[Interview] McKinsey’s Michael Bloch on Digital Transformation Strategy

A company’s digital transformation strategy will make or break their success in the rapidly evolving global market. This vital element has organizations around the world turning to leading experts to figure out how they can adopt new technology and adapt to the digital workplace.

One such expert is Michael Bloch, Senior Partner at McKinsey’s Global Business Technology Office, based in Tel Aviv. Now at McKinsey for more than 19 years, Michael has served clients across multiple industries with a special emphasis on support function transformation, large performance transformation programs and technology-driven innovation. Michael leads McKinsey’s fast-growth tech service line in Israel and spends much of his time working on FinTech with both global banks and innovative startups.

Today, he shares his insights from his experience leading medium and large companies through digital transformation.

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WalkMe Team: Tell us about how you came to be involved with digital transformation strategy and what you bring to the table when working with companies undergoing digital transformation?

Michael Bloch: I have been helping companies transform their operations leveraging technology and operations for nearly 20 years.

These transformations have gradually moved from the back office to encompass entire companies and value chains to the point that no company today is immune to digital attackers and competitors exploiting new technologies better than them.

It is only logical that McKinsey and I are moving to help our clients deal with these new threats and opportunities.

WalkMe: Digital transformation is quite the buzz phrase these days. When did this first appear on your radar as something distinct from change management or tech implementation? And what makes the digital transformation strategy different?

Bloch: The largest tipping point I see is that in recent years entire industries have been transformed. Think retail with Amazon or media with Netflix and iTunes as examples.

This has completely upset competitive dynamics, forcing some players to close shop and drastically compress margins. At that point, no company in any industry can call itself immune to this disruption.

This also means that the decision-makers in charge of thinking through the technology strategy are moving from the CIO and COO to the CEO, board of directors and other tech leaders. (I first wrote on the topic five years ago, see here).

WalkMe: Do you think decision makers are putting enough emphasis on digital transformation? Do you see any trends with which decisions makers are generally on board or not?

Bloch: I see all our clients (mostly medium and large-sized corporations) thinking through their response to the trends of digital value chains, technology-enabled business processes and new customer value propositions.

Where they differ is in their level of ambition to respond to these trends and the degree of urgency.

Some organizations set aside billions of dollars to transform their systems, processes, products and customer propositions. They set up new dedicated structures within their organizations to prepare their response, and elevate these topics to the highest level in the organization and ensure that all managers across the globe reflect on how to best leverage digital.

Others leave it to dedicated units separate from the line, launch small-scale pilots and let themselves be overrun by faster and nimbler competitors or attackers.

Time will tell but I am firmly convinced the latter’s lack of performance will become visible within a few years.

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WalkMe: Many companies are looking to digitally transition their employees and the company itself. Can you tell me a bit about the greatest challenge you have seen in technology adoption and digital transformation? What would have eased the process?

Bloch: The most effective players understand that innovation is not something you limit to a few thinkers or separate units in the organization.

Every employee needs to be engaged in this process. As such, the best organizations bake technology-enabled strategic thinking in the strategy development process of every unit, allow employees to propose innovations and fund the best, enable employees to experiment with new technologies and decide quickly whether to start or stop new initiatives based on clear KPIs for success.

Another key driver of transformation is the realization that 90%+ of the innovation is happening outside the walls of the corporation. As such, setting up partnerships and dialogue with innovators (often startups, universities and research labs), being in the right innovation clusters (be it Silicon Valley, Boston, Israel or Korea) and interacting with the innovation ecosystem become critical capabilities to develop.

In open innovation, some industries (e.g., pharma and high-tech) got this right years ago, others (e.g., banking and insurance) are still learning and experimenting.

WalkMe: You’ve worked on FinTech issues, what is unique to the digital transformation strategy of a financial institution and how is FinTech meeting (or not meeting) those needs and challenges?

Bloch: FinTech most often refers to the thousands of startups aiming to reinvent part of the customer experience in banking and insurance. What is unique in these industries is the high amount of regulation and compliance with laws and standards.

Banking has been transformed by technology for 20+ years. But, partly because of regulation, partly because of customers’ conservative attitudes, the overall pace of the transformation has been slower than other industries.

In banking, the FinTech startups often provide only specific services that cover only part of the needs of a typical banking customer. For example, they focus on asset management, international payments or peer-to-peer loans). After a few years where these FinTechs thought they would completely replace banks, they have realized that their best bet is to either remain as focused attackers or collaborate with banks.

As such, banks’ digital transformation is a combination of their own efforts to transform processes, products and customer experiences to match these niche attackers as well as collaboration with FinTechs which bring complementary technologies and products to enhance bank’s offerings.

WalkMe: Is digital transformation a forever ongoing process? Will we ever reach the finish line?

Bloch: As long as there are new technologies and innovative applications of those technologies to business problems, there will be a need for organizations to innovate and evolve.

The next big frontier is artificial intelligence (e.g., machine learning, robotics, cognitive computing, natural language processing). As these technologies become practical and useful at scale, there will be even more need to respond and innovate.

McKinsey’s Global Institute estimates that 30% of 300 million knowledge workers jobs will be affected by these technologies, with massive implications for worker retraining, new approaches to business processes and innovative customer interfaces.