McKinsey: We often hear about the disparity between companies leading in digital and AI adoption versus those lagging behind. Could you elaborate on how this gap has widened in recent years and its impact on company performance?
Louise Herring: We’ve seen a really noticeable gap between leaders and laggards over the years, and it’s only expanding. I think it’s incredibly important for companies to realize the extreme width of that gap. Depending on the industry, the gap between leaders and laggards now accounts for two to six times the difference in total shareholder return, which is staggering when you think about it. Not only is that gap already quite profound, but it’s actually growing. Over the last three years, the gap has increased by 60 percent, which shows how important it is for companies to really be thoughtful about where they’re leading in technology.
McKinsey: Why is tech underdelivering for some companies?
Louise Herring: Despite an exciting trend of companies trying to adopt digital and AI as real transformation levers, there’s absolutely a large divide between the ones trying and the ones succeeding. Of all the different ways we examine this, less than 30 percent of companies actually realize the benefits they were expecting. We’ve done a lot of research around this, and while there’s a few key levers, many of the shortcomings actually boil down to humans, rather than the technology.
First, companies must be clear about what they’re trying to achieve and focus their resources and entire organization behind the right objective. Another major pitfall is overfocusing on the technology. Although new technology is incredibly exciting, we find that tech teams alone can’t drive organizational transformation—which often comes through real change embedded in the frontline, and new ways of working throughout the enterprise. And so unless both parts are brought together in a really coherent way, the results aren’t realized at the end of the day.
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McKinsey: With McKinsey’s emphasis on the “Never Just Tech” perspective, could you explain how McKinsey’s approach goes beyond just technological solutions to encompass broader organizational strategies and cultural considerations?
Louise Herring: I think the most important thing at the heart of McKinsey’s approach to tech transformation and change is that it’s never just tech. At the end of the day, there are some incredibly important pieces around it—which are all human-led—and constitute some of the most complicated, difficult keys to success. And the biggest failures always ignore them completely.
Being successful, I think, starts with defining the desired change. What is the organization’s vision? What, from the top down, is it trying to achieve? How will it sequence? What is its stance on leading versus following?
Second, at the end of the day, every piece of technology should be in service to the customer, either internally or externally, which we find creates a huge role for many different talents. That includes designers making sure the customer journey is reimagined brilliantly for maximum ease, and translators really thinking through the business goal and how it meshes with the way AI and other technologies are being used.
Finally, there’s a really important piece around adoption, and scaling everything that’s been built. Very rarely do we find the solution, “Build it, throw it over the wall, and everyone will love it,” to be highly effective. You really need to take the time to think about those users you’re going to start with and ask yourself, how do you build momentum? How do you know what’s working, and what’s not working? Where do you need to pivot? All of those great change disciplines are incredibly important all the way through this journey.