Mckinsey And Company Quotes

As an associate at McKinsey & Company, my first assignment was on a team that consisted of a male senior engagement manager (SEM) and two other male associates, Abe Wu and Derek Holley. When the SEM wanted to talk to Abe or Derek, he would walk over to their desks. When he wanted to talk to me, he would sit at his desk and shout, "Sandberg, get over here!" with the tone one might use to call a child or, even worse, a dog. It made me cringe every time. I never said anything, but one day Abe and Derek started calling each other "Sandberg" in that same loud voice. The self-absorbed SEM never seemed to notice. They kept it up. When having too many Sandbergs got confusing, they decided we needed to differentiate. Abe started calling himself "Asian Sandberg," Derek dubbed himself "good-looking Sandberg," and I became "Sandberg Sandberg." My colleagues turned an awful situation into one where I felt protected. They stood up for me and made me laugh. They were the best mentors I could have had.

McKinsey partners tend to be designers of ditches, not diggers of ditches. When it comes to executing their lofty theories, well, consultants lean toward leaving those messy realities to the companies themselves.

McKinsey & Company advised AT&T not to enter the mobile telephone business, predicting there would be fewer than one million cellular phones in use by 2000. In fact, by 2000, there were one hundred million mobile phones.

One former McKinsey consultant wrote anonymously, ¨To those convinced that a secretive cabal controls the world, the usual suspect are Illuminati, Lizard People, or ´globalists.' They are wrong, naturally. There is no secret society shaping every major decision and determining the direction of human history. There is, however, McKinsey & Company.

For example, how much do you think a senior vice president of Microsoft who came from McKinsey knows about starting a company?

The desire to do so rarely feels small to people who cannot.

Complaints: McKinsey and Company found: • customers who have major problems but don’t complain about them have a purchase intention rate of about 9% • those who do complain, regardless of the outcome, have a repurchase rate of about 19% • customers who have their complain resolved have a repurchase intention rate of 54% • customers who have complaints quickly resolved have a repurchase intention rate of 82%

Digital educators Salman Khan and Shantanu Sinha contend the world is on the verge of another “printing press moment,” which will break the elite’s grip on the essentials of education, making available to millions of aspiring learners online knowledge and ideas once restricted to the lecture halls of Harvard or Stanford.

Historically, noted James Manyika, one of the authors of the McKinsey report, companies kept their eyes on competitors “who looked like them, were in their sector and in their geography.” Not anymore. Google started as a search engine and is now also becoming a car company and a home energy management system. Apple is a computer manufacturer that is now the biggest music seller and is also going into the car business, but in the meantime, with Apple Pay, it’s also becoming a bank. Amazon, a retailer, came out of nowhere to steal a march on both IBM and HP in cloud computing. Ten years ago neither company would have listed Amazon as a competitor. But Amazon needed more cloud computing power to run its own business and then decided that cloud computing was a business! And now Amazon is also a Hollywood studio.

The need for managers with data-analytic skills The consulting firm McKinsey and Company estimates that “there will be a shortage of talent necessary for organizations to take advantage of big data. By 2018, the United States alone could face a shortage of 140,000 to 190,000 people with deep analytical skills as well as 1.5 million managers and analysts with the know-how to use the analysis of big data to make effective decisions.” (Manyika, 2011). Why 10 times as many managers and analysts than those with deep analytical skills? Surely data scientists aren’t so difficult to manage that they need 10 managers! The reason is that a business can get leverage from a data science team for making better decisions in multiple areas of the business. However, as McKinsey is pointing out, the managers in those areas need to understand the fundamentals of data science to effectively get that leverage.

What have they fixed?” asked former McKinsey consultant Michael Lanning. “What have they changed? Did they take any voice in the way banking has evolved in the past thirty years? They did study after study at GM, and that place needed the most radical kind of change you can imagine. The place was dead, and it was just going to take a long time for the body to die unless they changed how they operated. McKinsey was in there with huge teams, charging huge fees, for several decades. And look where GM came out.”13 In the end, all the GM work did was provide a revenue stream to enrich a group of McKinsey partners, especially those working with the automaker. The last time McKinsey was influential at Apple Computer was when John Sculley was there, and that’s because he’d had a brand-marketing heritage from Pepsi. And Sculley was a disaster. Did McKinsey do anything to help the great companies of today become what they are? Amazon, Microsoft, Google? In short, no.

Perhaps the most widely read piece of research that McKinsey has published in the past decade showed that companies that rapidly re-allocate capital to new growth businesses outperform those that take a steady-state approach.21 Yet, the social side of strategy is such that companies still tend to take what is known as a “peanut butter” approach—spreading a thin layer of resources smoothly across the whole enterprise, even though it’s clear that opportunities are far greater in some areas than in others.

The flood of money from Amway’s founders failed, though, to quash an investigation by the Canadian government into a tax-fraud scheme in which both DeVos and Van Andel were criminally charged in 1982. The scandal exploded when Kitty McKinsey and Paul Magnusson, then reporters for the Detroit Free Press, shocked readers accustomed to DeVos and Van Andel’s professions of patriotism and religiosity with an exposé tracing an elaborate, thirteen-year-long tax scam directly to the bosses’ offices. At its highest levels, they revealed, Amway had secretly authorized a scheme creating dummy invoices to deceive Canadian customs officials into accepting falsely low valuations on products the company imported into Canada. Amway had thus fraudulently lowered its tax bills by $26.4 million from 1965 until 1978. Amway

The same thing, notes Brynjolfsson, happened 120 years ago, in the Second Industrial Revolution, when electrification—the supernova of its day—was introduced. Old factories did not just have to be electrified to achieve the productivity boosts; they had to be redesigned, along with all business processes. It took thirty years for one generation of managers and workers to retire and for a new generation to emerge to get the full productivity benefits of that new power source. A December 2015 study by the McKinsey Global Institute on American industry found a “considerable gap between the most digitized sectors and the rest of the economy over time and [found] that despite a massive rush of adoption, most sectors have barely closed that gap over the past decade … Because the less digitized sectors are some of the largest in terms of GDP contribution and employment, we [found] that the US economy as a whole is only reaching 18 percent of its digital potential … The United States will need to adapt its institutions and training pathways to help workers acquire relevant skills and navigate this period of transition and churn.” The supernova is a new power source, and it will take some time for society to reconfigure itself to absorb its full potential. As that happens, I believe that Brynjolfsson will be proved right and we will start to see the benefits—a broad range of new discoveries around health, learning, urban planning, transportation, innovation, and commerce—that will drive growth. That debate is for economists, though, and beyond the scope of this book, but I will be eager to see how it plays out. What is absolutely clear right now is that while the supernova may not have made our economies measurably more productive yet, it is clearly making all forms of technology, and therefore individuals, companies, ideas, machines, and groups, more powerful—more able to shape the world around them in unprecedented ways with less effort than ever before. If you want to be a maker, a starter-upper, an inventor, or an innovator, this is your time. By leveraging the supernova you can do so much more now with so little. As Tom Goodwin, senior vice president of strategy and innovation at Havas Media, observed in a March 3, 2015, essay on TechCrunch.com: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.

Take whatever job you can at one of those companies. Don’t worry too much about the title—focus on the work. If you get a foot in the door at a growing company, you’ll find opportunities to grow, too. Just whatever you do, don’t become a “management consultant” at a behemoth like McKinsey or Bain or one of the other eight consultancies that dominate the industry. They all have thousands upon thousands of employees and work almost exclusively with Fortune 5000 companies. These corporations, typically led by tentative, risk-averse CEOs, call in the management consultants to do a massive audit, find the flaws, and present leadership with a new plan that will magically “fix” everything. What a fairy tale—don’t get me started. But to many new grads, it sounds perfect: you get paid incredibly well to travel around the world, work with powerful companies and executives, and learn exactly how to make a business successful. It’s an alluring promise. Parts of it are even true. Yes, you get a nice paycheck. And yes, you get plenty of practice pitching important clients. But you don’t learn how to build or run a company. Not really. Steve Jobs once said of management consulting, “You do get a broad cut at companies but it’s very thin. It’s like a picture of a banana: you might get a very accurate picture but it’s only two dimensions, and without the experience of actually doing it you never get three dimensional. So you might have a lot of pictures on your walls, you can show it off to your friends—I’ve worked in bananas, I’ve worked in peaches, I’ve worked in grapes—but you never really taste it.” If you do choose to go that route and find yourself at one of the Big Four or the other top six firms, then that is of course your choice. Just know before you go what you want to learn and the experiences you need for your next chapter. Don’t get stuck. Management consulting should never be your endpoint—it should be a way station, a brief pause on your journey to actually doing something. Making something. To do great things, to really learn, you can’t shout suggestions from the rooftop then move on while someone else does the work. You have to get your hands dirty. You have to care about every step, lovingly craft every detail. You have to be there when it falls apart so you can put it back together. You have to actually do the job. You have to love the job.

Today’s second wave of customer service as practiced by some organizations — and it should be the customer service delivered by all companies of one — focuses on emotion and ease. A study from McKinsey showed that 70 percent of buying experiences are based more on how customers feel they are treated and less on the tangibles of a product. The feeling of being treated exceptionally well can only increase in the context of a second purchase or a subscription renewal, because the customer has already developed a feeling about how the first purchase went or how any support requests were handled.

We were discussing the performance-potential matrix that so many companies use for succession planning or “talent management.” McKinsey & Company originally developed it to help General Electric decide which businesses to invest in, and HR departments

Duckworth, herself, grew up the daughter of privileged Chinese immigrants in the middle-class town of Cherry Hill, New Jersey, and she studied neuroscience as an undergraduate at Harvard (Hartnett, 2012). After a masters at Oxford and then a year at McKinsey and Co., Duckworth became the CEO of the online public school rating company, Great Schools, before she altered course to become a charter school teacher on both the West and East coasts.

McKinsey & Company introduced a strategy planning system during the same period that divided a company into natural business units, later termed strategic business units (SBUs). The

Crunching data is not an automatic ticket for success, any more than putting up a website turned every company in the dotcom era into an e-commerce juggernaut. If the rollout of IT in the corporate world over the last 30 years has taught one lesson, it’s that the adoption of a transformative technology always requires careful and creative management grounded in facts. The new new thing never succeeds without a lot of help from the old old thing.

These data rarely exist in one place in the organization so you’ll need to pull in people from multiple functions such as marketing, sales, in-store operations, IT, and beyond. We’ve seen companies create small “SWAT” teams that assemble people from these functions to break through bureaucratic logjams.

What, then, are the practical steps that pricing managers can take to master Big Data? Companies must recruit a new generation of pricing talent with more of a “trader” profile than an “analyst” one.

One of the main ​reasons that MMM doesn’t deliver the benefits it should is because CMOs and marketers aren’t involved in the analysis. In many cases companies outsource the analysis or throw it over the wall to an internal analytics team. The result we often see is that the CMO pushes back on implementing the findings of the analysis, either because it’s too complex or challenges the status quo. Often times there’s a high level of distrust due to a lack of transparency into the process, so even if there’s great analysis there, the CMO won’t act on it.

McKinsey can also be hired when one executive needs “disinterested” support for an idea that might just also result in the removal of an internal rival. Lee Iacocca wrote in his autobiography that when Henry Ford wanted Iacocca out of the firm, he hired McKinsey to recommend a new organizational structure. Iacocca went to Chrysler, where he used Bain & Company instead of McKinsey.29 Finally,

Our culture of achievement has grown to emphasize visions of success that are, for the most part, fairly predictable. Cole skipped a couple of steps. The basic plan is to go to Goldman Sachs, McKinsey, or the like, then maybe to a top-ranked business school, then back to banking, consulting, private equity, hedge funds, or a name-brand tech company. Or maybe go from law school to top firm to partner or in house at an investment firm, and live in New York, San Francisco, Boston, or Washington, DC.* Again, these institutions and roles are necessary, and they’re natural developments in our economy. We need them. But we need people doing other things too. We need people willing to take risks and, yes, to occasionally fail. Like real-world consequences fail. We need people committed over extended periods of time to creating value, no matter how hard that is. We need people who care deeply about the work they’re doing. Imagine someone who you think could stand to take on some risk—someone well educated who would always have something to fall back on, whose family might have some resources so he would be unlikely to starve. And this person would probably be young and free of major life obligations. Someone sort of like . . .  Cole. What’s interesting is that many of the people I meet who are young, highly educated, and from good families are among the most risk-averse. They feel like they need to be making progress along a ladder with each passing month or year. Their parents have often set high expectations for them. They measure themselves each period against their peers, who are generally following various well-defined paths.

Still, McKinsey’s high self-regard survives even in the face of evidence to the contrary. McKinsey consultant Tom Steiner recalled a strategy study done for the New York office by another partner, Chuck Farr. “He had two slides. The first was the top clients of the New York office, by billings—companies like AT&T, American Express, and Manufacturers Hanover. All the partners got up to talk about what special thing McKinsey had done to become so vital to those clients. Before we knew it, there were only fifteen minutes left of what was supposed to be a two-hour meeting. Someone said, ‘What’s on the second slide?’ It was Booz Allen’s top clients. And they were pretty much the same companies.”14 McKinsey may have been earning more than Booz at the time, but it was from a client base that was clearly willing to pay for advice from everyone. There’s nothing special about that kind of product.

What’s more, a real premium began to be placed on being part of this knowledge oeuvre—not just in what McKinsey knew but in who at McKinsey knew these subject areas. An unstated understanding emerged that if you were a logistics expert in, say, the retail sector and you were called by a partner you had never met who mainly did work with pharmaceutical companies, you would nevertheless return the call. That reputation for contributing was your asset in the firm.

In many important ways the book really was an attack on McKinsey thinking, on the idea that the secrets of success could be found in an analytical framework or in a new corporate structure. It was an attack on the rationalist idea that businesses were machines that could be fine-tuned. The work of Peters and Waterman served to remind managers about first principles in business: If they didn’t listen to their customers or employees, then the rest was irrelevant. If the strategy revolution was forcing companies to look outward more than they ever had before, what Excellence did was force that gaze right back inside again. And it wasn’t talking only about financial management. It was also talking about how you treated the people who worked for you. It was, in short, the first great manifesto of the idea of corporate culture.

In another case, a McKinsey team went in to evaluate expansion opportunities for a division of a manufacturing company. After a few weeks of gathering and analyzing data, the team realized that what the division needed was not expansion; it was closure or sell-off.

Enron. One: The firm endorsed Enron’s asset-light strategy. In a 1997 edition of the Quarterly, consultants wrote that “Enron was not distinctive at building and operating power stations, but it didn’t matter; these skills could be contracted out. Rather, it was good at negotiating contracts, financing, and government guarantee—precisely the skills that distinguished successful players.” Two: The firm endorsed Enron’s “loose-tight” culture. Or, more precisely, McKinsey endorsed Enron’s use of a term that came straight out of In Search of Excellence. In a 1998 Quarterly, the consultants peripherally praised Enron’s culture of “[allowing executives] to make decisions without seeking constant approval from above; a clear link between daily activities and business results (even if not a P&L); something new to work on as often as possible.” Three: The firm endorsed Enron’s use of off–balance-sheet financing. In that same 1997 Quarterly, the consultants wrote that “the deployment of off–balance-sheet funds using institutional investment money fostered [Enron’s] securitization skills and granted it access to capital at below the hurdle rates of major oil companies.” McKinsey heavyweight Lowell Bryan—godfather of the firm’s financial institutions practice—put it another way: “Securitization’s potential is great because it removes capital and balance sheets as constraints on growth.” Four: The firm endorsed Enron’s approach to “atomization.” In a 2001 Quarterly, the consultants wrote: “Enron has built a reputation as one of the world’s most innovative companies by attacking and atomizing traditional industry structures—first in natural gas and later in such diverse businesses as electric power, Internet bandwidth, and pulp and paper. In each case, Enron focused on the business sliver of intermediation while avoiding the incumbency problems created by a large asset base and vertical integration.

DON’T REINVENT THE WHEEL (PART 2) Whatever the problem, chances are that someone, somewhere, has worked on something similar. Maybe that person is in your organization and can answer all your questions in the course of a phone call. Maybe other people in your field, in another division or another company, have seen the same problem already—find out who they are and get to know them. Do your research and ask questions; you will save yourself a lot of time and effort. Your time is valuable, so don’t waste it by reinventing the wheel!

But that was thirteen years ago. Today, the crème de la crème flock to younger, more vibrant companies, in both entry-level and much higher positions. The brightest students tend to not want to work for large companies anymore, and McKinsey is a large company. In the 1970s every smart student received an offer from Arthur Andersen, then about ten thousand strong. The more adventurous went to McKinsey, which employed a paltry four hundred by comparison. Today Arthur Andersen is gone, and McKinsey has taken its place in the student imagination. It’s for the average Harvard Business School graduate, not the Baker scholars. And, as has always been the case, McKinsey consultants continue to leave for big positions elsewhere. Among others, Facebook chief operating officer Sheryl Sandberg is a McKinsey alumnus, as is Google chief financial officer Patrick Pichette. McKinsey may be a career firm for some, but it tends to lose its best people.

They were so happy to be relieved of those strictures that they very quickly lapsed. Not everyone, of course, but the majority. We built the company a little too fast, and consequently the last 50 percent of the people hired really didn't have much commitment to the corporate culture. There were some warning signs. Consider McKinsey, which holds itself out as one of the world's leading repositories of knowledge on how to manage a business. They say they'll never grow their company by more than 25 percent per year, because otherwise it's just too hard to transmit the corporate culture. So if you're growing faster than 25 percent a year, you have to ask yourself, "What do I know about management that McKinsey doesn't know?" I still think it's more efficient—this is just an old Lisp programmer's standard way of thinking—if you have two really good people and a very powerful tool. That's better than having 20 mediocre people and inefficient tools. ArsDigita demonstrated that pretty well. We were able to get projects done in about 1/5th the time and probably at about 1/10th or 1/20th the cost of people using other tools. Of course, we would do it at 1/20th of the cost and we would charge 1/10th of the cost. So the customer would have a big consumer surplus. They would pay 1/10th of what they would have paid with IBM Global Services or Broadvision or something, but we would have a massive profit margin because we'd be spending less than half of what they paid us to do the job.

is driven more by fear of not being a success than by a concrete desire to do anything in particular.” The postcollege choices of Ivy League students, he explained, “are motivated by two main decision rules: (1) close down as few options as possible; and (2) only do things that increase the possibility of future overachievement.” Recruiters for investment banks and consulting firms understand this psychology, and they exploit it perfectly: the jobs are competitive and high status, but the process of applying and being accepted is regimented and predictable. The recruiters also make the argument to college seniors that if they join Goldman Sachs or McKinsey and Company or any similar firm, they’re not really choosing anything—they’re just going to spend a couple of years making money and, perhaps, recruiters suggest, doing some good in the world, and then at some point in the future they’ll make the real decision about what they want to do and who they want to be. “For people who don’t know how to get a job in the open economy,” Kwak wrote, “and who have ended each phase of their lives by taking the test to do the most prestigious thing possible in the next phase, all of this comes naturally.

Candidate: Well, this is really interesting. So far we’ve established that digital advertising is the spending category that’s growing, and the most recent information shows us that the big companies spend the most on advertising. My hypothesis is that the big companies are the ones shifting toward digital advertising in their marketing plans. To test this, I need to see a breakdown of advertising spending for the big companies over the past three years. Are the big companies the ones driving spending in digital advertising?

Based on the initial analysis, I recommend that the company expand Program B in the short term for the following reasons: Currently, Program A is losing money and cannot sustain itself. Program B is highly profitable. If we can expand the program by just X percent, the company can break even quickly. There are risks involved in expanding Program B, in particular the reputation risk. But due to the short-term nature of the expansion, these risks can be minimized. Given more time, we should evaluate options to turn around Program A and to unwind Program B.

The Mergers and Acquisitions Framework You might use the mergers and acquisitions framework to address cases in which one company wants to acquire or merge with another company. It is best used to determine the conceptual “fit” between two companies: Does joining these two companies have a multiplicative effect, where the whole is more valuable than the sum of its parts?

When a consultant interviews you, she is wondering, Can I drop you off with a division of a Fortune 500 company by yourself, with little to no supervision? Can you handle the client, solve its problems, and in the process make the firm look good? That’s what that consultant is really thinking, but most candidates don’t appreciate this perspective.

Integrating micro-recommendations into the company’s big-picture vision and providing supporting facts and analysis for those micro-recommendations allow the consultant to instill greater confidence in the client about moving in a particular direction.

many clients’ companies lose money, and typically one of a dozen or so common reasons can explain why. Thus, one commonly used issue tree deconstructs profits into component parts, enabling you to analyze each component to identify the root, or underlying, cause of the profitability problem. Because this is a somewhat standard analysis, we call this the profitability framework.

Hypothesis: Introducing XYZ product makes sense. Favorable customer factors Favorable competitive environment Favorable company operations factor Favorable aspects related to the product

After you analyze each company independently, you’ll run a third analysis of the two companies combined, which will provide you with qualitative insights about the benefits of such a transaction. Once you run all the analyses, you would use the qualitative data to refine your hypothesis and then analyze the potential benefits quantitatively (e.g., estimate the magnitude of financial benefit).

The most common M&A cases center on either strategic value or cost savings. The premise of a strategic value deal is that the combination of the two companies creates something more than either company could achieve on its own. A classic example of such a transaction is when Company A, a huge company with the biggest sales force on Earth, wants to acquire Company B, a small company that has a hot, brand-new product but very limited sales distribution. The rationale is that you move the product from Company B to Company A, let the large sales force work its magic, and boom! The new company has the hottest product on the market and the best distribution. In the cost savings deal, the new company combines the two companies in order to “eliminate” a negative (in this case, costs).

Candidates commonly and mistakenly interchange sales with profits. A company that wants to grow profits wants something completely different than does one that cares only about growing sales. Many candidates hear the word grow and automatically assume the client wants to grow only sales or only profits. Never assume. Always listen carefully and always double-check that you heard correctly.)

For example, let’s say that during your analysis you discover something indicating that the client’s key issue is internal, not related to its competitors. Instead of answering all the questions in the competitor section of the framework, revise your hypothesis to say that the client’s key issue is internal, and switch to the company portion of the framework (or in some cases, create a custom issue tree).

If customers are more concentrated, then the customers can demand (and get) big price discounts. If suppliers (the client’s company and its competitors) are more concentrated, then the vendors in the industry have the power to set high prices, and customers have no choice but to buy at those prices.

consider whether intangible assets such as brand names, reputation, and culture are relevant in testing the hypothesis. For example, if a no-name company and Coca-Cola introduced the exact same beverage, which one would do better in the marketplace? Similarly, much of Apple’s fanatical customer following is due to the company’s expertise in and reputation for product design.

organizational structure can be useful to analyze in cases that involve an execution aspect. Most cases deal with a big strategic decision—not the execution of a previously made decision—so you likely won’t need to consider this topic during the case interview. As a working consultant, however, you would be wise to analyze the company’s organizational structure to identify any conflicts between the structure and the strategy. We can refer again to the Fortune 500 CIO for this topic: If the CIO will deal with only one point of contact, he will not want to work with a company organized into five divisions, each with its own sales force.

Candidate: OK, things have remained flat during this time. I wonder if this is an industry-wide problem or a company-specific problem. Is comparable data for the rest of the industry available?

Candidate: To better understand what’s going on for Omega & Omega and its industry, we need to look at four key areas: the customers, the products, the company itself, and the competitors.

The preliminary conclusion here is that the profitability problem the client faces is a company-specific problem, not an industry-wide problem. Determining the root cause is important, because having to reframe it later could fundamentally shift your hypothesis and the subsequent issue tree or framework you use to test it. For example, if the problem is clearly a company-specific problem, it doesn’t make sense to analyze competitors. It makes sense to analyze the client’s operations and perhaps circle back to competitors later if something you discover about the client’s operations warrants a comparison to competitors.

The framework consists of four key components. I draw this framework as four distinct boxes, but you could quite easily redraw it as an issue tree with four branches: Customer Product Company Competition

What Are Each Segment’s Distribution Channel Preferences? A distribution channel, or sales channel, is a company’s means of reaching and selling to customers. For example, websites and mail-order catalogs are distribution channels. Selling through a reseller such as Walmart is another, as is having a sales force that visits clients in person. Different segments of customers prefer to buy through different distribution channels. A client sometimes wants to serve a particular customer segment, but the client’s primary distribution channel is one that customers in that segment refuse to use. This conflict needs to be resolved in order for the client to have an effective strategy.

Here are the types of questions I consider asking during product analysis: What is the nature of the product? (What are its benefits? Why would someone buy it?) Is it a commodity good or a unique good? (Could the company increase differentiation?) Are there any complementary goods? (Can the company piggyback off growth in complements or near complements?) Are there any substitutes? (Is the company vulnerable to indirect competitors, namely substitutes?) What is the product’s life cycle? (Is it new or almost obsolete?) How is it packaged? (This is an optional question. Is anything bundled or included with the product—for example, just a razor versus a razor with replacement blades, or just a product versus a product with a service contract? Would a change in the product’s packaging make the product more likely to meet specific consumer segments’ needs?) If you selectively ask questions about these product-related topics, you can uncover insights that will help you refine your hypotheses and ultimately serve your client more effectively.

The companies that win in commodity markets tend to be large and have incredible operational efficiencies or some type of cost advantage. Walmart is a perfect example of a winner in retail. Company size is a less-relevant factor for unique products as compared to commodity products, so you focus on other factors for unique products to determine which company will win over customers.

develop strategies for bundling products or partnering with companies in other industries. For example, when I was a child, my mom gave me cheese and crackers as a snack. This involved her cutting up the cheese and putting it in some type of container with some crackers. Someone at a food company noticed children—the customer— eating the company’s cheese with crackers. So the company launched an entire line of prepackaged, single-serving snack kits with cheese and crackers in a disposable container. This product has sold well because many moms buy it instead of a big block of cheese, which they have to cut into small pieces.

The company noticed that its customers spent a lot of money to maintain their GE equipment, but because GE didn’t offer maintenance services, the customers weren’t spending additional money with GE after purchasing the equipment. To tap into this part of the market, GE began to bundle maintenance contracts, extended warranties, and other repair-type services across all its major product lines. This new offering was wildly successful, bringing in billions of dollars in new revenue, and it all happened because someone at GE was smart enough to figure out what services customers used to complement GE products.

If your case or hypothesis necessitates a better qualitative understanding of your client’s company, you might use the section of the business situation framework on companies.

Questions on the following topics can help you identify helpful information about the company that you can then use to refine your hypothesis—and ultimately structure a more customized issue tree: Capabilities and expertise Distribution channels Cost structure (mainly fixed versus variable; is it better to have higher fixed costs with lower variable, which is a barrier to entry, or vice versa?) Investment costs (optional: only if the case involves an investment decision) Intangibles (e.g., brands, brand loyalty) Financial situation Organizational structure (optional: if, for example, team organization is in conflict with how customers want to do business, as in the case with the Fortune 500 CIO who wanted to do business with just one person)

If I do any company analysis at all, I almost always ask two specific questions related to this topic: What does this company do well? What does this company do differently than its competitors?

Once you understand the company’s distribution channel mix (the percentage of sales from each channel), you typically will want to compare it to competitors’ distribution channel mixes and customers’ distribution channel preferences.

Transforming your company to take advantage of data and analytics is the hard part, OK?

In a recent Harvard Business Review article we explore how companies require three mutually supportive capabilities to fully exploit data and analytics: an ability to identify and manage multiple sources of data, the capacity to build advanced analytic models, and the critical management muscle to transform the organization.

Algorithmic profits Algorithmic marketing is allowing companies to do things they couldn’t do before, and some early signs show it can deliver big value, especially in financial or information services. In North America, Amazon.com grew 30 to 40 percent, quarter after quarter, throughout the United States’ 2008-2012 recession, while other major retailers shrank or went out of business. From 2006 to 2010, Amazon spent 5.6 percent of its sales revenue on IT, while rivals Target and Best Buy spent 1.3% and 0.5%, respectively. That investment and focus has yielded increasingly sophisticated recommendation engines that deliver over 35 percent of all sales, an automated e-mail/customer service systems (90 percent are automated, versus 44 percent for the average retailer) that are a key component of its best-in-class customer satisfaction, and dynamic pricing systems that crawl the Web and react to competitor pricing and stock levels by altering prices on Amazon.com, in some cases every 15 seconds.

Eric Spiegel, the head of Siemens’ US arm, laid out a vision not that far removed from Ms Huang’s when he spoke at a breakfast in Washington hosted by the McKinsey Global Institute, the consultancy’s think-tank. The German engineering company, he said, would soon begin delivering spare parts to customers via email and 3D printers, also avoiding physical borders and the usual logistical complexities of global trade. But the advances in business are also coming up against fundamental debates about privacy. The Edward Snowden revelations of US online snooping have sparked a worldwide debate about privacy and the internet. Receiving less attention is the way international trade negotiations are trying to deal with what limits, if any, ought to be set on the flow of data around the globe and how to prepare for a digital future that is already a reality in some sectors. The negotiation of a 12-country Transpacific trade partnership (TPP) has sparked debate in Australia and New Zealand over whether companies ought to be allowed to store personal banking and medical data in foreign countries, or if such sensitive information should even be allowed to cross borders freely.

Business leaders will be digitally transforming their companies for the rest of their careers.

By his mid 40s Gupta was CEO of McKinsey, the world’s most prestigious consulting firm. He retired in 2007 to take on roles with the United Nations and the World Economic Forum. He partnered on philanthropic work with Bill Gates. He sat on the board of directors of five public companies. From the slums of Kolkata, Gupta had quite literally become one of the most successful businessmen alive

The talent required within the CoE is wide and ranges from business and operations excellence to risk and IT departments. According to McKinsey’s survey, the CoE of top-performing companies includes a large variety of profiles such as delivery managers, data scientists, data engineers, workflow integrators, system architects, developers, and, most critically, translators and business analysts.152 A

Just whatever you do, don’t become a “management consultant” at a behemoth like McKinsey or Bain or one of the other eight consultancies that dominate the industry. They all have thousands upon thousands of employees and work almost exclusively with Fortune 5000 companies. These corporations, typically led by tentative, risk-averse CEOs, call in the management consultants to do a massive audit, find the flaws, and present leadership with a new plan that will magically “fix” everything. What a fairy tale—don’t get me started.

The timeframe of the synergy could vary across what McKinsey has referred to as three horizons for strategy making – the first being the existing business, the second on transitions the company is making, and the third to a future or emergent new business.5

One way to introduce market forces was for private companies to buy NHS hospitals, particularly underperforming ones. Dalton, the British health official who was the focus of intense McKinsey politicking, met with McKinsey consultants on December 17, 2010 to sort through their options. They had a prospective buyer in mind - Helios - a private German hospital chain. Internal records showed that the parent company of Helios had been a McKinsey client in recent years. By the time lawmakers and bureaucrats began to consider the new NHS law, consultants were deeply embedded in Britain’s government. In 2010 the NHS alone spent £313 million on management consultants.

Consulting companies, such as McKinsey, Boston Consulting Group (BCG) and Bain & Company (often referred to as the “Big Three” strategy firms) and PwC, Deloitte, KPMG and EY (the “Big Four” accountancies), are hired by governments, businesses and other organizations to perform different types of tasks on their behalf.

Since the cost to renew and expand existing customers is a fraction of the cost for acquiring new business, this is a lucrative approach. McKinsey finds existing customers account for between a third to half of total revenue growth, even at start-ups.

renowned consulting firm McKinsey & Company advised AT&T not to enter the mobile telephone business, predicting there would be fewer than one million cellular phones in use by 2000. In fact, by 2000, there were one hundred million mobile phones. Not only was McKinsey’s prediction off by 99 percent, its recommendation also resulted in AT&T missing out on one of the biggest business opportunities of modern times.

In all racial groups, students from wealthy households tend to score better than those who are poor, but income does not explain group differences. A study by McKinsey and Company found that white fourth graders living in poverty scored higher—by the equivalent of about half-a-year’s instruction—than black fourth graders who were not poor. These differences increase in high school. On the 2009 math and verbal SAT tests, whites from families with incomes of less than $20,000 not only had an average combined score that was 117 points (out of 1600) higher than the average for all blacks, they even outscored by 12 points blacks who came from families with incomes of $160,000 to $200,000. Educators and legislators have not ignored the problem. The race gap in achievement is such a preoccupation that in 2007, 4,000 educators and experts attended an “Achievement Gap Summit” in Sacramento. They took part in no fewer than 125 panels on ways to help blacks and Hispanics do as well as whites and Asians. Overwhelming majorities in Congress passed the No Child Left Behind Act in 2002 to improve student performance and bridge achievement gaps. The government budgeted $24.4 billion for the program for fiscal year 2007, and its requirements for “Adequate Yearly Progress” have forced change on many schools. This is only the latest effort in more than 25 years of federal involvement. The result? In 2009, Chester E. Finn, Jr., a former education official in the Reagan administration, put it this way: “This is a nearly unrelenting tale of woe and disappointment. If there’s any good news here, I can’t find it.

This phenomenon has serious consequences for hierarchical organizations. Executives are just as loss-averse when the bets are small as they are when the gambles are large, even though small gambles do not raise the same issues of survival or ruin that provide a rationale for aversion to large risks. What’s more, small gambles offer opportunities for the risk-reducing effects of aggregation.

While the media looked for a few evil geniuses to blame, the real cause was amoral bizspeak. Corporate common sense regarding how to run a business had shifted over the years from long-term reinvestment and worker obligations to short-term returns. The ex-McKinsey men of Enron were cleverer, but not different from those at Andersen. While McKinsey or Andersen might have helped lead any one company astray, the real culprit was more insidious: the erosion of honest investment.

About 30 percent of founding CEOs in the billion-dollar group had not worked for anyone other than themselves before. Of those who had, about 60 percent had worked at companies with very well-known brands, like Google, Microsoft, Amazon, Goldman Sachs, or McKinsey. Those “tier-one companies” are famous for their rigorous hiring processes and their tendency to employ the best. Another 28 percent worked at “tier-two companies,” which I define as large and well-known companies that were less sought-after by top talent. Only 14 percent of founders of billion-dollar companies had worked solely at companies that were not well-known brand names.

For critics of the industry, the McKinsey documents are the smoking gun that describes in detail how the claims process shifted from customer service to profit center.

We seem to be trapped in a world of myopic short-termism, driven by a capitalist system that is obsessed with quarterly returns for absent shareholders. According to McKinsey research, this does not even make economic sense. Their 15-year analysis of short-term- versus long-term-oriented companies found the long-term firms showed 47 percent more revenue growth and 36 percent more earnings, had $7 billion more market capitalization growth and a higher total return to shareholders, and led to the creation of 12,000 more jobs. One distinguishing feature is that long-term companies invest almost 50 percent more in research and development, including during financial crises. It is time companies challenged quarterly capitalism and focused on long-term value creation.27 According to the former managing director

For Farmers’ ACME, as for Allstate’s CCPR and State Farm’s ACE, the McKinsey principles applied. The claims process would be radically altered. Traditionally companies pay what they should pay, with “should” defined by what the policyholder was owed. Transforming claims into a profit center would require focusing on leakage, or paying more than should be paid, where “should” was measured by the goal of reducing costs and increasing profits.