterly business reviews. Technology disruption and expectations are not letting up, and the banks that tackle the operating model overhaul now will be much better able to deliver new strategies and adapt in the future. Takeda gave up some ownership potential by doing so but accelerated its ability to deliver on its mission. 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. Other companies found that the pandemic confirmed their purpose in a highly tangible way. One South Asia bank is accelerating its operating-model transformation because of its COVID-19 experience. In the crunch of the pandemic, a singular purpose became more important than ever. Under pressure from multiple forces, successful banks will develop a new operating model better suited to changing times. Companies reacting with less urgency are soon likely to find themselves outpaced. Many companies have tested aspects of such models before and during the crisis with convincing results: total clarity on priorities and goals, nimble resource allocation, and reduced handovers can boost productivity by 20 to 40 percent. We'll email you when new articles are published on this topic. See “Reimagining energy, reinventing BP,” Ambition launch, London, February 12, 2020, bp.com. Faster decisions require more empowerment of the frontline team. One pharma company recently implemented a quarterly-business-review process to cascade priorities to its working teams. We strive to provide individuals with disabilities equal access to our website. A large European bank has embarked on a fundamental rethink of the way relationships and behaviors are managed both for business-to-business clients and among colleagues. 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. Before the pandemic, it believed that such a full conversion would take years. See “Reimagining energy, reinventing BP,” Ambition launch, London, February 12, 2020, bp.com. The company restructured its P&Ls and introduced new management rhythms, such as quarterly business reviews. Zoetis, a New Jersey company that is the global leader in animal health, managed to pull off a major product launch and keep R&D running at full speed during the pandemic. This bank kicked its digitalization efforts into high gear and launched fully redigitalized offerings online in just eight weeks. When the COVID-19 pandemic hit, Verizon suspended in-home installation appointments. Please try again later. A new model: Digital-only banking businesses. At the same time, it converted its people model into one in which existing and emerging talent is drafted into pivotal roles and upskilled in new ways of working, with a new contribution model that accounts for the different maturity of the lines of businesses. Please click "Accept" to help us improve its usefulness with additional cookies. Read the Bain Brief: New Bank Strategies Require New Operating Models 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. 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. And empowerment truly happens only when leaders let go of traditional hierarchical management. 1058 E Brokaw Rd San Jose, CA 95131 California (408)490-2070 See Map Hours — Wed: 9:00am-5:00pm collaboration with select social media and trusted analytics partners One reason: when CEO Kristin Peck gave local leaders in 45 countries greater latitude than ever, she also had a dashboard of leading indicators created to allow her and other leaders to monitor dynamic shifts in all those markets more closely. 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. Across a wide range of industries, we see companies now trying to make some or all of these operating-model shifts permanent. Leaders have seen for themselves what McKinsey’s own recent research has been showing: the various elements of truly agile operating models can deliver meaningful business gains. Flip the odds. ... however, mask the wide variation of performance at the individual bank level. Reconfigure the operating model. SWIFT, a European payments company, launched what it calls the DevSecOps academy, a virtual-training system for employees to strengthen their engineering capabilities and become fit for the future. 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. See “2020 Annual General Meeting: Chief executive officer,” BP 2020 Annual General meeting, May 27, 2020, bp.com. Their results clearly suggest that such models are the sturdiest for uncertain times. 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” As historian Yuval Noah Harari puts it: “That is the nature of emergencies. Climate change was a reality, Looney said, and the world would soon invest “trillions of dollars” in “replumbing and rewiring the global energy system.” To lead in this huge opportunity, BP would have to change and would need to become leaner and faster-moving to do so quickly. endstream endobj 45 0 obj <> endobj 46 0 obj <. During the COVID-19 crisis, technology resources have been steered toward two main goals: solving customer needs quickly and facilitating the work of customer-facing teams. Something went wrong. Never miss an insight. Thousands of hourly staffers now take at-home customer-service and sales roles. The real question for bank executives now is, how much time do we have? When COVID-19 hit, the telco was forced to shut down its offshore call centers. They fast-forward historical processes.”. 1. The company quickly pulled in retail staff to help with calls. The full executive team must then decide, stack hands, and explicitly settle on what changes to the old operating model will serve as the foundation of the new normal. They identified seven internal elements of an organization that need to align for it to be successful. The efforts of one Asian telco show how far some companies have been willing to bend their structure to adapt during the pandemic. Top leaders also tightened their own connection to the front lines, flattening the organization in response to their need for greater speed and focus. When the head of plasma-derived therapies at Takeda, a global pharmaceutical company, realized that it might speed the development of plasma-based COVID-19 medicines by partnering with others, it formed a nonprofit alliance with other companies. 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. Looking across a wide landscape of companies, we see that these COVID-19-driven changes fell into four broad categories, which can serve as useful pillars of an operating model built for adaptability and speed in the face of uncertainty. 0 2. When that option seemed unsafe, the company quickly leveraged smart glass technology that allows an expert in a remote location to tap into a piece of equipment, pull data from it, and change the settings as needed. FINANCIAL SERVICES Optimizing banking operating models From strategy to implementation September 2012 kpmg.com KPMG INTERNATIONAL 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). Previous McKinsey research supports the conclusion that such agile, speed-oriented operating models are the ones that companies need at moments of great change and instability. ... (a Dutch bank), TDC (a Danish telecommunications company), Spotify, Entel ... All operating-model design must be grounded in an understanding of how value is created in the industry and how the individual organization creates value. Learn more about cookies, Opens in new Leaders have seen for themselves what McKinsey’s own recent research has been showing: the various elements of truly agile operating models can deliver meaningful business gains. In this article, we highlight four key pandemic accelerations that are now being incorporated into the emerging operating models of leading companies. McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. 77 0 obj <>stream Lean management has already played a significant role in putting in place processes, capabilities, and tools to improve how businesses operate. Going forward, McKinsey anticipates the test presented for banks by the pandemic will evolve in two stages in the months and years ahead. Faced with the pandemic, companies quickly abandoned their standard process of addressing and balancing multiple competing priorities and instead zeroed in on their most critical objectives. cookies, McKinsey_Website_Accessibility@mckinsey.com, retraining that gives employees more options. 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. Operating model design. Unlike in the UK, in most of continental Europe, bank accounts and corresponding banking services are historically paid-for services. But remote work itself is the tip of the iceberg. The bank has already realized productivity gains and reduced operating costs, and leaders see the potential for much more. Based on that success, the company has standardized a rapid redeployment process that will pay off long after the pandemic is over. COVID-19 is shaping a new kind of operating model. McKinsey estimates that the top 15 US banks spend approximately $3 billion each year, combined, on disputes processing. Our flagship business publication has been defining and informing the senior-management agenda since 1964. 1 Please use UP and DOWN arrow keys to review autocomplete results. The next normal arrives: Trends that will define 2021—and beyond. IT is a key driver of costs and of the ecosystem design and business model. But when it saw how critical the need was, it delivered the strengthened digital product in record time. For instance, they are providing employees with the IT infrastructure required to work remotely in an effective way. 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. 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. Payments remains among the best-performing Organizing for speed requires faster decisions. No one can draw a blueprint of what a bank’s risk function will look like in 2025—or predict all forthcoming disruptions, be they technological advances, macroeconomic shocks, or banking … These decisions will determine the full extent of the shift, and no single company will make all the decisions in the same way—there is no such thing as a one-size-fits-all operating model. McKinsey sees a second wave of automation and AI emerging in the next few years, in which machines will do up to 10 to 25 percent of work across bank functions, increasing capacity and freeing employees to focus on higher-value tasks and projects. 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. (About 50 million to 100 million disputes occur annually in the US, with a cost per dispute ranging from $10 to $50.) zeb project experience suggests that successful TOM projects in general address six dimensions (see Figure 1): 2 To ensure that this transition is a company-wide effort, they have put a number of “hard” and “soft” enablers in place. See “2020 Annual General Meeting: Chief executive officer,” BP 2020 Annual General meeting, May 27, 2020, bp.com. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. 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. Unleash their potential. But much of the redeployment has been accompanied by retraining that gives employees more options in the long run. Then along came COVID-19, which exploded all those long-held assumptions. We also look at the process by which companies can evaluate the changes they made during the pandemic, decide which shifts they want to make permanent, and embark on a broader transformation to make this speed and efficiency the standard going forward. Remote work itself is the tip of the iceberg. As the COVID-19 pandemic developed, companies faced a raft of problems simultaneously: lessened demand, office closures, supply-chain derailments, and more. The success, and in some cases the survival, of many companies during the pandemic has depended on the willingness and ability of leaders to quickly shift to and adopt behaviors and practices that best suit the new reality. Implementing the next-generation operating model can reduce these operating expenses by 25 to 40 percent. %%EOF For instance, an Asian telco provider increased its customer-satisfaction score by 30 points, scored operating-expenditure savings of 20 percent, and speeded up time to market tenfold. ... Sonia Barquin is a consultant in McKinsey’s Kuala Lumpur office, and Vinayak HV is a principal in the Singapore office. the traditional banking business model. Much effort and money today goes into operating legacy processes and dealing with regulatory requirements to keep the bank running; Gartner estimates that banks on average spend roughly 60% of their IT budgets to maintain legacy IT systems vs. just 24% to grow the business and 16% to transform it. By the end of a month, wait times on service calls were down to a few minutes. McKinsey and Company in a report stated that digitalisation will enable Nigerian banks to achieve between 25 and 40 per cent cost-reduction. For many, there is simply no justification for returning to the old ways of doing business. Thanks to the pandemic, many companies have embarked on experiments in which they’ve organized around outcomes, in flattened structures that replace physical colocation with hybrid models. 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. 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. McKinsey Global Institute ... or building a successful ecosystem platform requires banks to rethink their value proposition and develop an operating model that is different from their traditional business. The experience of the COVID-19 crisis is accelerating the transformation upon which it had already embarked. 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. 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.” Build a two-speed IT operating model. [And] a good reputation is good business in the long term.”. During the COVID-19 crisis, technology resources have been steered toward two main goals: solving customer needs quickly and facilitatingthe work of customer-facing teams. McKinsey Quarterly. Throughout the pandemic, Johnson & Johnson has been able to keep production flowing for its medical devices and consumer products by relying on technology. At the same time, they have installed a new performance and change-management system to create incentives for the new way of working. Leaders should develop a clear sense of their strategic ambitions—where to play and how to win—and the business models they wish to employ, including target customer segments, channels, pricing, and delivery models, since both the strategy and business model directly influence the operating model design. The result: COVID-19 is shaping a new kind of operating model. Technology is used to create efficiency on the back end and delight the customer on the front end. This fundamentally links to strategy. By using this Site or clicking on “OK”, you consent to the use of cookies. It created microsites in the offshore location, staffed by teams that ensured that all call-center personnel received the technology needed to work from home. endstream endobj startxref Matyas Fekete, a consultant at KAE, explores some of the main similarities and differences in digi-bank business and operating models. While some smaller, more focused banks are delivering respectable growth, others continue to struggle in the low-rate environment. 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 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. Spurred by their experience during the COVID-19 crisis, more and more companies are shifting their people model to one that values skills-based mobility and contributions instead of location-based work and standard functional expectations. On February 12, 2020, just two weeks into his tenure and before there were even a dozen reported cases of COVID-19 in the United Kingdom, BP CEO Bernard Looney spoke to a live audience at London’s Royal Lancaster Hotel and laid out an ambitious reframing of the energy giant’s mission as “Reimagining energy for people and our planet.” 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. 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. Developing technology that enables remote work creates new opportunities for efficiency. Clear, commonly understood processes help ensure that the flat, decentralized structure doesn’t spin out of control. Instead, the company developed a new tool designed to help Verizon customers install new equipment and troubleshoot issues at home with remote assistance from a technician. CEO Christophe Weber insists that the decision was also good for business: “Doing the right thing for patients is highly motivating for our employees. Reinvent your business. While technology empowered remote teams, it also empowered corporate leaders. The model was developed in the late 1970s by Tom Peters and Robert Waterman, former consultants at McKinsey & Company. 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. Banking Digital Operating Model Post-login Customer Experience. h�bbd``b`�$�A,f �& b�LF@�%D��M�J@�n�H H1�)kȔE n6�/M@�q6�XZ���Ȱ����4�?�o 6< For example, before the pandemic the company would often fly scientists and engineers to different locations for equipment maintenance. Business leaders tell us that the metabolic rate of their organizations has soared. Boundaries and silos have been removed; new technology has been adopted quickly, delivering digital products that customers suddenly needed; decision making has accelerated and been pushed further down in the organization. People are valued for their skills and contributions, not their place in a hierarchy. Banking business models of the future Dr. Daniel Kobler Partner Banking Innovation Leader Deloitte Dr. Stefan Bucherer Senior Manager Consulting Deloitte When COVID-19 hit, this backbone process allowed the company to realign the entire organization to a new set of priorities in matter of days. A global oil and gas company cut the time required to plan wells by 50 percent, increased overall gas production by 5 to 10 percent, and increased gas production per employee by 70 to 80 percent. h�b```"V�s� ��ea��l`�Ѵ|����`o�� ��b�L�&͍�[�W��,���~(Б�����k������aC����5���0�1"L�ہ�0� �x�9㜿I2>�1�K�$�q��QCC���r��F'�20�7 iF�kn��.��4}D��@� IN2� Their companies have accelerated by adopting new ways to work. The wide variation of performance at the same time, they have a... Developed in the long run gone even further by giving employees the tools for success in a stated! We will be happy to work remotely in an effective way conversion take! 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