Eric Lamarre Sr. Partner, McKinsey & Company

cubating with:

Global imperative of innovation

Eric Lamarre

Global leader, IoT Venture

McKinsey & Company

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…

Taxi anyone?

Cyborg workforce

video

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

Disruption often comes from the periphery

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

Customer journeys reinvented

7 days

2 minutes

A

N

I

M

A

T

I

O

N

Improved mining productivity

A

N

I

M

A

T

I

O

N

1,000 hours/year

15% op. cost

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%

Improving products in-service

Example: Boeing

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

How should you

approach this?

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

Top-down leadership

video

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