Winning the Race to Rewire in 2026: Capturing operational advantage

Daphne Lucktenberg: Your company's future success demands agile, flexible and resilient operations. I'm, um, your host, Daphne Lucktenberg, 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. The shift from one year to the next naturally invites a moment of reflection, an opportunity to take stock of what we've learned and to set a clear course for the year ahead. This year marks a pivotal opportunity for how organizations will be able to optimize their operations. We're seeing leading companies already setting a course to redefine their operations as a source for competitive advantage and growth. In Today's episode of McKinsey Talks Operations, I'm delighted to be joined by Dan Swan and Ruth Huss, global co conveners of our operations practice. Together we'll explore the defining operations themes for 2026 and look at what we're seeing the bold movers doing as they set themselves up to win the race to rewire. What lessons can we learn? Ruth and Dan, it's great to have you both here.

Ruth Huss: Thank you, Daphne for having us. Really looking forward.

Dan Swan: Thanks, Daphne. Always fun to do these with, Ruth.

Daphne Lucktenberg: Looking back for a moment, we know clients were focused on remaining resilient, looking for ways to increase productivity and chart the course for growth. What bold moves did we see some of these clients embark on in 2025? Ruth, over to you.

Ruth Huss: Let's start with productivity, which was, um, obviously a, uh, huge theme in the last year for many regions and many clients. Uh, uh, it's growing without, uh, growing the amount of resources that you need to put into. And I think, uh, some of the, uh, fabulous US Players, um, have actually, uh, done that really cool with all their digital and AI business models. And many other companies are really looking to learn from these examples to, uh, try to do them manufacturing with limited, uh, resources, uh, at least on the people side, and just working much more towards a more leaner and efficient, uh, operating model. I think that's one big theme we saw in last year.

Daphne Lucktenberg: And Dan, what about from your side?

Dan Swan: Anybody that, um, was reading the newspaper over the last year has recognized that there's been, you know, pretty unprecedented volatility. Whether that's kind of inflation, whether that is the implications of tariffs and trade, whether that is geopolitical unrest. And in the midst of all that, companies have had to figure out how to make sure they're getting their products, make sure they're delivering them, um, the right way. And quite frankly that they're trying to minimize the disruption to their customers and on their operations. And so I think the implication has been a lot of people figuring out um, creative ways to get products and services to their customers and a lot of people spending time on being more resilient. And the one thing that cuts across both productivity and this resilience is the leveraging of technology, AI, generative AI, et cetera. And I think 2025 marked a bit of a turning point for clients going from uh, testing and learning and making small bits and pieces of progress to real separation from the winners. Using technology, AI, et cetera to drive the value that they're seeing both in productivity and to help them be more resilient. So sets the stage for an exciting 2026.

Daphne Lucktenberg: And as we look towards 2026 our insights point to three big imperatives. Rewiring operations, accelerating tech enabled decision making, and building resilience to drive growth. Where do you see the biggest economic opportunities emerging in manufacturing and supply chain, um, particular as automation and robotics move from pilots to scale deployment?

Dan Swan: Dan productivity is going to be as or more important in 2026 than it was in 2025. Uh, I think we see our clients and so many companies with aspirations for performance improvement this year that far exceed what they've done historically on a regular basis. And so the need for new technology and new capabilities to deliver on those objectives has never been higher. So we look at whether it's in the manufacturing or the distribution centers, the actual use of physical automation, whether that's robotics, humanoids, et cetera, has really continued to grow. And the expectation is those will get more and more affordable as time goes on and therefore continue to scale. I think we also see outside of the physical supply chain, whether that's in planning, procurement, call centers, the leveraging of AI is a uh, once in a generation opportunity to rethink how end to end processes get done. And importantly choosing to use those words, end to end processes, uh, very carefully because where we've seen people make pockets of investments in one or two small areas, it really hasn't had very good ROI where clients have tackled end to end processes that really are able to transform their business and leverage AI, generative AI, automation, um, building the capabilities of their people altogether, companies have started to see really transformative results.

Ruth Huss: Maybe to add on that, um, what we've seen in the last year is uh, especially in the services sector, ah, banking, insurances, um, uh, and similar industries also telco that all those more process as Dan said, um, end to end process related uh, industries. They have really embarked on not only uh, leveraging generative AI and large language models, but also agents, um, and even groups of agents, so really building out an agentic workforce. Many of our industrial clients are a bit behind on that because also there it's much more difficult. If you imagine M A manufacturing, a discrete manufacturing um, operation. Yeah, that's always more difficult to have like the complete um, stream digitized. And there we see some, some leaders experimenting uh, with for example how can you teach uh, the workforce uh, about all the different steps in the process and the manuals and so on. If you think about shifting one employee to another station, but there it's a bit more difficult. Um, uh, and as I said, the service industries are really storming ahead here.

Daphne Lucktenberg: Do you feel that those priorities are going to hold steady? I mean, have companies done enough yet to build true resilience? Ruth?

Ruth Huss: Well, what is true resilience in current times? Uh, so I think the name of the game is also agility. So um, how fast can you actually make changes in your supply chain if something happens? And that's not only because of geopolitical things, but we saw the same already in the semiconductor crisis. We see it um, when uh, disasters and climate catastrophes um, strike us. So I think the faster you are in actually changing your setup, the better you're prepared. Huh.

Daphne Lucktenberg: And Dan, let me bring you in here. So that acceleration and that agility that Ruth was talking about is that where AI and large language models can help and facilitate that, the ability to have

Dan Swan: more information at your fingertips and the ability for AI language models and agents, as Ruth talked about earlier, to actually take some decisions and help you take action faster, of course positions companies to be far more decisive and responsive than they have been historically. I think one of the things that we've seen is that is necessary but not sufficient. Right? And one of the things that requires you to get to that level of sufficiency is actually building the capability of your employees to understand how they use the agents, how they use the uh, LLMs to actually take decisions and move quickly. And so again it kind of comes back to one of the things that we talked about earlier, which is that ability to really understand an end to end process and make that change, whether that's how you do supply planning or whether that's how you do your new product development. And thinking about that of uh, what are the places where you need to have different capabilities of your employees and where are the places where you need to have and leverage Technology differently is really the magic sauce. And so again where we've seen people go and just try and point technology at a small issue. We've not necessarily seen companies get the roi, but where they've really looked at tackling that end to end, it's been incredibly valuable.

Daphne Lucktenberg: Let's stay with the idea of rewiring. It's hard to generalize across entire regions or are leaders grappling with fundamentally different challenges and opportunities? Ruth, I wanted to come to you first with this question.

Ruth Huss: The opportunities are uh, probably everywhere the same, but I uh, think the way that people are tackling them um, is a bit different. It has to do also a bit with like the ability and how much freedom you actually have for making choices. And um, I work a lot in the automotive industry yet maybe two examples um, uh, of uh, where we see those differences. So in China there is an ecosystem of electric vehicle players, um, who have no legacy, uh, to actually um, start from. Ah, so they have for example a complete digital toolchain. Yeah. Ah, so that starts from having your requirements um, in the tool chain, then following the requirements through up to the testing. While for example in Europe we have a lot of um, companies that have like different tools where they do one and then the other. Now obviously it's much more efficient if you can follow the requirements through the whole process. Instead of you have like something in this tool and then in that tool and then all of a sudden you don't really know. Is there any influence from piece to this piece? I think there, it has both to do with um, the legacy systems that I spoke about, but also for example with um, the tech affinity, if you want to call it like this. Ah, um, uh, and I think that is very strong in China as it is also in the us.

Daphne Lucktenberg: Dan, how are you seeing these universal principles being applied in a local setting?

Dan Swan: One of the things that Ruth said is certainly true is that a lot of the same technologies and opportunities exist across industries, across regions, but how they're applied and where they're worth more, worth less is obviously quite different. And so some of those things that we see are incredibly consistent are the notion of what's the data requirements and the data availability, how you think about really redesigning as an end to end process, how you think about building the capabilities of your employees, employees, how you think about the mix of automation, robotics, agentic AI, generative AI and the application of all those different technologies into one kind of coherent technology strategy. So there are a lot of these truisms that exist across like I said across companies and across regions there are some things that are, you know, very much driven by uh, the specific regional context or the specific industry context. You know, obviously where a cost sits in your organization can be quite different and therefore what you pursue uh, can be differently prioritized. You think this notion of what are the capabilities around your company, right? As you think about a broader ecosystem of suppliers and vendors and technology providers because uh, you're working in a broader ecosystem to do this stuff now versus doing everything uh, yourself. And then the last thing I would say in this is just really what's the reality of any given specific business. Whether that's the performance of the business, the constraints of people or time or dollar investment, etc. And so pretending there's an off the shelf solution is probably not right. But also making sure that people are learning from one another of where the value is actually being created is a super important balance to get right.

Daphne Lucktenberg: So let's dig a little deeper um, into technology. We've moved from experimenting with gen AI to deploying agentic systems that automate planning, scheduling and optimization across operations functions. What do you see as staying consistent and what you see as changing?

Dan Swan: Yeah, maybe I would say a couple things. I mean look on the technology front, 12, 18 months ago everything was about LLMs and now people are talking and pursuing agentic at a pace that hasn't um, been seen before. And so you know, my hunch is that that will continue to evolve and we'll continue to find the next best thing. And the pace of innovation is really unprecedented for what we've seen. One thing that I think will continue to be true is the way to drive value is not by asking the question, you know, how do I leverage agentic or how do I leverage AI? And instead what are our most important business problems? And therefore how do I leverage a full suite of technology and uh, potential solutions to solve those business problems. I think that will be really being impact focused on how you leverage the technology. I think one of the second things that will continue to be true is this notion of this ecosystem, right? How companies are working with multiple vendors and multiple providers to help uh, deliver these end to end technology implementations is going to be super critical. Uh, there are places where it makes sense to leverage more industrial solutions. There's places where it makes sense to build your own custom solutions. There's places where it makes sense to use a best of breed provider that might have a robotics solution or an LLM solution. Really companies getting very smart on how they want that to Fit together and being very strategic about that is super important. Maybe the third thing I'll call out that I expect to be uh, you know, very consistent is the fundamental need to rewire the capabilities of our employees. If you think about as someone working on the shop floor, you know, the skills it takes to work with a robot and kind of work in MES systems is very different than the skills to physically use your hands or your back or your legs to lift and be dexterous. If you think about it in a planning environment, you know, what it takes to understand where there are variables that need to change or where there are, are um, disruptions to the plan is very different than what it takes to actually build the plan the first time. And so teaching things like how you interact with the systems, how you drive problem solving and really get our humans focused on the things that only humans can do still is a really powerful truism that I think will continue uh, into the future.

Daphne Lucktenberg: And Ruth, I want to come back to you. You were alluding to some of these things are actually much slower for adoption in Europe for example. But what do you think the real calls to action are in Europe from leaders in manufacturing and process industries to keep up pace with the rest of the world.

Ruth Huss: So I think we had uh, probably one or two decades of uh, really enormously prosperous uh growth in Europe. As sometimes happens in those cases you not as much as on your toes. And we see that if we look at um, our Global Lighthouse Network initiative, um, which we have almost since 10 years and here it's very clear that there is a trend since many years to work much more in digital with gen AI, but also with robots. And to give you just a few facts, uh, in 2018 when we started the measurement, um, roughly 10 to 15% of the plants were experimenting with that. But today 80 plus percent, um, of the best plants have uh, genai, uh 5% roughly also already have robots in their plants, so um, fully autonomous. And I uh, think that is something that we in Europe have to catch up with. I ah, also believe that uh, industry leaders have now recognized that there is something to catch up with. And the other thing which is I think also very promising is there's still a lot of things that you can do even in an existing footprint as Dan mentioned earlier. Ah, so that makes me quite positive, um, that also looking at demographics and uh, potential future shortage of skilled labor that we will still be able to um, uh, compete.

Daphne Lucktenberg: And actually when I listen to leaders and I hear what they're saying and uh, what they're hearing from clients. I'm hearing a sense of measured optimism. There's a notion that as we enter 2026 that while geopolitical uncertainty continues to prevail, there will also be a new vector of opportunity to create value, especially for organizations who seem bold enough to embrace rewiring and tech enabled operation models. So let me come back to you both and um, what are the one or two key things that you hope that our listeners will take away from today's discussion that will help them make that impact or achieve that impact in 2026?

Ruth Huss: I think the one thing that I'm really convinced about is that the speed of change will not be any slower again. So we see innov, um, coming into all kinds of operation system at an unbelievable, uh, speed, which is on the one side a bit threatening on the other side. It also brings us a lot of opportunities. Ah, while yesterday it was only about large language models, you can almost skip that, um, uh, now and concentrate on the agents. So that makes me actually quite positive, um, that we can also do quite a lot, even if you start maybe a, um, bit later. And we also see in surveys that 80% of the companies are actually experimenting, uh, with uh, all kinds of things, but only 20% already reap the benefits. And so that means even if you start now, you can catch up. You just need to be very serious about it.

Daphne Lucktenberg: And Dan, how about you?

Dan Swan: Yeah, I mean, I think the combination of, you know, this unprecedented need for productivity, the challenging growth situation for many industries, and just the reality that there's going to likely continue to be supply chain disruptions means two things. Right. One is that means that no CEO or head of supply chain is going to be bored in 2026. Right. And I think the second thing it means is, you know, it's a once in a generation opportunity to leverage those things to create the focus and clarity within your organization to drive transformational impact. And I think the encouragement would be to really think big about, you know, how you rewire that organization. What are the fundamental processes that need to change? How do you think about it as a transformation at scale rather than a pilot in one or two small areas? And how do you think about this as a fundamentally different way of doing business from the technology adoption to the way the process works, to the capabilities of the individuals, uh, to get kind of very different results than if you piece pick small parts and try and make them uh, marginally better?

Daphne Lucktenberg: Love that. Let me finish with one last question for you both, which is what is the one thing that you are most optimistic about in 2026 when it comes to the operations agenda. Dan, you first.

Dan Swan: I think there's examples of companies that have started to get the value that everyone been promised over the last decade. Right. And an exciting situation where hopefully gives people the chance to believe and the excitement to go after it. And, um, you know, that makes me really motivated and energized for a lot of companies to achieve pretty unique results.

Ruth Huss: So I think, as Dan also said a bit earlier, ah, uh, it will not be boring. Um, there's tons to do. Um, uh, and I think, uh, it's a great time to start now. Why not start now with all these new challenges and opportunities and just make 2026 the year of, uh, rewiring.

Daphne Lucktenberg: It's great to end on, um, such a positive note. Thank you both Dan and Ruth, for being with us today. And we'll, uh, call on you throughout the year to hear your latest updates. You've been listening to McKinsey Talks operations with me, Daphne Lucktenberg. If you like what you heard, subscribe and stay tuned. Another great episode starts now.