Technology

The Tech:Forward recipe

for a successful technology
transformation
Successful transformations rely on mastering the complex set of interdependencies
between systems and initiatives.

This article is a collaborative effort by Anusha Dhasarathy, Thomas Elsner, Naufal Khan, Adi Pradhan, and Sriram Sekar,
representing views from McKinsey Technology.

© Getty Images

December 2022
 With companies facing a period of renewed The tech-transformation landscape is
uncertainty on the heels of the COVID-19 pandemic, bigger than you think
businesses are shifting their gaze once more to CIOs, even those at companies that are well along
technology. In addition to meeting the voracious the path of a tech transformation, should have a
digital appetites of consumers and customers clear view of all the possible tech initiatives and
during COVID, the technology function’s goals areas of focus. Detailed conversations with more
also need to include lowering costs and optimizing than 1,400 CIOs as well as our own experience
productivity. helping businesses execute complex technology
transformations have yielded a broad array of
While most companies have embarked on a tech insights, best practices, and guidelines. We’ve
transformation of some kind, many of the outcomes synthesized them into a Tech:Forward framework
are depressingly familiar: long delays, cost overruns, that highlights three interconnected vectors, within
and underwhelming results. which are eight specific “plays,” or domains of
activity (Exhibit 1).
At the core of many of these issues is one central
truth: because there are so many interdependencies It is important to call out that the identification of
in today’s modern enterprise, successful technology the activities themselves isn’t the main reveal—
transformations require companies to do multiple CIOs will be familiar with most if not all of them.
things well. Our latest CIO survey, in fact, clearly This Tech:Forward model has proven most useful,
showed that top performers were more likely to have however, in helping organizations understand
executed multiple initiatives and actively managed the scale of needed change and think through
their interdependencies.¹ Want to migrate systems interdependencies across vectors and plays.
to the cloud? You need to rework your operating
model, transform your talent pool, and rethink — Vector 1: A reimagined role for technology that’s
cybersecurity. Want to accelerate your product focused on the business. Effective technology
development? You need to organize your people functions maintain close ties with other business
around products and platforms, build up your functions, but best-in-class CIOs take this a step
engineering talent, create a flexible architecture, further, with technology driving the business.
and revamp long-standing financing and budgeting That requires reimagining technology’s role
practices. through technology-led business models
and technology functions becoming the
Through our analysis and work with companies on steward of digital user journeys, given their
hundreds of tech transformations, three learnings unique perspective across business functions
have emerged: such as marketing, sales, and operations. In
organizations that have truly reimagined
— Companies tend to focus narrowly on a small set technology’s role, the role of the CIO is also often
of initiatives, lacking a clear view of how big, in elevated.
fact, the tech-transformation landscape is.
— Vector 2: A technology delivery model built
— Successful transformations rely on mastering for flexibility and speed. Modern technology
an often-complex set of interdependencies functions set up their delivery models to keep
between systems and initiatives across IT and pace with the fast-evolving needs of customers
the business. and employees. Using agile methods (including
in budgeting), teams prioritize and carry out
— A set of recipes has emerged for delivering activities that have the greatest potential to
successful tech transformations. realize performance gains. They also partner

1
“Prioritizing technology transformations to win,” McKinsey, March 24, 2022.

2 The Tech:Forward recipe for a successful technology transformation

Exhibit 1
The Tech:Forward framework defines eight interdependent tech plays across
three vectors.

Reimagine role and strategy

Typical starting point for a tech transformation; influences approach to other two vectors

1
Tech strategy

Define business-backed
tech strategy, with a
well-defined view on
how IT can unlock value

Strongest
interdependencies:
None

Reinvent delivery
Focus is on “how” of technology (people, processes, technology) to build technology delivery capabilities

2 3 4
Modern organization Engineering excellence Talent, partnerships,
and operating model and capabilities

Organize teams around Establish practices and Develop approach to at-

products and platforms, processes that enable scale talent attraction
enabling rapid teams to deliver tech- and reskilling, sourcing,
technology delivery nology solutions better, and adaptable tech-
faster, and cheaper nology partnerships

Strongest Strongest Strongest

interdependencies: interdependencies: interdependencies:
3 4 5 4 5 7 8 2

Future-proof the foundation

Focus is on building a flexible foundation that supports innovation and can evolve

5 6 7 8
Platform-oriented Infrastructure, including Data capabilities Cybersecurity
architecture cloud

Design modular, API- Select infrastructure Unlock insights through Build seamless security
driven architecture to capabilities that support data and analytics, and so the organization can
implement next-gen the technology organiza- enable AI/ML capabilities grow and transform with
capabilities, drive reuse tion at scale speed and scale
and standardization, and
reduce tech debt

Strongest Strongest Strongest Strongest

interdependencies: interdependencies: interdependencies: interdependencies:
2 6 7 3 4 8 2 4 6 3 4 7

McKinsey & Company

The Tech:Forward recipe for a successful technology transformation 3

 thoughtfully with a variety of vendors, ranging to its needs. Meetings with the CFO, for example,
from hyperscalers to software-as-a-service explained in detail how an integrated operating
(SaaS) firms to niche engineering organizations, model that embedded IT with the business cut down
for help in building or augmenting capabilities on mistakes and accelerated delivery.
that are more challenging to develop or scale,
with incentives to deliver business outcomes The Tech:Forward framework essentially became
rather than output. a road map that everyone understood and could
use as a common reference, cutting off unhelpful
— Vector 3: A future-proof foundation of core tech discussions and reducing miscommunication.
systems that support innovation, collaboration, Not only did the board approve the tech-
and security. Renewing core systems so they transformation plan, but the workers’ influential
support new digital functionalities, multiple daily union representative endorsed the program to
production releases, and frequent upgrades all the company’s IT employees. Since then, the
can provide significant performance benefits. leadership team has implemented quarterly review
Such modern systems are arranged according cycles, using the Tech:Forward framework to track
to a flexible architecture built around platforms progress, break through barriers, and align on the
and products to serve the business. A modern next round of initiatives.
technology core includes data and analytics
systems that provide technology teams across
the enterprise with the high-quality information Mastering interdependencies is the
and powerful tools they need to gain insights core of successful tech transformations
into customer and employee preferences, To better understand how companies most
design innovative applications, and enrich effectively work across multiple initiatives, we
user experiences. It also enables tech teams to developed the Technology Quotient (TQ). The TQ
integrate security and privacy protections as provides a useful benchmark of competency and
they develop solutions, rather than adding them progress across all plays, but, more importantly, the
after solutions development is complete. data revealed combinations of plays that are most
effective:
Having an approach that is both this comprehensive
and detailed was instrumental in aligning one large — Tech leaders (those in the top decile by TQ score)
OEM’s tech-transformation goals. Previous efforts tend to activate multiple plays at once. We find,
had stalled, often because of competing priorities in fact, that they have a greater than 60 percent
across various business units, which frequently likelihood of scoring high in terms of their ability
led to a narrow focus on each unit’s needs. One to work on multiple plays (compared to about
might want to push hard for cloud, for example, 25 percent for laggards). The data shows, for
while another wanted to cut costs. Each unit would example, that leaders exhibit a high correlation
develop its own KPIs and system diagnostics, which between developing a next-generation
made it virtually impossible to make thoughtful organization and operating model and building
decisions across units, and technical dependencies out a platform-oriented architecture. Laggards’
between units would often grind progress to a halt. scores across plays are highly inconsistent,
suggesting that a piecemeal approach to
The company was determined to avoid making that transformation is holding them back. This finding
mistake again. So it invested the time to educate matches our experience.
stakeholders on the Tech:Forward framework,
detail the dependencies within each part of the — Industries such as banking, insurance, and
framework, and review exactly how different retail, where consumer-facing technology is
sequencing models would impact outcomes. In this key to value delivery, score higher in terms of
way, each function developed confidence that the current capabilities across all plays than do B2B
approach was both comprehensive and responsive industries such as mining, pharma, and defense.

4 The Tech:Forward recipe for a successful technology transformation

— Developing engineering excellence (play #3), Transformation recipes exist
particularly agility, and building up a modern No two tech transformations are the same. However,
organization and operating model (play #2) are we do see an emerging set of recipes where plays
typically correlated with higher scores on other can be combined differently and tailored to each
plays. The rapid decision making, frequent firm’s unique considerations.
feedback, and higher metabolic rate of agile is a
key enabler for tech transformations, while the Almost without fail, developing a business-backed
product-platform operating model enables small, technology strategy is a common denominator
autonomous teams to deliver value faster. across all successful tech transformations. While
this might seem obvious, a surprising number of
— Cybersecurity (play #8) is the most frequently companies still don’t do it, or at least not at the level
activated play. Our experience shows that of clarity and detail that’s needed.
thoughtfully integrating cybersecurity into
ongoing IT and engineering practices (such as Following is an example of how one company did it
embedding cybersecurity practices into the successfully (Exhibit 2).
development flow in a DevSecOps approach)
leads to the best outcomes.

Exhibit 2
Case example: Journey of a retailer leveraging the Tech:Forward approach.
Case example: Journey of a retailer leveraging the Tech:Forward approach

1 Tech strategy 5 Platform-oriented architecture

Product-platform operating model

The road map was defined

starting with maturing three plays Platforms build on cloud infrastructure

to support an e-commerce
2 Modern org and operating model

platform refresh and drive a digital

growth imperative.

6 Infrastructure including cloud Agile build for analytics use cases

4 Talent, partnerships, and capabilities

Data lake and analytics capabilities on cloud

Data and analytics talent

7 Data capabilities

Stage 1: otrategy phase prioritized Stage 2: 9egacy e-commerce platforms were Stage 3: Technology operating model was

e-commerce and data and analytics modernized into a modular set of microservices transitioned to a product and platform

capabilities to drive incremental (5) to facilitate rapid iteration and integration organization (2) to ensure customer-centric

growth (1). with other services, including martech platforms. evolution of digital offerings enabled by product

The modernized stack was instrumented to managers. Data talent war rooms (4) were set up

enable personalization and connected to cloud- to attract best-in-class analytics talent and

based (6) data and analytics platforms (7) to enable upskilling of e
isting analytics and

leverage best-in-class analytics capabilities and marketing sub ect-matter e
perts.

enable global scale.

The Tech:Forward recipe for a successful technology transformation 5

 A major enterprise in the food and beverage sector launched an effort to develop a new cloud-based
was falling behind its competitors, who were data architecture (play #6) that took advantage
continually rolling out improved digital products and of the cloud service provider’s services and
channels. To remedy this, the CIO launched a broad capabilities both to power insights into customer
transformation in partnership with the business to behaviors and how to effectively respond to them
digitize 20,000 locations across 12 geographies. with personalized offers and to cut costs by retiring
The CIO developed a tech strategy (play #1) to map its data centers.
out the critical areas of need and dependencies to
address in order to make the company’s technology The modernization of the tech platform and move
systems better able to meet specific business to the cloud gave the company the tools and
goals, including reducing time to market by half and capabilities to work better and faster, but teams
increasing both same-stores digital sales and digital were still trapped in legacy work methods that
as a share of overall sales. kept them from taking full advantage of them. So
the CIO reorganized teams around products and
The company quickly realized that its aspirations platforms (play #2). Product teams formed around
were impossible without upgrading its tech talent. specific consumer journeys, such as mobile, in-store
The business was largely relying on vendors kiosks, and web purchasing, while platform teams
to provide technical services, but the need to were organized around larger enabling functions,
release new and better products and services such as digital commerce, supply chain, finance,
more frequently required top technical talent in and back office. The CIO built out a standardized
house. It prioritized talent acquisition (play #4), API library to allow product teams to use relevant
bringing on more than 100 data scientists, cloud platforms without creating complex point-to-point
and software engineers, and architects in less than solutions. The product teams quickly rolled out
seven months—and saving about $70 million in the new payment options, coupon-delivery capabilities,
process. But it didn’t wait for all of them to be on and inventory-management tools. They set up A/B
board; with two architects, a data scientist, seven testing capabilities within each store’s kiosks to
engineers, and a designer, it began working on its better understand customer preferences.
first applications.
All the new products hitting the market created
Knowing that new digital capabilities put waves of new data, which flowed into the data lake
tremendous strain on the organization’s and data warehouse that had been set up earlier.
e-commerce and data platforms, the CIO To ensure the data was secured and useful to the
simultaneously launched an effort to re-platform rest of the enterprise, data governance teams were
the e-commerce architecture (play #5). The goal established (play #7). The CIO also set up a data
was to create a more modular infrastructure of help desk to support and train users. Marketing
microservices, allowing teams to deploy new could then track the impact of offers and campaigns
capabilities quickly, easily, and more reliably. This on individual customers, while finance could use the
effort included modernizing the tech stack that data for better reporting and forecasting.
supported offers, ordering, delivery integration,
customer data, and digital reporting. But the In less than one year, the company digitized
limitations of on-premises systems could not deliver operations and grew digital usage across its 20,000
the insights the business needed with sufficient stores by 20 to 40 percent. Products made it to
quality or speed. In parallel, therefore, the CIO market twice as fast, and sales increased.

6 The Tech:Forward recipe for a successful technology transformation

Next steps for executives considering skills and the ability to work in an agile model?
tech transformations This approach applies a relentless logic to
Like any complex undertaking, a successful tech bundling relevant plays and sequencing them
transformation requires strong leadership, careful so that they effectively build on each other and
planning, and top skills, from design to management create forward momentum.
to execution. Though each transformation is unique,
we have observed that the most effective start with 3. Scope the work to something that’s aggressive
three key principles: but manageable. Tech transformations are large
and complex initiatives. Unless they’re scoped
1. Develop a sound understanding of the adequately—not so big that they become too
business’s strategic goals and the technology complex to manage, and not so small that their
changes needed to deliver on them. This may impact is negligible—progress is hard. Hitting
sound obvious, but companies consistently fail this Goldilocks zone requires companies to
to get this basic step right. Often the CIO and his select a domain (such as a complete customer
or her team work on the tech transformation on journey or business function) that is sufficiently
their own. That inevitably leads them to focus on broad to account for all necessary dependencies
technology problems, not business problems. yet discrete enough to be manageable. To both
Unless the technology initiatives are explicitly support this work and incorporate lessons
tied to business value and overall strategy, the that can be carried over to other domains, the
tech transformation will not succeed. This CIO also needs to establish a transformation
requires fundamentally different behavior from “backbone” of standards (such as architecture
the business side. It must not only participate guidelines), resources (such as a developer
in the transformation but also understand the portal to leverage consumable tech products),
tech issues, be actively involved in both problem and capability centers (such as training).
solving and decisions, and commit to working in
joint teams with tech colleagues.

2. Drill into identifying the key dependencies.

Executing a tech transformation starts with
a highly disciplined process to drill into “root
dependencies” to understand what needs to be A company’s ability to compete and succeed in a
in place to enable further progress. If you want digital world depends on its ability to harness its
to move workloads to cloud, for instance, do you technology effectively. At the core of any successful
have the operating model to take advantage of transformation of a company’s IT will be its ability
cloud’s speed? If you want an agile operating to manage the interdependencies of the modern
model, do you have the talent with both cloud technology estate.

Anusha Dhasarathy is a partner in McKinsey’s Chicago office, where Naufal Khan is a senior partner; Thomas Elsner is a
partner in the Munich office; Adi Pradhan is an associate partner in the Toronto office; and Sriram Sekar is a partner in the
New Jersey office.

The authors wish to thank Morakinyo Adesemowo, Florian Behaim, Michael Cherkassky, Leorizio D’Aversa, Dinesh Dhingra,
Anna Halawa, Sebastian Hoffmann, Eric Lamarre, Jen Schrade, Jerry Sigmund, Kate Smaje, Nuvina Padukka Vidana, Katja
Zolper, and our colleagues in McKinsey Technology for their contributions to this article.

Copyright © 2022 McKinsey & Company. All rights reserved.

The Tech:Forward recipe for a successful technology transformation 7