How McKinsey's 7S Model Can Enable Successful Digital Transformations

Written By: Eric Kimberling
Date: October 31, 2023

What is the McKinsey 7S Model?

The McKinsey 7S Model is an academic framework widely taught in business and MBA programs worldwide. However, its significance extends beyond the academic realm, playing a vital role in facilitating successful digital transformations. This discussion aims to explore the application of the McKinsey 7S Model in the context of digital transformation.

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Strategy

One of the principal tenets of an effective digital transformation is developing a robust strategy. This process starts with the overarching corporate strategy, which should then inform the formulation of a specific digital strategy to support and enhance the broader corporate goals. The McKinsey 7S Model, a tool often used in this context, emphasizes that strategy is the foremost among the seven S's.

It highlights the necessity for this strategy to be in harmony with the other six areas, which will be discussed. Essentially, the initiation and the culmination of an effective digital transformation hinge on a well-crafted strategy, underscoring its position as the first 'S' in the 7S Model.

Style

The second 'S' in the McKinsey 7S Model refers to 'Style,' which encompasses the overall management approach and the organizational ethos. This model element addresses questions such as whether an organization adopts a command-and-control or a top-down management style. Alternatively, it may operate as a bottom-up, decentralized entity, or perhaps it embraces a laissez-faire approach, allowing different business segments to function independently with a high degree of trust in their effectiveness.

The key objective is to ensure that this chosen style is congruent with the overarching strategy the organization aims to pursue. Additionally, it is crucial for this management style to be in alignment with the other elements represented in the 7S Model, ensuring a cohesive and effective operational framework.

Staff

The next critical component of the McKinsey 7S Model, particularly relevant to digital transformation, is 'Staff.' This aspect concerns having the right personnel in place to support and enact the desired strategy and organizational style, along with the other elements of the model.

In the context of a digital transformation project, it is imperative to ensure that the team comprises individuals best suited to facilitate the intended strategy. The concept of having the 'best people' on a project refers to selecting those who are most capable and appropriately equipped to realize the strategic goals.

Aligning the right staff is not just vital for the success of the digital transformation initiative but is also crucial for the organization as a whole. During a digital transformation, assessing and aligning the staff with the strategy, style, and other elements of the 7S Model is essential. Failure to do so can lead to misalignment, where the capabilities and focus of the staff do not match the strategic objectives and the preferred management style, as well as potentially affecting other areas that will be discussed subsequently.

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Skills

Once the right staff is in place, ensuring the organization has the correct personnel, attention must turn to assessing their skills. Although it might seem similar to considering the staff, focusing on skills represents a distinct and crucial aspect. It involves aligning the workforce's skills with the broader objectives of the digital transformation, the organizational style, the strategy, and other elements previously discussed.

The process entails identifying the specific skill sets required to facilitate the transformation. This may include technical skills related to the deployment and utilization of new technologies, as well as competencies in organizational change management, ensuring that the organization can adapt to the transformation and other changes effectively.

These skills are vital not only within the digital transformation team but across the entire organization. As one of the most crucial components of the McKinsey 7S Model, skills alignment plays a key role in the success of a digital transformation.

Shared Values

The next component of the McKinsey 7S Model is 'Shared Values,' which can also be considered the organization's culture. This encompasses the philosophical aims of the organization, the type of work environment it strives to create, and the overall cultural ethos it seeks to foster.

In the context of digital transformations, shared values and culture assume a significant role. While all other elements of the model are crucial to digital transformation, shared values often necessitate change. Organizations typically aim to build upon the existing culture and values that have contributed to their success but must also consider how to adapt without undermining their core ethos. This involves careful calibration of the organizational culture. To gain deeper insights into company culture, you can explore more by visiting this link to our enlightening podcast titled - Company Culture and its Role in Organizational Change Management.

For instance, companies that have expanded through acquisitions often retain a strong entrepreneurial spirit, which is a key factor in their success and growth. However, as such companies mature and scale, there is a need to shift towards more standardized operating models and consistent business processes, potentially becoming less entrepreneurial and more structured or corporate.

The objective is not to completely discard the existing culture but to find a balance akin to adjusting a dial on a stereo. Incremental adjustments to the cultural aspects might be necessary. During a digital transformation, one of the most commonly overlooked aspects is this very concept of shared values and culture. Ensuring that these are in alignment with the other components of the 7S Model is critical for a successful transformation.

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Structure

'Structure' is another vital component of the McKinsey 7S Model, synonymous with organizational design. This aspect focuses on envisioning the ideal form of the organization, determining roles and responsibilities, and defining how different departments will interact and operate. It also encompasses considerations about business processes and the overall vision of the organization's future structure.

In the realm of digital transformations, the structure or organizational design is often an overlooked element. However, it is essential not only to address organizational design but to do so in the context of the rest of the 7S Model. This ensures that the developed organizational structure aligns with the strategy, shared values, and other aspects discussed earlier.

When embarking on a digital transformation, it is crucial to integrate this aspect of structure or organizational design into the transformation plan. It should be a deliberate component carefully considered to ensure it complements and supports all other areas of the 7S Model.

Systems

The seventh and final component of the McKinsey 7S Model is 'Systems,' specifically focusing on technology. Notably, systems have been intentionally discussed last in this context. While systems and technology often appear as the primary focus of digital transformation on the surface, it is the other six elements of the model that are more critical.

Before considering how systems can integrate and align with the organization, it is imperative to ensure alignment and clear direction in the other six areas: strategy, structure, skills, style, staff, and shared values. A common pitfall in digital transformation efforts is the premature or exclusive focus on systems, neglecting the other essential elements of the model.

Systems should be viewed as a capstone, serving as an enabler for the six other aspects. Only after defining and aligning these six elements should the organization implement technology. This approach ensures that the chosen systems and technologies effectively support and enhance the other key areas of the organization, aligning with the overall strategy and goals of the digital transformation.

In "The Final Countdown," Eric Kimberling emphasizes the importance of prioritizing People and Processes in organizational change, advocating for a transformative strategy where Technology is skillfully incorporated as the last, strategically essential element. You can purchase his book by clicking the link here - The Final Countdown.

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Key Takeaways

The key takeaways for successfully managing digital transformation involve the utilization of the McKinsey 7S Model as a comprehensive framework. This model is instrumental in assessing alignment and ensuring that all critical components necessary for an effective transformation are addressed.

As previously mentioned, organizations often disproportionately focus on the 'Systems' aspect of the model, sometimes considering one or two other elements. However, to achieve a successful transformation, it is crucial that all seven components of the model — Strategy, Structure, Systems, Skills, Style, Staff, and Shared Values — are well-aligned and integrated.

These components should collectively form a part of the organization's overall digital strategy and roadmap. Such an inclusive approach guarantees a more holistic and effective digital transformation, taking into account not just the technological aspects but also the organizational, cultural, and human factors that are essential for sustainable success.

Get in Touch

I would enjoy brainstorming ideas with you if you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, so please feel free to contact me at eric.kimberling@thirdstage-consulting.com. I am happy to be a sounding board as you continue your digital transformation journey.

Be sure to download the newly released 2024 Digital Transformation Report to garner additional industry insight and project best practices.

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Eric Kimberling

Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.

Author:
Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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