That means explaining how the value proposition and strategy will impact customer experience, growth, and talent-and communicating this perspective consistently across internal and external forums. ![]() Not only should organizations clearly articulate software’s role in their existing culture, but they also need to ensure that the culture drives customer-centric innovation and fosters a “software mindset.”Įmbedding software into organizational culture requires, first and foremost, that companies outline a clear vision for their software business. Build a software- (and customer-) centric cultureįor most legacy companies, cultural change is the biggest challenge in digital transformations. Those principles align broadly with cross-sector trends examined in McKinsey’s recent software transformation research. This expectation only raises the already-high stakes of staying ahead of the technology curve for consumer and retail players.īut what exactly does it take to keep up and make that level of technology innovation part of a consumer or retail organization’s DNA? According to our research and experience, six principles are critical for consumer and retail organizations to leverage tech effectively and perform more like software companies. As a result, the annual productivity impact of generative AI on the sector is projected to be $400 billion to $660 billion, among the highest of all industries. Consumer and retail organizations are anchored on many functions where generative AI’s impact is projected to be felt most heavily, including marketing, sales, and customer operations. In addition, the advent of generative AI, which helps to accelerate, automate, and augment human tasks, can potentially drive the transition of traditional consumer companies into software entities. Markers of strong DevOps and developer tooling, modern engineering practices, best-in-class product development life cycles, and structural and strategic alignment toward products are directly tied to strong business results: organizations with high maturity across these dimensions boast, on average, 2.2 times greater return to shareholders, as well as 40 to 45 percent higher customer engagement and brand awareness, compared with those that have little or no technology operating culture. Our analysis of more than 120 public consumer and retail companies also reveals that those with a mature technology operating model outperform those that operate more traditionally. 3 S&P Capital IQ and annual reports, accessed 2022 for fiscal years 2017–2021 digital leaders are considered within the S&P 500 Index by sector (subject of S&P 500 Index companies by sector). Our research shows that consumer and retail companies investing heavily in software outperform their peers: digital leaders have created outsize value to shareholders-three times the returns over the past five years, compared with nondigital leaders. And L’Oréal invested in Digital Village-a virtual world-building platform and nonfungible token (NFT) marketplace-to bet on opportunities within the metaverse and Web3 for virtual store creation. Lego partnered with Epic Games to create a metaverse for kids to connect, playing between digital and physical worlds seamlessly. For example, Starbucks developed Deep Brew, a tool to leverage AI for various applications. Many retail and consumer players recognize this reality and have already made decisive software and technology investments. With technology increasingly a competitive differentiator, companies that make software a core part of their organization and harness emerging technologies-such as AI (including generative AI), mixed reality, and robotics-can lay a strong foundation for sustainable growth. And that investment can pay off in the long run. Investing wisely in software across the entire value chain, from initial customer interactions to internal corporate functions, can help consumer packaged goods (CPG) and retail companies meet these rising expectations. Building a shopping app, for instance, no longer suffices the experience needs to be as engaging and seamless as it would be if app delivery were the organization’s core competency. ![]() ![]() Customers increasingly expect experiences powered by software and on par with those offered or enabled by the most successful software and tech players. While technology has already revolutionized this sector, not least with the advent and mass adoption of e-commerce, the next wave of transformation is imminent. This article is a collaborative effort by Aman Dhingra, Chandra Gnanasambandam, Rahul Mangla, Hannah Mayer, and Roger Roberts, representing views from McKinsey’s Consumer Packaged Goods, Retail, Digital, and Technology, Media & Telecommunications Practices.
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