The new era of operations

Volatility, inflation, scarcity, climate change—now is the time for CEOs to embrace radical new approaches and rapidly transform operations.

How can operations turn the top CEO challenges into opportunities?

Joseph Tesvic: Our work with clients in Asia suggests that five challenges are at the top of the CEO agenda, and that operational innovations are the key to turning these challenges into a source of competitive advantage.

First, inflation and scarcity are everywhere, and you can’t just crudely raise prices or cut costs. In Asia, leading companies are turning to more sophisticated operational techniques, like AI-enabled cleansheet modeling or product teardowns. These techniques allow you to both reduce costs and give customers the products that they value most.

Robert Mathis: Supply chain resilience and simple part and product availability have definitely been top-of-mind for many CEOs right now. And if you look at the dramatic impact that supply chain disruptions have on a company’s business and their customers, you’ll see what I mean.

Many leading players have been moving ahead by implementing operational innovations such as digital supply chain control towers, which help greatly to improve supply chain transparency, but also the ability to plan cross-functionally and much more quickly.

Another big topic is sustainability. We at McKinsey have always said that ‘lean and green need to go together’. That is why we see many CEOs right now trying to overlay the objectives of decarbonization and productivity improvement.

Take, for example, the well-known cleansheet costing approach. Now these cleansheets are being fully loaded with carbon footprint information, so that you can—for any of your products—double click and understand by component, by material, and by supplier what your decarbonization potential is. That is how you make ‘lean and green’ possible.

Denise Lee: For many CEOs, scaling digital transformation and solving the skills mismatch are also their top challenges. The good news is that we have 103 impact stories to learn from. They are the 103 Lighthouse organizations, named by the World Economic Forum’s Global Lighthouse Network, which is an initiative in collaboration with McKinsey. These lighthouse organizations are capturing the value of digital transformation, and they’re prioritizing people and the planet.

Why is Asia the proving ground for the new era of operations?

Denise Lee: Asia is on track to account for 40 percent of the world’s consumption, and more than 50 percent of global GDP by 2040. Asia is also home to more than half of the 103 lighthouse organizations in the Global Lighthouse Network.

Joseph Tesvic: Asian companies have the resources, capabilities, and most importantly, high ambitions to deploy these operational innovations. That’s the key to prosper in this new era.

Robert Mathis: Now if you’re a CEO that has set out to build a resilient and reimagined business, now is the time to start a new era of operations—and that new era has to start in Asia.

Learn more at mck.co/ops.