(Still) learning from Toyota

24. February 2014

A retired Toyota executive describes how to overcome common management challenges associated with applying lean, and reflects on the ways that Toyota continues to push the boundaries of lean thinking.

February 2014 | byDeryl Sturdevant, McKinsey Quarterly

In the two years since I retired as president and CEO of Canadian Autoparts Toyota (CAPTIN), I’ve had the good fortune to work with many global manufacturers in different industries on challenges related to lean management. Through that exposure, I’ve been struck by how much the Toyota production system has already changed the face of operations and management, and by the energy that companies continue to expend in trying to apply it to their own operations.

Yet I’ve also found that even though companies are currently benefiting from lean, they have largely just scratched the surface, given the benefits they could achieve. What’s more, the goal line itself is moving—and will go on moving—as companies such as Toyota continue to define the cutting edge. Of course, this will come as no surprise for any student of the Toyota production system and should even serve as a challenge. After all, the goal is continuous improvement.

Room to improve

The two pillars of the Toyota way of doing things are kaizen (the philosophy of continuous improvement) and respect and empowerment for people, particularly line workers. Both are absolutely required in order for lean to work. One huge barrier to both goals is complacency. Through my exposure to different manufacturing environments, I’ve been surprised to find that senior managers often feel they’ve been very successful in their efforts to emulate Toyota’s production system—when in fact their progress has been limited.

The reality is that many senior executives—and by extension many organizations—aren’t nearly as self-reflective or objective about evaluating themselves as they should be. A lot of executives have a propensity to talk about the good things they’re doing rather than focus on applying resources to the things that aren’t what they want them to be. Read the rest of this entry »


Driving lean management: An interview with the COO of TD Ameritrade

24. February 2014

Unfortunately, I don’t understand what this has to do with “Lean Management”. This is just purposeful participative management, which is fine, but does not conclude that “lean management” is the success factor. (hfk)

The financial-services group’s Marv Adams explains how ridding organizations of valueless complexity can spur growth.

February 2014, McKinsey Insight

Marv Adams is the chief operating officer (COO) of TD Ameritrade, a leading US provider of electronic discount brokerage and related financial services. The company currently holds more than $524 billion in client accounts and executes an average of nearly 400,000 trades per day.

In his role as COO, Mr. Adams oversees all IT and operations functions, including systems development, data centers and infrastructure, networks, project management and process improvement, and retail brokerage clearing and operations. He has devoted much of his 30-year career to the pursuit of lean management, initially in traditional manufacturing environments and later in financial services. He has been a member of the senior leadership teams at Ford Motor Company, Bank One, Citigroup, Fidelity Brokerage Services, and TIAA-CREF.

art

Marv Adams biography

McKinsey spoke with Mr. Adams at his office in Jersey City, New Jersey.

McKinsey: Across the many operational contexts in which you have worked, what do you find makes lean management so powerful when it is done well?

Marv Adams: Lean management effectively taps into associates’ convictions and passions. They have a deeper sense of when their company is acting in the right way—for the long term, out of a genuine belief in serving clients—versus when it is just reacting to short-term pressures in a never-ending cycle of “flavor of the year.”

Flavor of the year is exhausting. It consumes time and energy without achieving real change. That’s dispiriting for associates and makes it even harder for middle managers to motivate their teams. Everyone is so worn out that when they see a system that says, “We are stewards; it is our responsibility to find a better way to help our clients,” they find it inspiring. When associates can tie their work back to a purpose that’s deeper than just making more money next quarter, the result is a culture in which people are much more satisfied, inspired, productive, and innovative at every level of the organization. So it’s incredibly powerful when it’s done well. Read the rest of this entry »


The enterprise IT infrastructure agenda for 2014

27. January 2014

IT infrastructure managers must simultaneously capture the next rounds of efficiencies, accelerate the transition to next-generation infrastructure, reduce risks, and improve organizational execution.

January 2014 | byBjörn Münstermann, Brent Smolinski, and Kara Sprague, McKinsey & Co.

This year has been tough for many organizations that manage IT infrastructure—the hardware, software, and operational support required to provide application hosting, network, and end-user services. Highly uncertain business conditions have resulted in tighter budgets. Many infrastructure managers have rushed to put tactical cost reductions in place—canceling projects, rationalizing contractors, extracting vendor concessions, and deferring investments to upgrade hardware and software.

We have conducted more than 50 discussions with heads of infrastructure at Fortune Global 500 companies over the past six months to get a sense of the issues they are wrestling with. Clearly, infrastructure leaders must meet 2013 budgets while ensuring they can address critical challenges in 2014 and beyond. They can do so by pulling 11 levers.

Capture the next round of efficiencies

There is no indication that 2014 will be dramatically easier from a budgetary standpoint than 2013 has been at many companies. Even as infrastructure organizations lock in 2013 savings, they need to take several actions to establish a pipeline of cost-improvement initiatives that will create space in their budgets for 2014 and 2015.

1. Put in place a commercial-style interaction model with business partners Read the rest of this entry »

Die Zukunft der Berater

17. January 2014

Geschäftsmodelle

Die Zukunft der Berater

Von Clayton M. Christensen, Dina Wang und Derek van Bever, Harvard Business Manager, 15/1

Die Consulting-Branche verdient ihr Geld damit, Unternehmen beim richtigen Umgang mit strategischen Bedrohungen zu unterstützen. Jetzt gerät sie selbst in Gefahr.

Jahrelang hatten sich die Berater von McKinsey & Company mit ihrer Situation auseinandergesetzt. Sie hatten Diskussionen geführt und Analysen erstellt. Im Jahr 2007 schritten sie dann zur Tat. Die globale Beratungsfirma startete eine Reihe von Geschäftsmodellinnovationen, die das Verhältnis zu ihren Kunden grundlegend verändern könnten. Eine der spannendsten ist McKinsey Solutions: software- und technologiebasierte Analysewerkzeuge, die sich in die Systeme von Kunden integrieren lassen. Sie ermöglichen eine Zusammenarbeit auch über die traditionellen Projekte hinaus. Mit McKinsey Solutions entbündelte das Unternehmen zum ersten Mal seine Angebote und machte sein Wissen in Form von Produkten zugänglich.

McKinsey und andere Beratungsfirmen haben sich zwar schon häufiger neu aufgestellt – von universeller zu funktionaler Ausrichtung, von lokalen zu globalen Strukturen und von eng zusammenhängenden Teams zu miteinander vernetzten Experten an unterschiedlichen Orten. Der Start von McKinsey Solutions aber ist etwas gänzlich Neues, denn erstmals geht es nicht mehr darum, Berater zu entsenden.

Doch warum investiert ein Unternehmen, dessen wichtigstes Wertversprechen auf fundierten Urteilen und maßgeschneiderten Diagnosen beruht, in eine solche Neuerung – wo doch sein Kerngeschäft bislang noch floriert? Zum einen verspricht McKinsey Solutions kürzere Projekte mit einem klareren Return on Investment, die helfen, in wirtschaftlichen Schwächephasen Umsätze sowie Marktanteil zu bewahren. Zudem kann die Beratung, wenn sie proprietäre Analyseinstrumente beim Kunden einrichtet, dort auch in der Zeit zwischen zwei Projekten präsent bleiben. Das verbessert die Chancen auf zukünftige Aufträge. Diese geschäftlichen Vorteile dürften für die Entscheidung von McKinsey eine Rolle gespielt haben. Doch letztlich, so glauben wir, ging es um noch viel mehr: McKinsey Solutions ist als Absicherung gegen eine mögliche Disruption der klassischen Beratungsarbeit gedacht. Read the rest of this entry »


Closing the Skills Gap

21. November 2013

Date: 21-11-2013
Source: Project-Syndicate

MONA MOURSHED

Mona Mourshed leads McKinsey & Company’s global education practice.

WASHINGTON, DC – In an age of skyrocketing unemployment, it may seem reasonable to assume that companies do not have to worry about finding workers. But a recent McKinsey survey of more than 2,800 employers worldwide has underscored just how flawed that perception is. Four out of ten employers said that they cannot find workers to fill entry-level positions in their firms, with more than one-third of respondents saying that their businesses are suffering from a lack of appropriate skills in the labor market.

Meanwhile, young people worldwide are struggling to find jobs. While the eurozone crisis helps to explain why more than half of young people in Greece and Spain are unemployed, rapidly growing economies like South Africa and Nigeria are experiencing similar rates of youth joblessness. In the Middle East and North Africa, one in three young people are unemployed. And, in the United States, roughly half of bachelor’s degree-holders under the age of 25 were jobless or underemployed upon graduation last year.

All of this points to the costly skills mismatch at play in today’s economy. In the US alone, the opportunity cost of failing to improve education would amount to $1.7 trillion by 2030. Similarly, by bridging its growing skills gap, China could augment its GDP by $250 billion by 2020. So why isn’t more being done to ensure that young people acquire the skills they need?

The problem is rooted in divergent perceptions among the various players in the labor market. More than 70% of the educational institutions surveyed by McKinsey believe that their graduates are ready for the job market; more than half of employers and young people disagree. Closing this gap requires that educators and employers work together more closely. Employers should communicate their requirements to educators; educators need to give their graduates the tools that will enable them to meet these requirements. The problem is missed connections, so the solution is to make more of them. Read the rest of this entry »


Leading in the 21st century: An interview with Hertz CEO Mark Frissora

12. November 2013

McKinsey Insights, November 2013MFrissorasm

The digital revolution has dramatically affected how rental-car companies do business, as Hertz CEO Mark Frissora explains 

Since joining Hertz as chief executive officer, in 2006, Mark Frissora has helped negotiate a major merger, implemented new technologies that will change the company’s business model, and, most recently, announced plans to move Hertz’s headquarters from New Jersey to Florida. Hertz, whose fleet consisted of just 12 Model T Fords when the company began in 1918, is now the largest publically traded rental-car operator in the United States. In an interview with McKinsey’s Rik Kirkland, Frissora discusses the enduring importance of understanding what’s happening on any company’s front line, how the car-rental business is continuing to evolve, and why organizations ignore technology at their peril.

McKinsey: Hertz has nearly 41,000 employees and more than 10,000 locations worldwide. How do you balance the need to think strategically with the challenges of running such a logistically complex business?

Mark Frissora: I often hear people say, “As a CEO, you can’t get too involved in the day-to-day operations of your business. That’s micromanaging.” My response is, “I have to get ‘too involved’ in the business because I’m setting the strategy. If I don’t understand the business, then I’m a poor manager and I’ve failed as a leader.” It’s critical that leaders spend a lot of time where the work actually gets done—that they get into the guts of the business and see what happens there. The further down the chain you go, the easier it is to see how your strategy might not work the way you’d intended. You might even discover that the strategy itself is backwards. You always walk away with a new insight or a new opportunity.

McKinsey: How do you ensure that you spend enough time on the front line?

Mark Frissora: I’m on the road about 60 percent of the time. I always try to stop in at the Hertz counter in the airport. And about three times a year, I take my whole team to visit our call center. We have lunch with about 25 call-center supervisors, and then we spend an hour listening to different types of customer-service calls—roadside assistance or reservations, for example. It’s critical to plug yourself into the call centers. Read the rest of this entry »


Finding your digital sweet spot

2. November 2013

The potential impact of digital technology varies widely by industry, but most enterprise leaders share an important challenge: how to get beyond the small share of the prize they are capturing today by looking for impact across the whole value chain.

November 2013 | by’Tunde Olanrewaju and Paul Willmott, McKinsey & Co.

While online sales, social networking, and mobile applications have received most of the buzz when it comes to digital, our recent research finds that the greatest bottom-line impact may come where most companies aren’t looking—from cost savings and changes beyond the interface with customers. Our yearlong study shows that, across the industries we examined, the average bottom-line impact that can be realized from digital sales over the next five years is 20 percent: a significant opportunity to be sure, but much less than the bottom-line impact from cost reductions, which average 36 percent. (See sidebar, “Calculating the economic impact of digital transformation.”)

Sidebar

Calculating the economic impact of digital transformation

Digital transformation can make a big difference. To calculate just how big, we examined ten industries: retail banking, mobile telecommunications, airlines, consumer-electronics retailing, apparel, property-and-casualty insurance, hotels, supermarkets, pay-TV broadcasting, and newspaper publishing. To get at costs, we recut the expense categories of these sectors on an apples-to-apples basis and computed the difference that fuller use of digital channels, greater automation, better analytics, and innovative virtual models—such as remote freelance call-center workers—might yield, using metrics such as reduced head count and improved productivity. On automation, for instance, we assessed the typical distribution of human resources across processes in a service-operations function and identified which labor-intensive activities could be done by technology. For sales, we compared the sales outperformance of selected digital leaders in each sector against the industry average, forecasting the likely digital advantage such companies could build up over the next five years. Combining this analysis with online-penetration growth rates in each industry and average margins, we were able to estimate bottom-line impact.

On average across the sectors we examined, we found that digital transformation can boost the bottom line by more than 50 percent over the next five years for companies that pull all levers. This ranged from 20 percent in pay-TV broadcasting to more than 200 percent in music retailing, with most sectors clustered in the 30 to 60 percent range. These headline figures are underpinned by a few critical insights: most sectors are expected to double their share of sales coming from digital channels over the next five years. Additionally, digital leaders are on average growing their digital sales at 2.5 times that of their sector peers, with as high as a 9 times multiple seen in newspapers, for instance. Furthermore, we found that companies can, on average, cut the total cost base by 9 percent, resulting in average bottom-line impact of 36 percent, through shifting customer interactions to digital channels and automating paper-heavy processes. This ranged from 3 percent of total costs in grocery retailing to 20 percent in retail banking—substantial impact, which passes directly to the bottom line and reshapes the economics of competition across these sectors. Read the rest of this entry »


The digital enterprise

1. November 2013

The evolution of digital technology presents opportunities and threats for all businesses. In this video, McKinsey director Paul Willmott explains how companies can successfully transition to becoming digital enterprises.

McKinsey & Co., November 2013 

Willmott McK

It’s safe to assume virtually all companies use digital technology in some form or another. Yet getting beyond obvious and small applications of technology to drive the creation of truly “digital enterprises” is vital—and presents a challenge for executives. In this video interview, McKinsey director Paul Willmott explains the opportunities and threats posed by the evolution of digital technology, why becoming a digital enterprise is critical, and what leaders should do. What follows is an edited transcript of his remarks.

Interview transcript

A technology explosion

Companies have always relied on technology to innovate and improve productivity and so on. But over the last few years, we’ve seen an explosion of technologies such as mobile and social media and big data. And in turn, that’s creating huge new opportunities—and threats—for most enterprises. Consumers are increasingly willing to buy goods and services through digital channels. Over 50 percent of air travel is now purchased online, for example. Read the rest of this entry »


All Things Online: How the Internet of Things Changes Everything

24. September 2013

Date: 24-09-2013
Source: Foreign Affairs

As models wearing Google Glass tromped down runways in New York earlier this month, it might have been tempting to see wearable digital devices — including experimental headgear (what looks like a pair of eyeglasses without lenses that immerse the user in the Internet), smart watches (Web-surfing computers in the form of wristwatches), and running shoes and athletic apparel with built-in data sensors — as just the latest fad. In fact, they represent a more profound change that is reshaping major industries, even as it blurs the lines between humans and computers.

What has made such devices possible is the interplay between two of what the McKinsey Global Institute has identified as among the most disruptive technologies of the coming decade: the mobile Internet and the Internet of Things. The mobile Internet is the ability to access the Web on mobile devices. The Internet of Things is a set of technologies that incorporates the physical world into the virtual one through networks of electronic sensors and devices connected to computers. The applications of a mobile-ready Internet of Things go beyond clothes: Tiny detectors that can gather and relay data about location, activity, and health (how well an object or device is holding up) have already been incorporated into everything from bridges and trucks to pacemakers and insulin pumps. Read the rest of this entry »


McKinsey looks set to stay top of the heap in management consulting

21. September 2013

Date: 19-09-2013
Source: The Economist: Schumpeter
Subject: The future of the Firm

IT IS one of the engines of global capitalism. Not only does McKinsey provide advice to most of the world’s leading companies (and governments). It also pioneered the idea that business is a profession rather than a mere trade—and a profession that thrives on raw brainpower more than specialist industry knowledge or plain old common sense.

Yet McKinsey’s name has suffered a succession of blows in the past 15 years. The Firm, as it calls itself, was deeply involved in the Enron debacle: the energy company’s boss, Jeff Skilling, was a McKinsey veteran who praised the consultancy for doing “God’s work”, and the McKinsey Quarterly published articles on Enron as enthusiastically as Hello! runs pieces about the Beckhams. In 2010 Anil Kumar, a McKinsey consultant, admitted passing inside information to Raj Rajaratnam of Galleon, a hedge fund. Last year Rajat Gupta, a former McKinsey managing partner, was also convicted of passing inside information to Mr Rajaratnam.

Life is getting tougher for professional-services firms. Midsized consultancies are already suffering: Monitor Group went bankrupt last year—Deloitte later bought it for $120m—and Booz & Co and Roland Berger are agonising about their futures. If the legal profession is anything to go by, worse is to come: Dewey & LeBoeuf collapsed last year after borrowing heavily in a dash for growth, and other elite law firms are struggling to win business.

So, are McKinsey’s best days behind it? Two new publications offer some interesting answers. “The Firm”, by Duff McDonald, is a generally admiring book that nevertheless asks hard questions about the organisation’s future. “Consulting on the Cusp of Disruption”, by Clayton Christensen and two colleagues, is a penetrating article in the October Harvard Business Review, arguing that the comfortable world of the strategy consultancies is about to be turned upside down.

McKinsey’s success depends above all on an unimpeachable reputation for integrity. It cannot continue to serve most of the world’s leading companies (including working simultaneously for competitors) if its consultants are willing to spill secrets. Mr McDonald argues that the firm’s size makes it impossible to avoid repeats of the Kumar problem. It is now a giant factory with 1,200 consultants rather than the cosy club of old. The firm has to keep growing, not least to provide its partners with the $1.5m or so a year that they earn. But every time it grows it puts its most important asset at risk.

McKinsey’s success also depends on its ability to remain at the cutting edge of business. But in recent years it has seemed to be on the wrong cutting edge. Mr McDonald points out that whereas McKinsey has led the “financialisation” of basic industries such as oil and gas, it has had little if any role in shaping the giants of the internet economy, such as Apple and Google. The new lords of business are engineers in hoodies, not MBAs in pinstripes.

Mr Christensen focuses on a bigger subject: how the forces that have disrupted so many other businesses, from steel to publishing, are disrupting consulting. The big three strategy consultants—the other two are the Boston Consulting Group (BCG) and Bain—are masters of opacity. But Mr Christensen argues that light is being let in on the magic. Companies are getting better at measuring results and demanding value for money. They also have access to more business expertise than ever before: the big three have more than 50,000 living alumni.

The big three have been masters at bundling lots of different services into a single, high-priced package. But clients no longer want to pay fat fees for a bit of strategic advice from a senior partner and a lot of humdrum work from neophytes. Mr Christensen says low-priced competitors are beginning to dismember the consultants’ business. Eden McCallum cuts costs by deploying freelancers, most of whom once worked for the big three. BeyondCore replaces overpriced junior analysts with Big Data, crunching vast amounts of information to identify trends.

McKinsey clearly faces a more difficult market than it is used to. But it has overcome serious challenges before—such as in the 1980s, when it lost the intellectual high ground to BCG and then Bain before regaining it. The firm is fixing some of the problems from the Gupta era. It has elected two successive managing directors, Ian Davis and Dominic Barton, who have worked hard to restore its professional ethos. Mr Barton urges companies to embrace “long-term capitalism” rather than “quarterly capitalism” and corporate responsibility rather than financial engineering: the very opposite of the Enron-era McKinsey’s gospel.

Old boys (and girls) everywhere
McKinsey also has two huge assets: talent and knowledge. It retains an unrivalled ability to recruit hundreds of clever young people and turn them into an army of problem-solving worker ants. It also has an enviable network of alumni, many of whom are happy to hire their old employer: in 2011 more than 150 ex-McKinseyites were running companies with more than $1 billion in annual sales. The firm has also invested heavily in knowledge for decades: perhaps no other organisation has as much interesting data on global capitalism.

Though lesser firms may be facing disruption, McKinsey dispenses a special sort of consultorial fairy-dust that is hard to replicate, and as much in demand as ever. The global ruling class is seized with a toxic combination of status-obsession and status-insecurity. Decision-makers also fear being swept away by one of Mr Christensen’s disruptive forces. They seek constant reassurance and reaffirmation from prestigious institutions. McKinsey knows better than almost anyone how to exploit this peculiar mindset. That will guarantee the Firm a solid future, even if no one can prove that its advice actually does any good.