'An existential question'

'An existential question'

McKinsey partner Harry Seip says no industry is spared the disruptive effects of digital transformation

Mr Seip heads McKinsey's work on digital and analytics in Thailand. (Photo by Pawat Laopaisarntaksin)
Mr Seip heads McKinsey's work on digital and analytics in Thailand. (Photo by Pawat Laopaisarntaksin)

Ask a chief executive in New York, Beijing or Bangkok and it's a fair guess that digital transformation and innovation are forefront in their minds.

But while the largest companies in the world have invested heavily in adopting new technologies, success has been fleeting. According to a 2018 survey by McKinsey & Co, more than eight out of 10 respondents said they had undertaken digital transformations over the past five years. But only 16% said such efforts helped improve performance and resulted in sustainable change.

According to McKinsey partner Harry Seip, the key challenge in any transformation rests with execution.

"In Thailand for sure, what trips people up is that intellectually knowing something and executing it is very different," he said. "When you move closer to the customer, when you move to a digitally enabled business that is more real-time, execution becomes very important. Downloading someone else's strategy is not difficult. But setting up this execution muscle, and doing it in a daily or weekly fashion, where you are previously used to annual plans, or quarterly budgets, that is sometimes a very big step to overcome."

Mr Seip, who heads McKinsey's work on digital and analytics in Thailand, said there is broad recognition among corporate boards and executives of the need to "become more digital".

"I would argue that today, 2019, there is not an industry left anymore that can claim that digital is not a disruptive force for their business," he said.

Transformation should be viewed from three pillars, starting with a recognition of how technology is changing one's business model and what opportunities exist moving forward.

Before investing in new technologies, Mr Seip said companies should first understand how they can better create value for stakeholders through digital transformation.

The second pillar is technology transformation, and how companies can leverage artificial intelligence, blockchain, machine learning, data and the Internet of Things to enhance value. Does your company have the wherewithal and engineering skills to implement digital technologies in your current processes?

Mr Seip said the third pillar in transformation is people.

"So one issue we grapple with a lot with our clients is, 'How do we skill?' " he said. "We've climbed the mountain of why [digital transformation] is important. We've climbed the mountain of where we need to invest and where it will bring value. But now we are grappling with how to get the right people with the right skills."

While big tech giants like Google and Facebook can easily recruit the best and brightest engineers, most companies don't enjoy this luxury. Attracting and retaining talent becomes critical to sustainable success, in addition to the already considerable challenge of changing the mindset of "legacy" employees.

"It's definitely an existential question," Mr Seip said. "What is helpful is to have a very open mind and to say, yes, we have a legacy. But for the purposes of defining our future, we need to leave those constraints behind to understand what can we be.

"If you were a new startup, you would do this. But since you do have responsibilities to stakeholders and you do have a legacy, the question is how do you incorporate this?"

Mr Seip said creating the understanding of the need to "reinvent at the core" by leadership is essential.

"Changing people's mindsets, not just in digital transformation but in any transformation, has always been the most difficult part," he said.

Gamification is one tool companies can tap to help create incentives for staff to "go digital".

Mr Seip said that in the case of one mining client, workers received points for completing safety modules or inputting data about the mine in a newly created app used by the company.

In other cases, cross-discipline teams can be created to tackle specific use cases and incentivised to compete on a public "leaderboard" to encourage change.

Mr Seip said the Thai cultural norms around consensus are actually a potential strength in digital transformation.

"I think a lot of Thai companies take time to make sure that all stakeholders are involved to create a consensus," he said. "And that is actually a very powerful ability. Building consensus and working as a team is something important when you become more agile, where everything becomes much more team-based."

Mr Seip disputed the idea that for older workers change is impossible.

"What always inspires me … is that when you empower people, they actually love it, step up, and can impress and amaze more than the opposite is the case," he said with a smile.

"I actually don't believe that there are legacy employees who will never change. There might be small pockets [of resistance], and that is normal. But the majority embrace it. When you see teams that have made that adoption successfully, it is all different types of employees -- young and old, risk-averse to very new departments. It comes from being empowered, which unleashes a lot of creativity and a lot of value."

Creativity is another trait found in Thailand and the region that can be a strong asset in change, particularly as companies move to become more agile.

"It's a paradigm shift," Mr Seip said. "In the past, you might have planned, built and released something that will work for the next five years.

"Now, you still plan, but you build the minimum viable product, release as quickly as possible and then get feedback for the next version and the one beyond that. This takes a lot of creativity."

Mr Seip voiced optimism about how digital technologies will create added business value for more companies as adoption increases.

"As we digitise and make many more interactions seeable by machines, we will unlock new levels of growth," he said.

While AI and machine learning may now be the province of companies such as Google or Alibaba, such technologies and capabilities will soon be readily available to small companies.

"It's like the smartphone," Mr Seip said. "Ten years ago, no one had it. Now 4 billion people do."

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