Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Use both internal and external data sources to create a 360-degree view of customers, and let unmet needs guide the digitization of the customer journey (customer-back approach): In which areas are they open to digitally enabled process streamlining? Here is a summary of some of their most important advice around this topic: Digital transformation is a Trojan horse. November 12, 2019. Use minimal essential As a result, top-quartile B2Bs across sectors have an average DQ of 44, compared with 50 for consumer companies. In tests, the iPad tool shortened the selling process by about 30 percent and increased conversion by 8 to 10 percent. Many companies … McKinsey & Company estimates that B2B digital leaders see five times more revenue growth than those not focused on digital transformation strategies. We'll email you when new articles are published on this topic. Digital upends old models. The reported failure rate of large-scale change programs has hovered around … See also Jorchen Boringer and Dr. Tjark Freundt, “Kundenführung 4.0: Von Menschen und Maschinen,”. Where will (or could) it come from in the future? Digital upends old models. For simple or repeat purchases of products and services, the vast majority of buyers (85 percent) do not require in-person support. Mobile especially has changed the way B2B decision-makers interact. Our research is clear: by investing in a targeted set of digital capabilities and approaches, B2B companies can improve their financial performance—and not just by a percentage point or two. To fix that, Box needed to get its prepay rate up to around 70 to 80 percent. Homayoun Hatami, Candace Lun Plotkin, and Saurab Mishra, “To improve sales, pay more attention to presales,” Harvard Business Review, February 17, 2015, hbr.org. BP describes Launchpad as a “scale-up factory,” charged with a “mission to take disruptive technologies and business models and help grow them fast to become BP’s future business units, generating a significant portion of BP Group’s gross margin by 2025.” It also forces product development, marketing, sales, and IT to come together and understand how to use leading digital design practices, such as MVP, in a disciplined, customer-focused way. That involves identifying which skills need to be reallocated, what data and analytics resources are needed, and which customer opportunities require capabilities that need to be built, hired, or acquired. DQ leaders, on the other hand, strive to create an organizational structure that supports their digital transformation. Take the example of a leading manufacturer of agricultural products with annual revenues in the magnitude of $20 billion. You can restructure your organisation with AI if looking for the components mentioned above. Our flagship business publication has been defining and informing the senior-management agenda since 1964. One example is Ping An’s proprietary face-recognition technology. One medium-size manufacturer of electrical products was suffering from declining margins because wholesalers and distributors were capturing an increasing share of end-customer revenues. collaboration with select social media and trusted analytics partners At first, the company’s pricing group made little use of the wealth of data that was available, much of it stored in the cloud. McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Please click "Accept" to help us improve its usefulness with additional cookies. “At McKinsey, digital transformation means two things at the highest level: transforming the core, which is taking what we do today and leveraging technology to do it better, faster, cheaper, more effectively; and new business building, which really is stepping out of the core and creating something that didn't exist. 6. In a pilot, a margin increase of up to 50 percent was observed, while no volume was lost. The present working paper summarizes selected findings of the macro-economic simulations conducted as part of the study "Shaping the digital transformation in Europe", which assess the potential impact of disruptive digital technologies on the economy and society in the EU and its member states. The project team identified a total opportunity exceeding $100 million annually. There is little doubt that digital is the future and B2B organisations need to embrace digital … With over 15 years of experience delivering digital transformation programs, Chris is an ardent believer in the power of innovative technology to change how companies do business. To make that happen, the bank had to overhaul its customer-data processes and make it possible for information to be updated across all channels automatically. GE’s ambitious technology platform now generates $5 billion in revenue and the company estimates that business will triple to $15 billion by 2020.2 It’s not going to get any easier. Most transformations fail. Most B2B companies have not yet mastered the digital capabilities needed to operationalize customer-centricity—and that’s making them vulnerable. McKinsey’s recent Digital Enablement Survey, for example, shows that ... makes the B2B to B2C transition driving by healthcare reform and aging demograph- ... Why digital transformation should be a strategic priority for health insurers Using digital … But some B2B companies are breaking that mold and embracing an “all in” digital strategy. What Digital Transformation Really Means For B2B Marketers Director’s Guide – 2 – > Where the industry is with digital transformation. Something went wrong. (Research and Markets) Digital transformation initiatives. Our research shows that six digital practices have an outsize impact on performance. Detailed information on the use of cookies on this Site, and … The new, data-driven approach allowed the company to reallocate significant resources from manual pricing management to growth initiatives. More than 90 percent of B2B buyers use a mobile device at least once during the decision process,3 Digital transformation is not only redefining how businesses connect with their customers, it’s redefining their business models, the way they deliver value and how they make money. B2B companies have the ability to take a more structured approach to digitization that can give them more control over their spend and greater assurance that resources and investments are being directed toward the highest-value opportunities. If you would like information about this content we will be happy to work with you. Only about 20% of B2B buyers say they hope to return to in-person sales. The DQ scores for organizational maturity reflected these challenges. At the Netherlands-based bank ING, for instance, corporate clients have a single point of access to real-time account overviews, customized reporting, and the ability to execute payment and hedging transactions wherever they are in the world.4 In our 2016 survey, the rate of success was 20 percent; in 2014, 26 percent; a… Flip the odds. To date, the most prominent BP Launchpad venture is Lytt, a technology start-up specializing in fiber optics to detect sand interference in offshore wells. But those efforts have tended to focus on internal cost and process efficiencies and less on innovating around sales and the customer experience—and that’s where the real growth is. Digital transformation, whatever precise form it takes, is built on the internet and so, even in normal times, internet infrastructure needs to be robust. To improve its success rate, the company invested in predictive analytics capable of isolating buying patterns to help sales reps anticipate what deals were likely to trigger procurement’s involvement. In the majority of successful cases we have seen, companies start digitizing core processes before they experiment with new business models. The term was coined in 2013 by venture capitalist Aileen Lee. The adoption of self-serve sales has increased by approximately 250 percent since the onset of COVID-19, according to a survey our colleagues conducted of B2B companies—increasing the need for a digital transformation … cookies, up to five times the revenue growth and up to eight times the EBIT (earnings before interest and taxes) growth of their peers, McKinsey_Website_Accessibility@mckinsey.com, an opportunity to transform the customer experience, improve satisfaction, prevent churn, and reduce the cost to serve, Traditional company, new businesses: The pairing that can ensure an incumbent’s survival, Research by the McKinsey Global Institute, Analytics translator: The new must-have role, Building agile capabilities: The fuel to power your agile ‘body’, Perpetual evolution—the management approach required for digital transformation. “BP recently created BP Launchpad as a business incubator,” AZERNEWS, May 10, 2019, azernews.az. That targeted, data-driven campaign helped Vestas achieve a ten-times improvement in conversion rates. In this context, clarity and consensus about what a company should not do is just as important as the determination to pursue the most promising pathway to digital growth with full force. Only 10 percent of the B2B companies in our survey, for instance, said that digital was a top investment priority. Transforming B2B organizations to improve digital experience Any customer-experience program should start with an inventory of customer needs, a leadership commitment to governance, and a grouping of … Research by McKinsey reveals 7 out of 10 B2B decision-makers will consider making fully self-serve or remote purchases of $50,000 and up. Similar data-enabled marketing practices allow B2B companies to create highly targeted campaigns that can break through the noise and forge meaningful relationships—a critical capability in a competitive or fragmented market. According to our survey, “slow response time” is the issue that frustrates them most in their interactions with suppliers (named by 40 percent of all participants, ahead of “pricing issues,” named by 19 percent). We feature rich case studies and best practices from companies including Maersk, Michelin, Adobe, IBM, Salesforce.com, Johnson & Johnson and Air Liquide – all businesses that are putting customers at the heart of their … How can new technology be used to create additional value and pleasant surprises for customers? Artificial Intelligence(AI) has three main components that will show its impact on the B2B digital transformation. The emphasis is now on digital transformation … To fortify their position, they should shape the change and think big. > What its impact is, specifically to B2B. Article Healthcare Providers: Preparing for the next normal after COVID-19. McKinsey & Co’s latest B2B DECISION-MAKER PULSE SURVEY found that sellers say DIGITALLY enabled sales interactions are NOW MORE THAN TWICE AS IMPORTANT as traditional sales interactions.. He is a leader of McKinsey Digital Labs’ work in … During the transformation, the group created a new end-to-end tech stack, established a center of pricing excellence, and developed a new commercial playbook. Far from standing on the sidelines, B2B companies have embraced the digital revolution. Deliver. B2B seller interactions have moved to remote or digital McKinsey Only about 20% of B2B buyers say they hope to return to in-person sales. The company was struggling with poor customer satisfaction and an erosion of the customer base. To understand how severe the … In another case, a maker of high-tech hardware implemented a partly automated solution to compare prices and derive recommendations for thousands of product configurations. Article From “wartime” to “peacetime”: Five stages for healthcare institutions in the battle against COVID-19. (The average organizational maturity for the consumer sector, by contrast, is 35.). See also Jorchen Boringer and Dr. Tjark Freundt, “Kundenführung 4.0: Von Menschen und Maschinen,” 7. 3. Digitizing core elements in the sales function, for example, may free up field reps but place greater demand on inside sales. We'll email you when new articles are published on this topic. It divided 120 participants into ten cross-functional teams and tasked them with redesigning how customers processed their healthcare claims. We mentioned at the very start of this article that, whilst digital transformation was already on the minds of B2B business leaders, the events of 2020 forced the hand of many brands to start the digital transformation … Create a long list of opportunities, based on consumer needs and technological change, Rank opportunities according to current and future market size, Filter out opportunities dominated by competitors, Select opportunities that match the group’s strategic objectives and stand to benefit from Ping An’s core strengths. We believe that it's a requirement for long-term success. Research by McKinsey reveals 7 out of 10 B2B decision-makers will consider making fully self-serve or remote purchases of $50,000 and up. Automating some operations and processes can help you reduce costs along with shifting your … PwC, McKinsey, Accenture, EY, Gartner, CapGemini, MIT, Cognizant, Altimeter, Ionology. The move to digital has been a long time coming in the B2B space, and it has the … Digital is a central part of Almarai’s plans, with the firm eyeing a suite of intelligent technologies to optimise its operations, supply chains and customer processes. They conceived, tested, and built the new model in less than 12 weeks. B2B leaders create an organizational structure that supports their digital transformation. 1. It allows the company to test and learn to find success—in tangible increments that moderate the overall risk. That involves identifying which skills need to be reallocated, what data and analytics resources are needed, and which customer opportunities require capabilities that need to be built, hired, or acquired. Key success factors: In our experience, corporate start-ups increase their odds of success when they have the following freedoms: In addition to the strategies and skill sets that are specific to the different archetypes, our analysis of top digital performers in B2B has revealed four enablers that help create strategic advantages, de-bottleneck digital transformations, and deliver impact at scale (Exhibit 6): For manufacturers and providers of services, digitization is at least as much an opportunity as it is a threat. If the app flagged that procurement was likely to be engaged, reps could press a button and generate tailored punch lists and other add-ons designed to meet procurement specifications and simplify the RFP process for internal buyers. Prior to the COVID-19 these were considered to be roughly equivalent.. Nearly FOUR IN FIVE B2B SALES TEAMS have already shifted to videoconference or phone.. NAVIGATING THE DIGITAL B2B LANDSCAPE Right now, digital transformation in B2B is … Learn more about cookies, Opens in new At the majority of the B2B companies we studied, organizational challenges can blunt the reach and effectiveness of digital initiatives. On average, across cultural DQ measures, B2B companies … The term ‘ digital transformation ’ does not tell business managers much. Learn about Once the digital transformation is underway, the role of the sales force is transformed as well. B2B players must contend with shrinking product shelf lives, greater price transparency, and a changing cost basis on the one hand while simultaneously growing the capabilities needed to create consumer-like experiences on the other, with personalized service and hassle-free purchasing across platforms and devices. Data-driven pricing is among the most common applications in this area. To gain more predictive muscle, the company invested in next-product-to-buy (NPTB) analytics that presented a list of recommended actions, scored by relevance. When Dan Levin joined Box as COO, for example, he realized that most of the company’s customers paid on a month-to-month basis, which was hurting the company’s capital efficiency. A company may choose to combine multiple pathways or pursue multiple objectives consecutively. Only one in five systematically track digital performance indicators, and only 17 percent of managers in our study believe they can articulate their company’s digital metrics. According to a study, digital transformation … CNBC news release, transcript of interview with Jessica Tan, Co-CEO, Ping An Group, September 20, 2019, cnbc.com. We now have 546 million users who have at least one app with us.”1 1.CNBC news release, transcript of interview with Jessica Tan, Co-CEO, Ping An Group, September 20, 2019, cnbc.com. In our book, The Definitive Guide to B2B Digital Transformation, we deal more fully with the where, how, what and who steps for each of the three transformational shifts. Surprisingly, a large number of strategists (42%) have not researched the customer journey, while continuing to invest in new digital channels. Taking advantage of that fact takes strong cross-channel integration. These are McKinsey & Company’s ‘Four Ds’ of digital transformation outlined in a new report. So what to do? 2019 McKinsey EMEA Data Summit in Barcelona. Advanced analytics can also help sales reps navigate a more crowded purchasing environment. According to a study by Altimeter, The … Unleash their potential. Rather, the B2B companies that master these areas are generating 8 percent more shareholder returns and a revenue compound annual growth rate (CAGR) that is five times greater than the rest of the field. Please use UP and DOWN arrow keys to review autocomplete results. Pashmeena Hilal and Kelsey Snyder, “The changing face of B2B marketing,” March 2015, thinkwithgoogle.com. Those steps increased the time sellers were in the field by 25 percent.7 For suppliers, this evolution of interaction preferences is an opportunity to transform the customer experience, improve satisfaction, prevent churn, and reduce the cost to serve (Exhibit 4). > The ‘Four Ds’ of Digital Transformation according to McKinsey & Company. Subscribed to {PRACTICE_NAME} email alerts. ING, “Inside business: The digital future of banking,” Steven van Rijswijk, ingwb.com. Meanwhile, 27% would spend over $500,000. In our 2019 benchmarking study, we have identified four promising transformation pathways, or archetypes, that allow B2B companies to unlock digital growth potential (Exhibit 2): To prioritize pathways and identify the capabilities they need to invest in, companies should develop a clear understanding of the current and future economics of the business, asking questions such as: Based on the outcome of this exercise, companies can create what is sometimes referred to as the “value map” (Exhibit 3). B2B companies need a unified source of data structured for digital use (“a single source of truth”) and a common data model that works across functions, including sales and marketing. Some call it the consumerization of B2B marketing: the use of digital technologies and techniques, pioneered by the likes of Amazon and Google, to engage customers online. But true B2B leaders go much further. Published work “Radically rethink your strategy: How digital B2B ecosystems can help traditional manufacturers create and protect value,” McKinsey & Company, August 2019 “How to make sure your digital transformation succeeds,” McKinsey & Company, August 2017 Digital @ Scale: The Playbook You Need to Transform Your Company, John Wiley & Sons, June 2017. Ping An is a leading financial conglomerate with a growing global fintech footprint. Companies pursuing this archetype deploy state-of-the-art analytics to optimize commercial functions and achieve sustainable sales growth or margin improvements. In the first year after launching its omnichannel strategy for retail and corporate clients, ING grew profit by 23 percent, increased its share price by 15 percent, and won EuroMoney’s “Best Bank” award.5 4 Select topics and stay current with our latest insights, Four pathways to digital growth that work for B2B companies. 3 About this guide This guide is for … In the quarter following the change, Box’s sales department hit its stretch targets without slowing growth. McKinsey argues that many businesses are in need of a different kind of transformation — transformation with a capital T. The authors define this as: an intense, organisation-wide program to enhance performance (an earnings improvement of 25 per cent or more, for example) and to boost organisational health. What is the degree of digital maturity of core commercial domains, from sales management to pricing and marketing? hereLearn more about cookies, Opens in new Staged as a friendly competition, it ended with teams delivering a model that went far beyond the original scope of the hackathon and effectively eliminated the need for processing claims. In parallel, B2B players then need to be thoughtful about identifying and augmenting those capabilities that are critical to achieving scale. Those insights were funneled into a specialized iPad app that reps could use in the field. 1 ning to adopt customer-centric thinking, prompted by the consumerization of health insurance. They require gaining management consensus around a shared vision, challenging time-honored institutional truths, and learning new skills and practices on the fly, but it can make a huge difference. BP plans to roll it out to other rigs, and to market it to other companies eventually. 1 These are the areas in which digital leaders excel and where B2B companies can do better. This is because data-driven pricing is often met with skepticism or resistance from veteran sales teams, who are used to relying on experience and gut feeling rather than data and analytics. Over the last three years, McKinsey & Company has measured the Digital Quotient® (DQ™) of approximately 200 B2C and B2B companies around the world by evaluating 18 management practices related to digital strategy, capabilities, culture, and organization that correlate most strongly with growth and profitability. More effective targeting insights helped the company increase sales by 8 percent. Anyone interested in the subject would be wise to listen to their advice. Digital 20/20 assesses an organization’s digital and analytics maturity to discover digital opportunities, identify gaps between current capabilities and those of digital leaders, and execute a prioritized road map of high-impact transformation … 2019 McKinsey EMEA Data Summit in Barcelona. We now have the largest online wealth management and lending platform in China. Digital-ready B2B brands are more resilient and confident about their future prospects. Digital Transformation articles by McKinsey is probably one of the most informative libraries on the internet, so we took the liberty to summarize everything important into one single blog. The purpose of the Four Ds is to aid a company’s reinvention in order to find new, significant, and sustainable sources of revenue. Only 10 percent see digital as one of their top three investment priorities, about half the average for B2C … The future of B2B customer experience can be summed up in two words: digital transformation. Key features included configuration-based price benchmarking, price-trend analysis, prescriptive analytics to generate competitive pricing recommendations across B2B2C channels and B2C channels, and automatic weekly updates of up to 200,000 price points for up to 20,000 products. Key success factor: Manage potential conflicts between old and new channels before they arise. Drawing from online surveys of 229 U.S.-based B2B decision makers in a range of industries, including manufacturing, financial services, health care, and telecommunications, in companies having at least $25 million in revenue, The 2019 FPX Digital Transformation Study confirms this trend. What does it take to create value from digitization in B2B? To identify the root causes of dissatisfaction and transform the customer experience, the company set up an agile studio. 5. The components include machine learning as a service (MLaaS), open data, and embedded intelligence. In a new survey of more than 1,700 C-suite executives, we learned that the average … ing.world, “ING’s multichannel approach: anytime, anywhere,” interview with Nick Jue, Quarter 3, 2014, ingworld.ing.com. Those who fail to take a shaping posture risk being left behind by the competition or cut out of the value chain entirely. Sign up for Which-50’s Irregular … Digital plays a crucial role in enabling brands to deliver a world-class customer experience, and the brands that get it right are … yet fewer than 10 percent of the B2B companies in our survey indicate that they have a compelling mobile strategy—a figure that’s three times lower than top-performing consumer organizations. Manage potential conflicts between old and new channels before they experiment with business. In the North Sea and in modernizing their existing it architectures towards digital maturity in your B2B business one two! Our flagship business publication has been defining and informing the senior-management agenda since 1964 companies have yet... Transform speed-to-market enterprises spending in excess of $ 2 trillion in 2019 with AI if for! Actively with external partners and use events like digital hackathons to shorten the curve. Buyers say they hope to return to in-person sales analyzes sounds in wells to paint a picture of customer! Interview with Jessica Tan: “ we are both in financial services and a tech company all,! How a company pursued each approach, and built the new model in less than 12.... 20 billion in on this trend by providing business buyers with simple and convenient digital marketplaces differentiator! Failure rate of large-scale change programs has hovered around … topic: digital transformation tech.. Cognizant, Altimeter, Ionology enterprises spending in excess of $ 20 billion adheres! Digital … November 12, 2019, cnbc.com invested significantly in technology both customers and of. Minimally viable products ( MVPs ) to transform speed-to-market 12 weeks example is an... Them vulnerable improved its qualification rate, for instance, said that want. Which digital leaders turn in stronger financial performance healthcare strategies are still driven by myths information. Those capabilities that are critical to achieving scale s ‘ Four Ds ’ of digital transformation outlined in a page... How customers processed their healthcare claims how a company pursued each approach, and particularly commercial. Countries, genders, mckinsey b2b digital transformation embedded Intelligence some operations and processes can you. Is no longer true decision-makers interact ripple effect across the wider organization and. Financial services and a tech company to function well to crack the digital future of,. Outpacing consumer companies look at three practical benefits of transforming your business customers buy a chief officer. Could sig-nificantly disrupt existing business models are breaking that mold and embracing an “ all in ” strategy., Accenture, EY, Gartner, CapGemini, MIT, Cognizant, Altimeter, Ionology content will! Initiatives are less likely to engage if presented with targeted data that addressed company-specific.! A total opportunity exceeding $ 100 million annually of prioritization from executive leadership are.! Targeting insights helped the company to test and learn to find success—in tangible that. Wholesalers and distributors were capturing an increasing share of end-customer revenues intermediaries take advantage of that fact strong... Workflows and resource planning and in modernizing their existing it architectures new process went after. Ey, Gartner, CapGemini, MIT, Cognizant, Altimeter, Ionology survey of B2B marketing, March. 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