Digital Disruption. How to react? Bestyrelsesforeningen

Transcription

1 Digital Disruption How to react? Bestyrelsesforeningen

2 Klemens Hjartar Senior Partner, Copenhagen Business Technology Office Global Lead McKinsey Digital TMT Favorit app: Vivino Favorit app: Instagram, Klemenzh123 McKinsey & Company 1

3 2004 Darpa Challenge In 2002 was the first Grand Darpa challenge for aunonomous vehicles announced. The competition was held on March 13 in 2004 in the Mojave desert None of the vehicles were able to complete the route McKinsey & Company 2

4 7 years later in 2011 McKinsey & Company 3

5 Yesterday evening McKinsey & Company 4

6 Disruptive Technology - Economic potential in 2025 $ trillion, annual Range of sized potential economic impacts Low High Mobile Internet Impact from other potential applications Cloud technology Internet of Things Automation of knowledge work Advanced robotics Autonomous and nearautonomous vehicles D printing Energy storage Advanced oil and gas exploration and recovery Renewable energy Next-generation genomics Advanced materials McKinsey & Company 5

7 What does this mean? Primary Secondary Other potential impact Implications for individuals and societies Changes quality of life, Changes health, and patterns of environment consumption Changes nature of work Creates opportunities for entrepreneurs Implications for established businesses and other organizations Shifts surplus Shifts surplus Creates new between from products and producers or producers to services industries consumers Changes organizational structures Implications for economies and governments Drives Changes economic comparative growth or advantage for Affects productivity nations employment Poses new regulatory and legal challenges Mobile Internet Cloud technology Internet of Things Automation of knowledge work Advanced robotics Autonomous and near-autonomous vehicles 3D printing Energy storage Advanced oil and gas exploration and recovery Renewable energy Next-generation genomics Advanced materials SOURCE: McKinsey Global Institute analysis McKinsey & Company 6

8 What does this mean? Primary Other potential impact Secondary Mobile Internet Implications for individuals and societies Changes quality of life, Changes health, and patterns of environment consumption Changes nature of work Creates opportunities for entrepreneurs Implications for established businesses and other organizations Shifts surplus Shifts surplus Creates new between from products and producers or producers to services industries consumers IT, big data, and advanced analytics everywhere Combinations of technologies will multiply impact Changes organizational structures Implications for economies and governments Drives Changes economic comparative growth or advantage for productivity nations Affects employment Poses new regulatory and legal challenges Cloud technology Internet of Things Benefits will not be evenly distributed Automation of knowledge work Consumers will be big winners Advanced robotics Autonomous and near-autonomous vehicles 3D printing Entrepreneurs have a bright future The nature of work will change Energy storage Advanced oil and gas exploration and recovery Renewable energy Next-generation genomics Advanced materials Business models and the pursuit of surplus Incumbents must evolve on multiple fronts fast Policies and rules will have a hard time keeping up (but must) SOURCE: McKinsey Global Institute analysis McKinsey & Company 7

9 November 30, 2015 $521bn $313bn $296bn $428bn McKinsey & Company 8

10 Unprecedented number of Unicorns SOURCE: CB Insights McKinsey & Company 9

11 Party like it s 1999?? McKinsey & Company 10

12 However the world did actually change Researched online Percent of purchasers in category Still in store Grocery HH Products DIY Health & Beauty Lg. Appliances Footwear Home décor Mobile phones DVD/Video Clothing Gone to digital Digital battleground Electronics Video Games Books Comp HW/SW Music Purchased online Percent of purchasers in category SOURCE: iconsumer research 1 As a percentage of those who bought a product in the respective category in the last 6 months McKinsey & Company 11

13 and in some industries value shifted radically between participants Total year-end RIAA (US) revenue statistics 8-track LP Music video Cassette Digital 1 CD USD B (adjusted 2013) 15 Value in the ecosystem is mostly captured by recording labels and artists 1999 illegal upstarts (e.g., Napster) proves download potential April 2003, itunes store launch. Remaining value in the ecosystem shifts dramatically towards itunes Spotify is launched and becomes successful when model moves to mobile Includes synchronization, on-demand streaming (ad-supported and paid subscription, ringtones, kiosk, download music video, download album, download single SOURCE: Recording Industry Association of America (RIAA) McKinsey & Company 12

14 Few sectors are immune to disruption Incumbent Attacker Transport Retail Shipping Leisure Manufacturing McKinsey & Company 13

15 Attackers always change the game on cost ESTIMATES, BASED ON EXPERT S EXPERIENCE Airlines example Operating costs, EUR cent per ASK (available seat kilometres), 2004, adjusted 1 Banking example Customer acquisition costs, USD per customer Product, distribution, G&A ,1-66% -41% 300 Infrastructure (station, fees, ground handling) ACMI 2 + fuel 6.5 3,8 0, , ,2 4,2 3,1 2, Very low 4 Top 3 majors Traditional bank Pure online bank 1 Stage length: 800 km; inflation adjusted to 2004; adjusted for seat density 2 Aircraft, crew, maintenance, insurance 3 Cost mainly on promotion per expert s estimation 4 If they acquire the customers from the already existing platform users SOURCE: IATA AETF; AEA; annual reports; Expert interviews, McKinsey analysis McKinsey & Company

16 Increase quality Line spacing on MRZ too broad McKinsey & Company 15

17 and replace labour McKinsey & Company 16

18 In turn putting huge pressure on pricing Example: retail banking products Consumer finance Revenue 1 Profit 1-40% -60% Payments -30% -35% SME lending -25% -35% Sample analysis: consumer finance Revenues, 2025, $ bn ~-40% Wealth management 2-15% -30% Mortgages -10% -20% 2025 before disruption Lost volumes Price erosion Captured by Fintechs 3 Total ROE impact: -6 pps 1 Compared to 2025 projections without the impact of Fintech and digital attackers; Profit numbers include the impact of savings on operating costs as a result of digital; Revenues are after risk cost, Profits are after tax; figures are rounded 2 Excluding deposits 3 Includes currently unbanked segments SOURCE: McKinsey Panorama McKinsey & Company 17

19 Transformation pattern is relatively predictable Customers shift and Incumbents struggle Tipping point New normal Time Start-ups exploit new tech New technology emerges Digital models proliferate Innovative startups disrupt Early adopters emerge 5 10 years Mainstream customers shift Advanced incumbents start adapting Laggards shrink / die McKinsey & Company 18

20 3 important lessons we ve observed Face up to the new (superior) economics Tipping point New normal It s not about the Innovator it s about their model Pay attention to (new) customer behaviour Laggards shrink / die McKinsey & Company 19

21 So, what can we learn from all of these Unicorns McKinsey & Company

22 Unicorns High aspirations for value creation $50bn 143 $40bn Unicorns 1 $30bn $20bn $507bn $10bn Collective Valuation SOURCE: CB Insights, Press Search, McKinsey analysis 1. Privately held start-ups valued at >$1bn McKinsey & Company 21

23 Retail B2C proposition is leading the way Number of Unicorns Online Retail Social/ Entertainment Cyber & Software services Corporate Services Financial Services Data/ Analytics Hardware Healthcare Taxis 7 7 Real Estate 2 1 Education 2 2 SOURCE: CB Insights, Press Search, McKinsey analysis 1 $36bn $2bn $42bn $79bn $28bn $75bn $55bn $27bn $27bn $50bn $85bn Business 2 Consumer Business 2 Business Verticals that may see more business model disruption McKinsey & Company 22

24 Business models are being innovated # 1 / Value XYZ as a Service Robo- Frontline Experience overlay Global Niche Digital Plumbing Services provided at a variable cost and with low to zero tech footprint Substitute traditional frontline distribution with algo/ smart data analytics Create frictionless overlays on typical everyday tasks at an improved price At-scale focus on specific segment (e.g. Sports fans, Interior Designers) on global basis Next generation technology tools and functionality that underpin new digital offerings 24 / $61bn 11 / $35bn 19 / $105bn 17 / $50bn 22 / $40bn SOURCE: Press Search, McKinsey analysis 1. Excludes 50 players with copycat (23/ $76b) or proprietary tech (27/ $141bn) models McKinsey & Company 23

25 Knip Experience overlay Unicorn in training Taking over your insurance relationship in minutes Select where you think you have 3-page Very Hand little over sign-up information your process relationship required insurance McKinsey & Company 24

26 Drosophila melanogaster the common fruit fly SOURCE: McKinsey & Company 25

27 Incumbents experience disruption slowly then suddenly Netflix vs. Blockbuster ( ) Revenues, USD billions 6.0 Physical rental 2.5 Digital rental McKinsey & Company 26

28 The digital playbook is by now well known Act quickly Build new businesses Think like an attacker Focus on the customer Innovate Experiment Hire new talent McKinsey & Company 27

29 But the playbook is flawed Act quickly Build new businesses Think like an attacker Focus on the customer Innovate Experiment Hire new talent Risks running in the wrong direction Doesn t fix your core business You are not an attacker Faster horse problem Not really what incumbents are known for Doesn t move the needle You have too many people already McKinsey & Company 28

30 I suggest an alternative play book Act quickly Build new businesses Think like an attacker Focus on the customer Innovate Experiment Hire new talent Act thoughtfully Transform your core business Think like a winning incumbent Focus on agility Copy proven models Invest at scale Build new capabilities McKinsey & Company 29

31 Are you using your existing assets while you still can? Customers Data Balance sheet Cash flow Brand Talent Engage Mine Reshape Invest Digitise Repurpose McKinsey & Company 30

32 Software is eating the world