McKinsey: 5 initiatives to improve business performance

04 February 2016 4 min. read
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Technology deployment within companies remains a hot topic within the business world. In recent research, McKinsey & Company correlates improved profit margin performance for telecommunications companies with five key technological capabilities.

In the study, McKinsey & Company researches the outcome of five key technology implementations on 80 large global telcos. The IT benchmarking study, titled ‘Lessons from digital telcos: Five initiatives to improve business performance’, explores the effect of robust customer analytics, digitisation of order management, self-service customer relationship management, a simplified IT-application landscape, and automation of IT-infrastructure management on the profit outcomes of participants.

The study finds correlation between activity in the five IT areas and profit margins. Implementation of these key capabilities is, however, not always an easy task, according to the researchers. Obstacles include rigid legacy systems, overly complex IT architectures, and data sources that are not integrated in any way. However, when done well, profit for those with stronger implementations are up 43%, while those with less digitisation have a profit margin increase of 21%, on average. In a bid to identify how or why the five capabilities improve profitability, the consulting firm explores them in more detail.

McKinsey: 5 initiatives to improve business performance

1. Establish robust customer-analytics capabilities
Understanding customers and their needs, through the creation of a 360-degree view of the customer (within the bounds of consumer privacy laws and regulations), allows marketing sales and other customer-facing functions to better anticipate and deliver the needs of customers. This reduces wasted resources and cuts down on guesswork. High-margin telcos tend to outperform their peers on this front, suggesting it is an element in their wider success.

2. Digitise the order-management process
The second digital area in which successful companies operate is by delivering speed, convenience, and accessibility in the purchasing process. Replicating the success of internet giants and their ease of use in order-management has become a priority for many telcos, with centralisation of data and automation capabilities the key component. Again, top performers tend to have well established automated order-management systems that are linked within their wider value chain across a wide range of processes, including initial capture and validation of service requests to fraud checks, payment authorisations, billing, and customer communications completed quickly and cost-effectively.

3. Digitise the customer-relationship management process
Engaging with companies is made considerably easier with digital technologies, allowing consumers to quickly compare a range of services, read reviews and research fundamentals. More than 80% of auto insurance shopping is now done online, while banking customers tend to be way more active via digital channels than the traditional local branch. Engaging customers has, on the other side, become more difficult for companies as much of the information written about them comes from third parties. The deployment of a sound multi-channel effective customer-relationship management (CRM) system is helping set top performers apart from laggards. The engagement of customers through online forums and lists of frequently asked questions, for instance, costs the average telecom company just 12% of its typical call-centre baseline.

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4. Streamline the company’s application landscape
Improving a company’s aging IT system is another key differentiator between high and lower performing digital transformations. The jumble of different technologies throughout various aspects of an organisation make it sometimes difficult, the survey finds, to identify what to upgrade and what to integrate. Top performers streamline their IT landscapes – removing redundant platforms, automating core processes, and consolidating overlapping capabilities.

5. Standardise and automate the company’s IT infrastructure
The final key IT component to better performing margins is the removal of inefficient IT processes through the automation of a wide range of IT back-end business processes. The massive data pools generated from a wide range of inputs needs to be more efficiently processed rather than increasing the complexity of capabilities to process them. For this task, the consulting firm suggests pursuing a simplification and automation of various backbone IT processes and systems—for instance, automating server deployments, load balancing, and service-ticket management.