The world’s largest
taxi service…
The world’s largest
hotel service…
The world’s largest
retailer…
…doesn’t own
any beds
…doesn’t own
any stores
…doesn’t own
any cars
It’s a crazy world…
It’s not all about the next Google Efficiency-driven Customer-focused Science-based
Engineering-based
A
N
I
M
A
T
I
O
N
Innovation: we all want it!
Innovation is important to growth strategy
84%
Satisfied with innovation
performance
6%
You have
heard it all
before…
…invest less in R&D and IT
…commercialize less
…are subscale
…cannot benefit from government
procurement
…have insufficient access to talent
…have low tolerance to risk
…operate in a smaller market
…[add your favorite]
Constructing a simple
innovation agenda
Closing the
gap to best
practices
Leveraging
technology to
push the frontier
1 2
Benchmarking as a great
source of innovation A
N
I
M
A
T
I
O
N
Support functions Customer experience Product/service design
A simple innovation agenda
1. Closing the gap to
best practices
2. Leveraging technology
to push the frontier
Customer experience
Product/service design
Business processes
Periphery scan
0.6 3D printing
Renewable energy
0.5 Advanced materials
Advanced O&G exploration/recovery 0.5
0.3
11.1 Internet of Things
Mobile Internet 10.8
6.7 Automation of knowledge work
1.6
Autonomous vehicles
Advanced robotics
Cloud technology
1.9
4.5
6.2
Next-generations genomics
0.6 Energy storage
Economic impact; $ Trillions, annual
1
2
3
4
5
6
7
8
9
10
11
12
Next wave of disruptive technologies
A
N
I
M
A
T
I
O
N
What is digital?
Reinventing the core
Commercial processes
Operations processes
Back-office processes
Imagining new business
models
New businesses
New channels
New products
Value-added services
Most existing data not used 100%
Data
captured
40%
Data
stored
1%
Streamed
on shore
~1%
Monitored
as historical
KPIs
<1%
Analyzed
for insights
in real time
0%
Used in
decision
making
Selling outcomes Sensors
continuously
monitor jet
engine
performance
Live data
enable real-
time condition
alerts and parts
inventory
management
Preventive
maintenance
and aftermarket
services
maximize
uptime
9% revenue
growth
increase in
engine
availability
30%
Digital driving rapid change across
industries
Travel
Oil and gas Chemicals
Retail High tech
Banking Telecoms
Media
Aerospace Utilities
Tipping point
<10% >40% ~10-40%
% of digital revenues or digitized operations
Digital value destruction/transfer
-12.0
-6.0
Average revenue growth, %
-4.5
-10.2
Average EBIT growth, %
Current Full Current Full
-3.5% -7.3% -1.2% -5.3%
Median
Automation potential of activities
120
100
60
40
0 80 20 100
80
20
40 0 60
% of time on activities that can be automated
$ per hour
Landscaping workers
44% of
activities in
10 years
File clerks
CxO
High-cost location
wage (e.g., Canada) 60-100
15-25
4-10 Robotics process
automation
Low cost location wage
(e.g., India, Philippines)
Forget offshoring $ Thousands per year
Finding the value is different
by industry
New business
models
Commercial
processes
Operations
processes
Back office
processes
New channels
New products
Predictive maintenance
ERP-driven financials or HR
Digital marketing and pricing
Asset inspection
Supply Chain & Procurement
Sales digitization
Multi-channel customer exper.
New businesses
Value-added services
Robotics process automation
Self-serve
Ops - yield, energy, throughput
Example components
Heavy
Indus-
tries
B2B sales
organisa-
tions
B2C
consumer
goods
B2C
servi-
ces
New talent is always required
UX designers Chief Digital Officer
Digital marketers
Platform architect
Agile coaches Data architect
Scrum master
Data engineers
Software developers
Process automation specialist
New Ventures Competition Organic Innovation Engine
Solutions Software, analytics, and data solutions
Organic Scale-ups Scaling-up new service lines and capabilities
Inorganic Alliances and Partnerships
Ecosystem and org design is critical
McKinsey
Academy
McKinsey
Leadership
Develop-
ment
McKinsey
IoT Venture
McKinsey
Infrastruc-
ture
A simple innovation agenda
1. Closing the gap to
best practices
2. Leveraging technology
to push the frontier
Customer experience
Product/service design
Business processes
Periphery scan
Roadmap
Talent
Ecosystem and org design
Top-down leadership
www.mckinsey.com/iot