Coca-Cola: The people-first story of a digital transformation

With thousands to train, the transformation of Coca-Cola’s commercial product supply operations needed buy-in from the boardroom to the front line.
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There is a widely reported war for talent across industries and sectors, with no slowdown in demand. McKinsey GIobal Institute research estimates that one in every 16 workers will need to transition to new roles by 2030—a 25 percent increase compared with prepandemic predictions—to support increased demand for all things digital.

Global consumer goods company Coca-Cola has established a digital academy to upskill managers and frontline team leaders across its business operations. In its first year, the academy trained more than 500 people in digital skills using a combination of go-and-see visits, immersive boot camps, and e-learning modules. Graduates of the academy have implemented about 20 digital, automation, and analytics approaches at ten-plus sites in the com­pany’s manufacturing network, boosting productivity and throughput by more than 20 percent. Digital-skills training is now being rolled out to about 4,000 employees across the organization.

In this episode of McKinsey Talks Operations, Daphne Luchtenberg is joined by Iain McLaughlin and Gigy Philip, vice president of commercial product supply and transformation director, respec­tively, at the Coca-Cola Company. Roberto Migliorini, a partner in McKinsey’s Operations Practice, provides his insight on the need for digital trans­formation and the skill building required to deliver it. The following is an edited version of their conversation.

Daphne Luchtenberg: Your company’s future success demands agile, flexible, and resilient operations. I’m your host, Daphne Luchtenberg, and you’re listening to McKinsey Talks Operations, a podcast where the world’s C-suite leaders and McKinsey experts cut through the noise and uncover how to create a new operational reality.

It seems increasingly clear that there is a labor mismatch across industries and sectors. And as with key frontline sectors such as truck drivers and line operators, there is a marked gap in the digital talent available—only 1 percent of supply chain leaders report having sufficient talent in-house to support their increased digitization, down from 10 percent in 2020. The pioneers of the Fourth Industrial Revolution have learned that human capabilities are critical when organizations wish to adopt advanced digital technologies successfully. For example, Coca-Cola, our guests here today on McKinsey Talks Operations, has established a digital academy to upskill managers and frontline team leaders across their business operations.

I’m delighted to be joined today by Iain McLaughlin, VP of commercial product supply, and Gigy Philip, transformation director, both from the Coca-Cola Company. I’m also joined by Roberto Migliorini, a partner in McKinsey’s Operations Practice. Welcome.

Iain McLaughlin: Thank you.

Roberto Migliorini: Pleasure to be here.

Gigy Philip: Thank you.

Daphne Luchtenberg: Roberto, can I turn to you first to help sketch out the context a bit more? We know that supply chain disruption is a topic of the day, and we’ve heard much about digital and analytics and how they can drive resilience building and performance in operations. Learnings are constantly building. What’s the latest thinking in this area?

Roberto Migliorini: Yes, Daphne. Supply chain disruption is definitely the topic of the day, or we can say of the last two years, and it seems that disruptions are building on each other. What we see today is a crazy inflationary environment with a lot of pressure on input, cost, and macroeconomic volatility, as well as a lot of political uncertainty. And this builds on a situation that was already pretty difficult from a supply chain standpoint, that is, the post-COVID reality, with significant shifts in consumer behaviors, labor shortages, and overall supply chain disruption in logistics and global freight. So, digital and analytics are becoming more and more important for the organization to be able to take on such a difficult period, and we think that they will become even more important in the future.

We know that more than 90 percent of the supply chain leaders surveyed by McKinsey cannot keep up with today’s elevated demand, because of supply chain disruption. And we know that disruption is happening on average every 3.7 years with a month worth of disruption that can really impact almost the full year’s EBIT. So we do see that embarking on a digital-transformation journey is now becoming extremely important for the supply chain organi­zation to survive in this very difficult period.

Embarking on a digital-transformation journey is now becoming extremely important for the supply chain organization to survive in this very difficult period.

Roberto Migliorini none

Daphne Luchtenberg: And Iain, how has a global organization such as Coca-Cola been thinking about the adoption of digital and analytics to accommodate the supply chain challenges?

Iain McLaughlin: Well, just a word about what we do: commercial products supply manufactures and distributes concentrate and beverage base, and that is the fundamental ingredient that we make our finished beverages from. We operate from 18 plants, literally all over the world, and we ship to about 1,000 locations of our bottling partners in 170 coun­tries. So, clearly, the height of our concern at the moment is continuity of supply. If we don’t ship concentrate and beverage base to our bottling partners, we can’t produce the finished product. And you can imagine that even in good times, when the supply chain is consistent and predictable, it is challenging to manage this operation. So, in the current environment, it’s extremely challenging indeed, with very, very high levels of volatility. But we are actively using digital and analytics in many ways to help us through the current disruption that we’re facing.

One of the things that has been most helpful to us is that early in 2021, we built a digital twin of our manufacturing network to support business continuity planning, as well as network optimization. Previously, we had relied on experience, we had relied on know-how within the organization in order to do business continuity planning. But by digitizing it, we actually brought all of the data together into a single model, which has helped us enormously in reacting to situations during the pandemic.

As you can imagine, we’ve had to react to ingredient shortages, border closures, and various other disruptions. And the good thing about the model is that it takes the human bias out of the analytics and the decision making, and it has really opened our mind to possibilities for continuity of supply that we had never considered before. So, I think really relying on data and analytics [to support business continuity planning] has been a tremendous benefit to us and the organization.

Daphne Luchtenberg: That’s fantastic. And Iain, of course speed is of the essence in those scenarios that you’ve sketched out. So I imagine that’s another dimension that this technology has brought to you.

Iain McLaughlin: Yes, absolutely. I think given that we are in a very short cycle from supply of concen­trate to actually being present in the market with the finished product, it’s very important for us to react quickly. And I would say that analytics and the capability of the digital twin have helped us do that with ingredients supply. We’ve been able to see where the hot spots are and react much more quickly, and with a greater degree of accuracy, to make sure we have the ingredients we need, where we need them.

Daphne Luchtenberg: Fantastic. Roberto, we’ve often talked about pilot purgatory, and certainly [its impact] when it comes to embedding these kinds of transformations. Can you talk more about how a phenomenon like pilot purgatory can hold a company back?

Roberto Migliorini: Absolutely. We had the oppor­tunity to work with the World Economic Forum on reviewing more than 10,000 plant sites across the globe that were trying to achieve a difference in performance, thanks to Industry 4.0. And what we have discovered is that many companies have been successful in driving successful pilots. However, the main challenge was, how do you scale these pilots across the different lines in a plant, across the different plants in the organization, to achieve the significant impact that is vital for the business?

Daphne Luchtenberg: Yes. And Iain, just to come back to you, did you kind of hit a moment where there was a bit of pilot purgatory when you were first embedding the adoption of this technology?

Iain McLaughlin: Fortunately, no. And the reason is that we did a lot of research and prework to understand the potential impact of Industry 4.0, and we did that as part of our overall planning for the transformation. So we were aware of the pitfalls of pilot purgatory. But pilots are still important, right? You have to understand if there’s value, where the value is, and how you can capture that value. Pilots have an important role to play, and we did one. There was a significant pilot at our largest facility in Ireland. But having done that, and having seen the fact that there was tremendous value to be captured, what we then did was take time out to plan the strategy. So we always started from a viewpoint that we were taking this across the network. Therefore, by the time we started executing the strategy, we already knew we were going to multiple sites. And that has really helped us to move at speed and scale. So, pilots are important, I’m not dismissing them. But pilots for the sake of pilots are not going to get you the transformation that you might be looking for.

Daphne Luchtenberg: Yes, that’s super helpful. And Gigy, I’d like to bring you in as the transformation director who has been instrumental in making some of these things a success. I understand that the digital academy that you built really helped to avoid the purgatory trap and to help with the transformation and the dissemination of the plans and getting everyone to buy in. Can you talk a little bit about how you went about setting up the digital academy to support this transformation?

Gigy Philip: We worked with a team of experts to build the framework for the digital academy and launched it in July of last year. Our digital academy is designed really to build foundational knowledge and skills on core digital, analytics, and agile topics so that our associates can be successful operating in a digital world. All of our 3,000-odd employees across CPS [commercial product supply] will be participating in the academy. In terms of the design mechanics, we grouped all the roles within the organization into six cohorts based on learning needs and used a very structured approach to develop customized learning journeys for each of the cohorts. Across the six learning journeys, we developed 25 unique modules, covering three major areas. The first area is around creating awareness and excitement. The second is around transformation skills, and the third is around digital and analytics skills.

Everyone in CPS will be participating in four basic modules. First is the transformation kickoff presentation, followed by an e-learning digital-explorer module, then training around data and analytics and new ways of working—about 15 hours of training in total. Then, depending on their role, [participants] will undertake further training in modules that have been tailored for their cohorts. Typically, associates start their learning journey about a month before deployment of key digital-transformation initiatives in their operation. So, in essence, our associates are taking quite a staggered start to their learning journey. By the time all of our associates go through and complete their learning journeys, we estimate that we will have run over 7,000 training events and completed over 60,000 hours of training.

Daphne Luchtenberg: Amazing. Yes, Iain.

Iain McLaughlin: It’s the single-biggest investment we’ve ever made in training. And the reality is we have a phenomenally engaged team in CPS that really is a huge asset to the business. So to bring them on the journey and maintain the current high levels of engagement that we have was incredibly important to us. And we see the invest­ment in the digital academy as being instrumental in building the skills of the team.

Daphne Luchtenberg: Yes, I can see how that worked. And these levels of engagement are just amazing to see. Gigy, how did the organization strike the balance between building the skills of the existing cohort and bringing in expertise to actually drive knowledge transfer?

Gigy Philip: The broad range of digital technologies that we’re seeking to adopt as part of the transfor­ma­tion will fundamentally change the way we work. So a significant number of existing roles in CPS will require new knowledge and new skills. And several new roles with competencies that we don’t currently have will also need to be created. So, we’re seeking to bridge the skills gap and deliver the workforce diversity that’s needed to tackle the challenges ahead, primarily through reskilling and through the digital academy initiative.

This decision is really not only driven by the current talent shortage that is making it very, very difficult to hire new talent but also by the reskilling, which contributes to the learning culture that we’re trying to build in the organization, and this culture of continuous learning can pay dividends on the employee front. And reskilling also makes financial sense because it’s obviously cheaper to reskill current employees than to hire new ones. So, the primary focus is on reskilling, but we’re also bringing in new talent with skills that we need for the future that we don’t currently have.

We’re seeking to bridge the skills gap and deliver the workforce diversity that’s needed to tackle the challenges ahead.

Gigy Philip none

Iain McLaughlin: A great example of that would be data scientists. The organization never had data scientists, because we weren’t looking at data across the network. We were looking at analytics and metrics at an individual plant level. But what we’re finding is that by really looking at the data in a different way, at the people with the real skills, we’re driving considerable value. So this is working very well to drive the transformation.

Daphne Luchtenberg: You’re well down the road in this transformation journey, and your people are coming with you. It sounds like you had a fantastic, robust plan at the outset. Is there anything that surprised you in what you’ve learned? Gigy, I’ll ask you first.

Gigy Philip: I’m not sure that there’s been anything really surprising. I think our key learning has been that [the workforce is] delivering a holistic tech-enabled transformation that requires a number of building blocks. And these include having a very clear road map, as well as a clear change story that needs to be cascaded through the organization. The second building block is around talent. We spoke about the reskilling process and bringing in talent with skills that we need for the future, but having a structured program in terms of building skills throughout the whole organization is also important. The third building block is around an agile delivery methodology—how do you bring the new ways of working into the organization very quickly and have this very fast-paced iterative process that’s very focused on value?

And then, there is the building block on technology. We need to bring in new technology to ensure that we are maximizing the business impact of the transformation. Iain spoke about data and analytics. Data and analytics are going to become key in terms of future performance. Organizing the data and structuring it so that we can actually do higher-end analytics is also a fundamental building block in terms of the transformation. And then the last piece is around having a very structured process in terms of adopting and scaling the use cases across the organization. So, how do you build systems, processes, as well as tools and the whole change management principles and incorporate that into the process? Having these six building blocks has been a key learning for us.

Daphne Luchtenberg: Got it. Thanks for sharing. It’s a really helpful framework. Roberto, what do you find are some of best practices in the industry on these big transformation programs?

Roberto Migliorini: It was very interesting to hear from Gigy, because I can really see, in this trans­formation, some of the best practices that we see from the leading companies that are managing to successfully drive impact. And one aspect that we keep seeing is that technology is hard, but it is the easiest part in the transformation. The transformation [of people] is indeed the [hardest part of the] transformation.

As such, it’s important that you prepare the organization around what is the change story, what is the reason you’re after, as well as how do you equip the whole organization, how do you build the capability to go after. And so, you actually move thousands and thousands of people with you. What we have seen as the secret recipe in these tech-enabled transformations is the focus on the trans­formation together with an agile approach to technology. The second aspect on agile approach to technology is fundamental in order to make the ROI work over the transformation, so you don’t get stuck in a multiyear investment without seeing the impact.

Iain McLaughlin: One of my best surprises has been just how willing people have been to adopt new methods and new technologies. We come from a very established business that was reliant on legacy technology. And some of that legacy technology made it difficult to get things done. And we saw that in our regular engagement surveys. Actually improving the technology, making people’s lives easier, making it easier to connect and get things done has had a fantastic impact in those sites where we’ve implemented the technology. So, I wouldn’t underestimate the willingness or indeed the hunger for frontline workers to change this kind of transformation. We found that to be one of our key strengths.

Daphne Luchtenberg: Iain, I imagine that you were able to involve them in shaping the change too, right?

Iain McLaughlin: Absolutely, in shaping the change, in executing the change. And one of the nice things I have experienced is demonstrating the change. Finally, after two years of operation, we were able to inaugurate our newest plant in the network in Costa Rica. For me, to see our frontline workers talk directly about how they’re using the technology and how that’s improving what we do was incredible. I mean, so exciting, so energizing.

Daphne Luchtenberg: So what were some of the other impacts on operations in terms of performance and improvement? And Gigy, I was going to ask you, what are some of the real results you’ve seen from the transformation so far?

Gigy Philip: In terms of the manufacturing space, we are seeing an improvement in productivity between ten and 20 percentage points. Across the supply chain, there is an improvement in terms of service levels and reduction in terms of obsoles­cence and write-ups.

Daphne Luchtenberg: Right. And you must have also made some lasting changes to the operating model, to how the teams are interacting together as well.

Iain McLaughlin: At Coca-Cola, we’re on a journey to become a networked organization. And we have used our transformation as a way to turbocharge that within CPS. We’ve always worked globally because our manufacturing plants are codependent. Sometimes we have to help other plants react to crises. But we’ve really used the technology in a way such that we have many of the plants in the network working together to solve problems. Also, when we design solutions, we design them at scale so that we can take those across the network, as opposed to the teams in one plant building solutions for that plant. In Singapore, we’ve seen a production join tool built that is now being scaled across the world. In Costa Rica, we’ve seen a prior-to-use app, which is really helping in terms of quality, [that was] built in Costa Rica but now being rolled out across the world. So, I think it really gives you the opportunity to work at scale and as a network, and that is one of the key benefits that we are seeing.

When we design solutions, we design them at scale so that we can take those across the network, as opposed to the teams in one plant building solutions for that plant.

Iain McLaughlin none

Daphne Luchtenberg: Roberto, where have you seen things go wrong when those operating models are not in sync?

Roberto Migliorini: What we have seen working with several companies is two extremes. One, when the approach is too centralized, especially with a big focus on tech, engineering, and IT. And the opposite side is when there is a decision to leave each plant driving the transformation on its own. In the first instance, what we see is the development of an amazing application from an engineering and technology perspective, but no pull from the sides, no pull from the operation. So, the issue is, if you have an amazing app that no one’s going to use, the impact is not going to happen.

On the opposite side, what we have seen is that a company went on with giving a lot of freedom to each plant to develop their own solutions with very limited coordination. While this brings some impact, what we’ve seen is that you leave two main aspects on the table. One is synergies, in terms of investment and cost of developing new solutions. And the second one is the sharing of best practices. As you can imagine, not all of the plants can use the best ideas from the whole application. So you definitely achieve better results when you use the brain of everybody in the organization for each solution.

Daphne Luchtenberg: That’s great. Iain, you talked about the fantastic engagements that you’ve had right across the organization. And I’m curious, was that the same at all levels of the organization? And how did you make sure that the senior leaders were also along the journey and perhaps also had to transform a little bit? How did that work?

Iain McLaughlin: That’s a very interesting question. I would say that, in the beginning, we had a spectrum of commitment, let’s call it that. Some who were early adopters and some who were laggards. But we felt that if we were investing in building the capability, then everyone had to invest in themselves and in building the capability for the organization. So, as a leadership team, we all went through digital fundamentals, for example, so that we understood how we could frame it and think about it from our own perspective, but also how we could have the appropriate, consistent conversations with our team. There is an excitement and commitment at all levels of the organization to prepare and adopt the change.

Daphne Luchtenberg: And Gigy?

Gigy Philip: In terms of the learning journeys, we engaged associates at all levels, from the very early stages of the design phase of the digital academy. And this engagement included many hours of interviews. So we interviewed the extended leadership team. We also interviewed associates at all the different levels of the organization. I think these sets of interviews helped us to identify the training requirements, and it gave us great input into what was required to develop the training content. From the onset, our aim was to create a very fun, experiential learning journey for associates at all levels of the organization, and I think we have met this ambition.

Daphne Luchtenberg: And everybody rolled up their sleeves, didn’t they?

Gigy Philip: Absolutely. As they got into the learning journey, I think they wanted more. We haven’t had any pushback, per se. All of the feedback that we’ve had to date has been very positive. The only push that we’ve had so far is for us to actually accelerate the rollout of content and the training, which is a very positive sign.

Daphne Luchtenberg: I love it. Well, it sounds like a great success story and a great journey, but there’s still a long way to go and much more to achieve. So, thank you for sharing that with us. Roberto, I wanted to ask you what is your final thought, as we’ve been listening to this conversation, for our listeners out there who are in organizations who are considering this type of big digital-transformation program?

Roberto Migliorini: I think we’ve touched on many interesting points and some recommendations throughout this podcast. But one point that is worth mentioning is the desire and the commitment of the leadership at the beginning to make this work. Because it’s not an easy journey, and it needs commitment and conviction across the whole orga­ni­zation. And what we see is that these journeys require, at the beginning, a big push from the top management to happen, and to happen successfully.

Daphne Luchtenberg: And Iain, what advice would you give to a peer at your level embarking on this? How brave do they need to be?

Iain McLaughlin: I would say, undoubtedly, that you have to be brave. If we embarked on this during the pandemic, traditionally, we would have been in the plants working with the teams on the front line. Instead, we did it all virtually. So I would say these things don’t work based on incrementality. Be bold, take the time to develop a holistic strategy for the transformation, and engage the team in that, because ultimately, you’re dependent on the team to execute it. It can’t be executed from a central function. And then of course, make sure your metrics are in place, and course-correct where you have to. You’re not going to get it perfect the first time. But if you’re not bold in the beginning, you run the risk of ending up in pilot purgatory. So, know where you’re going, is what I would say.

Daphne Luchtenberg: Sounds good. Well, Gigy, what would be a final word from you?

Gigy Philip: I support everything that both Roberto and Iain have said. The key piece here is to be bold. We won’t have all the answers. We didn’t have all the answers as we embarked on this transformation process. We learned along the way, and continue to learn along the way, and continue to adjust and adapt our transformation program as we move through this process.

Daphne Luchtenberg: Thanks so much for those final thoughts. Your experience is truly inspirational. And I hope that many of our listeners will have taken heart from the successes that you’ve reaped so far. Thank you, Iain, Gigy, and Roberto for being with us today.

Roberto Migliorini: Thank you.

Iain McLaughlin: It’s been our pleasure. Thank you very much.

Gigy Philip: Thank you very much.

Daphne Luchtenberg: You’ve been listening to McKinsey Talks Operations with me, Daphne Luchtenberg. If you like what you’ve heard, subscribe to our show on Apple Podcasts, Spotify, or wherever you listen. We’ll be back with a brand-new episode in a couple of weeks.

Source: McKinsey