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March 14, 2024
This week’s headline findings:
Customer demands. Organizational customer care leaders find themselves trapped in no-man’s-land as they balance preparing for an AI-enabled future with managing escalating customer expectations in a rapidly digitizing contact center environment. Partners Eric Buesing, Julian Raabe, and coauthors report that more than 80 percent of organizations are investing in generative AI or plan to do so soon, even as 57 percent anticipate increased call volumes in the next one to two years. Leaders are responding by prioritizing technology upgrades, operational efficiency, employee upskilling, and outsourcing partnerships—all while enhancing the customer experience and hitting revenue targets.
Cyber risks in finance. Financial institutions are rapidly adopting emerging technologies, such as cloud computing and AI, but 70 percent believe they are underspending on cybersecurity to mitigate growing risks. A recent report from partner Justin Greis, McKinsey colleagues, and collaborators at the Institute of International Finance reveals shortfalls in key capabilities such as third-party risk management (a top weakness for 65 percent of institutions) and attracting skilled talent. The report urges strategic alignment of tech priorities with security investments to harness these transformative technologies securely.
Data-driven railways. AI could unlock $13 billion to $22 billion annually for the relatively data-sparse railway industry. Still, only 25 percent of rail companies have successfully adopted AI at scale, write senior partner Nicola Sandri and coauthors. The most mature at-scale use cases include shift optimization, predictive maintenance, and security. The authors note that railways can unlock these technologies’ transformative potential by setting clear technology objectives, investing in talent upskilling, and partnering with data-driven organizations.
Further notable analysis from McKinsey:
A recent edition of Author Talks features Chris Dixon, a general partner at Andreessen Horowitz, speaking about his new book, Read Write Own: Building the Next Era of the Internet (Random House, January 2024). Dixon argues that the internet has become overly centralized and makes the case for a decentralized architecture using blockchain technology to restore openness, empower users and creators, and promote innovation.
The case study collection Rewired in Action illuminates companies that have launched digital transformations to build value. Supported by technical and industry expertise from McKinsey, these organizations have changed their trajectories through the integration of digital and AI.
This briefing note, based on McKinsey’s latest published insights, was prepared by Jermey Matthews, an editor in McKinsey’s Boston office.
Do these insights resonate with you? What else should we be writing about now? Tell us by emailing insightstoimpact@mckinsey.com.
March 7, 2024
Why organizational surgery may be needed before companies can see the full benefits of generative AI. Our weekly digest explores that topic and more.
This week’s headline findings:
Organizational rewiring. Companies are finding that realizing the potential value of generative AI (gen AI)—for everything from customer service to content creation—is harder than expected. According to senior partners Eric Lamarre, Alex Singla, Alexander Sukharevsky, and Rodney Zemmel, to truly benefit from gen AI, organizations must focus on rewiring the business for distributed digital and AI innovation. That involves developing the capabilities to broadly innovate, deploy, and improve scalable solutions. They note that the cost to build an AI model is often a small portion (10–15 percent) of the total cost—the real investment lies in making it work at scale.
Banking on gen AI. Gen AI has the potential to enhance risk management, compliance, and decision making in the banking industry. Senior partner Ida Kristensen and coauthors share how banks can improve efficiency and strengthen risk prevention by deploying virtual experts, automating manual processes, and accelerating code development. However, banks may also need to build or invest in high-quality data sets to ensure the accuracy of their gen AI applications.
Board director responsibilities. As the business world becomes more complex, board directors face a growing number of responsibilities, including keeping up with the latest developments in geopolitics, technology, and sustainability. They’re also expected to engage more deeply with senior management on strategy, investments, M&A, talent, and organizational issues. In a recent episode of the Inside the Strategy Room podcast, McKinsey senior partner Frithjof Lund and corporate board members Karen McLoughlin and Steven Sterin share tips that board directors can use to create value, including inviting new directors to meet on-site with the company’s frontline leadership. Given the likelihood of ever-increasing responsibilities, Sterin suggests that directors may also need to consider reducing the number of boards they serve on.
Further notable analysis from McKinsey:
A recent edition of Author Talks features former executive vice president and COO of PepsiCo Grace Puma speaking about her new book, Career Forward: Strategies from Women Who’ve Made It (Scribner/Simon & Schuster, February 2024), coauthored with Christiana Shi, a former Nike executive and McKinsey senior partner emeritus. Puma details how working women can shatter the glass ceiling and describes five essential elements that define long-term career success.
The case study collection Rewired in Action illuminates companies that have launched digital transformations to build value. Supported by technical and industry expertise from McKinsey, these organizations have changed their trajectories through the integration of digital and AI.
This briefing note, based on McKinsey’s latest published insights, was prepared by Jermey Matthews, an editor in McKinsey’s Boston office.
Do these insights resonate with you? What else should we be writing about now? Tell us by emailing insightstoimpact@mckinsey.com.
February 29, 2024
Will AI be to the Fourth Industrial Revolution what steam was to the first? Our weekly digest explores that topic and more.
This week’s headline findings:
Just as the First Industrial Revolution was powered by steam, our current Fourth Industrial Revolution (4IR) will be powered by AI. Enabled by the capture of terabytes of data from a broad range of sources, AI can accelerate industrial innovation. Senior partner Enno de Boer and coauthors suggest that organizations at the forefront of 4IR won’t, for instance, run narrow trials to transform factories but will instead use entire factories as pilots for networkwide deployment.
A compelling equity story is necessary to attract capital from large, sophisticated investors. Partners Jamie Koenig, Anna Mattsson, and coauthors detail mistakes companies often make when attempting to convince these investors. To convey a winning equity story, leaders should avoid canned presentations and instead articulate a plan for long-term value creation that’s backed by evidence of tangible steps already taken. It’s important to focus on a limited number of vital themes and make sure they’re contextualized within broader industry trends.
Generative AI (gen AI) could be transformative for American state governments. Gen AI is here now, can be user-friendly, and doesn’t necessarily require an overhaul of existing IT infrastructure. Senior partners Gayatri Shenai, Tim Ward, and coauthors say state governments that seize the gen AI opportunity could be rewarded with improved operational efficiency, better resident experiences, useful insights from existing data sets, and enhanced talent management.
Further notable analysis from McKinsey:
A recent edition of Author Talks features organizational psychologist Robert I. Sutton speaking about his new book, The Friction Project: How Smart Leaders Make the Right Things Easier and the Wrong Things Harder (St. Martin’s Press/Macmillan Publishers, January 2024). Sutton explains how leaders can reduce bad friction (that harms productivity) and inject good friction (that prevents, for instance, unethical behavior) into their organizations.
The case study collection Rewired in Action illuminates companies that have launched digital transformations to build value. Supported by technical and industry expertise from McKinsey, these organizations have changed their trajectories through the integration of digital and AI.
This briefing note, based on McKinsey’s latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.
Do these insights resonate with you? What else should we be writing about now? Tell us by emailing insightstoimpact@mckinsey.com.
February 22, 2024
Is M&A poised for a comeback? Our weekly digest explores that topic and more.
This week’s headline findings:
Global M&A activity fell by 16 percent in 2023. But a surge in the fourth quarter suggests that M&A could be on a path to recovery. Senior partners Jake Henry and Mieke Van Oostende say the market remains durable, in part because M&A is a vital strategic lever for companies adapting to shifts in the business landscape. Much cash remains on the sidelines, and healthy job growth, robust consumer spending, and subsiding inflation fears all point to a more favorable environment for M&A in 2024.
Self-assessments gathered from more than 100 CEOs, mostly representing companies headquartered in Asia, reveal the issues weighing on corporate leaders today. Many CEOs report that they are least confident in their ability to engage effectively with board members and to allocate resources objectively (especially when it means shutting down initiatives). But most CEOs feel secure in their ability to set a vision for an organization, remain true to their convictions, and practice gratitude and humility. Senior partners Gautam Kumra, Joydeep Sengupta, and Mukund Sridhar note that when CEOs take the time to pause, reflect, and invest in their learning, they can improve their confidence across a broad range of duties.
Further notable analysis from McKinsey:
A recent edition of Author Talks features Andrew McAfee, principal research scientist at the Massachusetts Institute of Technology’s Sloan School of Management, speaking about his new book, The Geek Way: The Radical Mindset That Drives Extraordinary Results (Little, Brown and Company/Hachette Book Group, November 2023). McAfee explains his theory that a corporate culture built on obsessiveness and unconventionality is more likely to thrive.
The case study collection Rewired in Action illuminates companies that have launched digital transformations to build value. Supported by technical and industry expertise from McKinsey, these organizations have changed their trajectories through the integration of digital and AI.
This briefing note, based on McKinsey’s latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.
Do these insights resonate with you? What else should we be writing about now? Tell us by emailing insightstoimpact@mckinsey.com.
February 15, 2024
Why do healthy organizations outperform unhealthy ones by as much as three to one? Our weekly digest explores that topic and more.
This week’s headline findings:
More than two decades of McKinsey research shows that organizational health remains the top indicator of a company’s long-term success and sustained performance. According to McKinsey senior partner Arne Gast and coauthors, healthy organizations exhibit four foundational behaviors, among them a clear plan to execute their vision and strategy and a keen awareness of their position in the competitive landscape. They also deliver three times the TSR of unhealthy organizations. In one study, companies that improved their organizational health saw a notable 18 percent increase in EBITDA within just a year.
In the US, Black residents continue to lag their White neighbors in health, economic, and social outcomes, according to a report on the impact of location on the state of racial equity in the US. On a recent episode of The McKinsey Podcast, McKinsey partner JP Julien notes that Black residents are doing better in the suburbs, which benefit from their proximity to high-growth cities, than in other locations but not nearly as well as they could be. Julien says that closing the racial wealth gap will require sustained private and public investment in housing, education, and economic opportunities.
For much of the past decade, the medtech industry enjoyed strong results. In recent years, however, performance has been mixed. In 2023, the US Food and Drug Administration approved a record number of novel devices, but medtech companies’ profits still fell short of investor expectations. McKinsey senior partners Karsten Dalgaard, Gerti Pellumbi, and Peter Pfeiffer and colleagues expect another strong year of innovation in 2024, especially in the cardiovascular, digital-health-device, and neuromodulation segments. Industry growth could exceed prepandemic rates in the new year, with China, Japan, and the US continuing to lead the way, but performance across geographies could remain uneven.
Further notable analysis from McKinsey:
A recent edition of Author Talks features Howard Friedman, a data scientist, health economist, and adjunct professor of health policy and management at Columbia University, speaking about his new book Winning with Data Science: A Handbook for Business Leaders (Columbia Business School Publishing, January 2024). Friedman says that business leaders can get the most from their data science teams by having conversations, learning basic concepts and frameworks, and asking good questions.
The case study collection Rewired in Action illuminates companies that have launched digital transformations to build value. Supported by technical and industry expertise from McKinsey, these organizations have changed their trajectories through the integration of digital and AI.
This briefing note, based on McKinsey’s latest published insights, was prepared by Jermey Matthews, an editor in McKinsey’s Boston office.
Do these insights resonate with you? What else should we be writing about now? Tell us by emailing insightstoimpact@mckinsey.com.
February 8, 2024
Differences in outcomes for Black Americans can be tied to community types. Our weekly digest explores topic and more.
This week’s headline findings:
A new report on the state of Black residents looks at differences in outcomes for Black Americans living in various types of communities. Outcomes are broadly better in suburban and high-growth areas of the United States, but these places generally have smaller Black populations. In almost no areas are outcomes for Black residents on par with those of their White neighbors, and, at current rates of change, it could take centuries to achieve racial parity within communities. Senior partner Shelley Stewart III and coauthors identify affordable housing and early-childhood education as priority areas for action when it comes to narrowing racial gaps in a wide range of locales.
The payments industry is confronting greater risk, intensifying regulatory scrutiny, and shifting global standards. There are indications that delinquency levels could ramp up, which may render some prior credit models unreliable. Prioritizing risk management could help payments services providers reduce potential liabilities, protect customers, and maintain regulatory compliance. But risk management isn’t only about downside: partners Ishanaa Rambachan, Julian Sevillano, Vasiliki Stergiou, and coauthors say that risk can be a lever for growth. With strong risk management in place, companies can consider, for instance, entering markets or segments that they might previously have avoided.
The medical-aesthetics market, which includes neuromodulators (such as injectable Botox) and dermal fillers, has climbed steadily since 2019, with private-equity acquisitions growing approximately 30 percent a year from 2019 to 2021. Senior partners Olivier Leclerc, Nils Peters, and coauthor point to manufacturer innovations and an increasingly diverse consumer base as reasons to expect continuing resilience. Analysis suggests the market for medical aesthetics is potentially underserved, as many consumers say they plan to try a medical-aesthetics product in coming years.
Further notable analysis from McKinsey:
A recent edition of Author Talks features Mohammed Alardhi, executive chairman of Investcorp, speaking about his new book, Connecting to the Future: A Blueprint for Dynamic Leadership (Simon Element/Simon & Schuster, October 2023). Alardhi explains how the situational awareness he developed while flying fighter jets for the Royal Air Force of Oman has helped him navigate the world of investment and asset management.
The case study collection Rewired in Action illuminates companies that have launched digital transformations to build value. Supported by technical and industry expertise from McKinsey, these organizations have changed their trajectories through the integration of digital and AI.
This briefing note, based on McKinsey’s latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.
Do these insights resonate with you? What else should we be writing about now? Tell us by emailing insightstoimpact@mckinsey.com.
February 1, 2024
What challenges and opportunities await private markets in 2024? Our weekly digest explores that topic and more.
This week’s headline findings:
Private markets face another year filled with uncertainty. Fundraising and overall deal volume were slow in 2023 and might see only modest growth in 2024. Amid this context, senior partners Fredrik Dahlqvist, Alastair Green, David Quigley, and coauthors identify ten considerations for private-market decision makers. The authors suggest that larger funds could continue to be in favor, infrastructure investing could accelerate, and real estate deal volume could ramp back up.
Individual US states could play a vital role in America’s decarbonization efforts. States should consider how to access and use national subsidies to help advance an orderly energy transition. Senior partner Adi Kumar and coauthors propose that state-level leaders can look for ways to convene public and private sector stakeholders, develop integrated energy transition plans, coordinate infrastructure projects, and catalyze the development, adoption, and scaling of climate technologies.
Semiconductor demand is expected to keep growing. Senior partners Ondrej Burkacky, Matteo Mancini, Mark Patel, and coauthors submit that, to meet this increased demand, semiconductor manufacturers could expand operations into new regions. In exploring this greenfield opportunity, manufacturers should look for locations that are secure enough to minimize supply chain risks, have access to plentiful renewable resources, and can potentially benefit from government-sponsored subsidies.
Further notable analysis from McKinsey:
A recent edition of Author Talks features Moshik Temkin, a fellow at Harvard University’s Belfer Center for Science and International Affairs, speaking about his new book, Warriors, Rebels, and Saints: The Art of Leadership from Machiavelli to Malcolm X (PublicAffairs/Hachette Book Group, November 2023). Temkin says that history offers examples illuminating a wide range of leadership styles.
The case study collection Rewired in Action illuminates companies that have launched digital transformations to build value. Supported by technical and industry expertise from McKinsey, these organizations have changed their trajectories through the integration of digital and AI.
This briefing note, based on McKinsey’s latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.
Do these insights resonate with you? What else should we be writing about now? Tell us by emailing insightstoimpact@mckinsey.com.
January 25, 2024
Could closing the women’s health gap improve the global economy? Our weekly digest explores that topic and more.
This week’s headline findings:
Women spend 25 percent more time in poor health than men, and more than half of this gap occurs during women’s working years. Expanding research into women’s health issues could improve lives while also boosting productivity. In a new report from the McKinsey Health Institute, senior partners Kweilin Ellingrud, Lucy Pérez, and their coauthors say that for every $1 invested in women’s health—including funding to address medical conditions that disproportionately affect women—$3 in economic value could be created. The impact on the global economy could equate to at least $1 trillion annually by 2040.
In a Davos debriefing, senior partner Ishaan Seth recaps banking-related themes that emerged from the recently wrapped World Economic Forum Annual Meeting. Generative AI (gen AI) was not a major topic at last year’s event, but this year, it was nearly impossible to have a conversation that didn’t touch on its implications. Ensuring preparedness for “crucible moments”—pivotal decision points that can make or break a company—is also claiming an increasing share of business leaders’ attention amid the current context of uncertainty. And while Davos delegates were largely hopeful about the possibility of an economic soft landing and pleasantly surprised at the ongoing resilience of consumer spending, banking leaders (who are acutely aware that consumer savings have become heavily depleted over the past year) still see a macroeconomic picture marked by fragility.
The shifting macroeconomic landscape could create intensifying competition within the wealth management industry in the United States. Many wealth managers are implementing more affordable client acquisition strategies, such as direct-to-consumer marketing. Meanwhile, clients are increasingly seeking one-stop-shop solutions. Senior partners Jonathan Godsall, Jill Zucker, and coauthors say that wealth managers could reposition their franchises by pursuing strategies such as expanding their offerings, leveraging gen AI capabilities, and reallocating resources to highest-conviction priorities.
Further notable analysis from McKinsey:
The case study collection Rewired in Action illuminates companies that have launched digital transformations to build value. Supported by technical and industry expertise from McKinsey, these organizations have changed their trajectories through the integration of digital and AI.
This briefing note, based on McKinsey’s latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.
Do these insights resonate with you? What else should we be writing about now? Tell us by emailing insightstoimpact@mckinsey.com.
January 18, 2024
Will 2024 offer stagnation—or a chance to lift productivity? Our weekly digest explores that topic and more.
This week’s headline findings:
Ongoing economic uncertainty could provide companies with a three-sided productivity opportunity. By upskilling workers and updating operations, offsetting higher input prices and interest rates by leveraging capital, and investing in technology and innovation, companies can boost their growth and profitability even while navigating a shifting landscape. Senior partners Asutosh Padhi, Sven Smit, and their coauthor say that business productivity gains writ large could eventually translate into GDP growth, higher living standards, and the advent of future abundance.
Thirty percent of CEOs don’t make it past year three in the role. In discussions with dozens of CEOs from around the world, senior partners Carolyn Dewar and Vik Malhotra have found that many CEOs feel they could have performed better in year one. Four key elements of preparation can help a prospective CEO hit the ground running: assess your motivations and expectations, inform your outlook on the future of your company and industry, inject humility into your perspective, and deeply understand the board’s selection process so you can align your vision with it.
More than half of employees say they are disengaged at work, according to recent McKinsey research. Senior partner Aaron De Smet and coauthors suggest that employers can use a short quiz to help determine where workers fall on the satisfaction spectrum. By understanding employee archetypes—from disruptor to thriving star—and improving engagement through different tactics tailored to each group, employers can create healthier workplaces while improving organizational performance.
Further notable analysis from McKinsey:
The case study collection Rewired in Action illuminates companies that have launched digital transformations to build value. Supported by technical and industry expertise from McKinsey, these organizations have changed their trajectories through the integration of digital and AI.
This briefing note, based on McKinsey’s latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.
Do these insights resonate with you? What else should we be writing about now? Tell us by emailing insightstoimpact@mckinsey.com.
January 11, 2024
Which digital ideas are flying under the radar? Our weekly digest explores that topic and more.
This week’s headline findings:
Generative AI (gen AI) is getting a lot of attention, but it’s important that business leaders not ignore other digital topics that are core imperatives. Senior partners Kate Smaje and Rodney Zemmel identify ten ideas flying slightly under the radar that could help shape the modern business landscape. Among them: innovators dominate headlines, but only those that scale a technology can dominate markets (more than 40 percent of digital and AI transformations stall out at the scaling phase); well-implemented digital solutions compound competitive advantages (the distance between digital AI leaders and their competitors has increased by 60 percent over the past three years); and—as simple as it sounds, it’s sometimes overlooked—the ultimate purpose of new digital initiatives is to build value (organizations that lead successful transformations deliver, on average, 2.7 times the value they initially expected).
Regulatory bodies are weighing possible policies governing the use of AI and gen AI. Concerns involve issues such as intellectual property infringement, privacy violations, and the spread of misinformation. Senior partner Daniel Mikkelsen and coauthors say organizations should prepare now by self-regulating to avoid potential legal, financial, and reputational risks. Among the no-regrets actions that organizations can take today: create transparency on AI and gen AI usage, implement governance structures that ensure oversight and accountability, and educate users about their individual rights.
When a CEO prepares to exit the role, the moment is fraught with risks for both the executive and the organization. Finding the right time can be difficult, as many CEOs feel they can’t leave when times are tough but don’t want to leave when things are going great. In an appearance on McKinsey’s Inside the Strategy Room podcast, senior partners Carolyn Dewar, Kurt Strovink, and partner Blair Epstein say CEOs should prepare for their successions (in consultation with their boards) from day one, ensure their potential successors receive proper leadership development and experience, and err on the side of leaving too early instead of too late. After the transition happens, former CEOs should get out of the way (and consider taking some time off before diving into anything else).
Further notable analysis from McKinsey:
The case study collection Rewired in Action illuminates companies that have launched digital transformations to build value. Supported by technical and industry expertise from McKinsey, these organizations have changed their trajectories through the integration of digital and AI.
This briefing note, based on McKinsey’s latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.
Do these insights resonate with you? What else should we be writing about now? Tell us by emailing insightstoimpact@mckinsey.com.
For McKinsey’s 2023 perspectives on sustainable and inclusive growth, visit our archive of briefing notes that were published throughout the year.
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