Aligning McKinsey to impact
How McKinsey is shifting its operating model to maintain alignment with client service
How McKinsey is shifting its operating model to maintain alignment with client service
The operating model of McKinsey is quite simple; it is at its core a human capital driven organization, where its operating model relies heavily upon the recruitment and development of people. From an organizational standpoint, McKinsey puts these people onto teams through a staffing process, which matches those interested in a certain organization or industry with opportunities that are closely aligned with that. Through a multitude of projects with a specific client or industry, consultants are able to garner expertise with regards to what are best practices.
In many ways, the way that McKinsey is able to create and capture value is by sending these teams into client organizations, and to be thought-partners and objective thinkers for client leaders. Consulting has been, traditionally, a very human capital intensive business; clients hire McKinsey because they want long-term advisors that will be there for them through major change and transformations, to be the voice of objectivity at cross-roads and decision-making. After all, being a leader in a client organization can be a very lonely job, and that is why historically, McKinsey’s business model of client service through human support has been very aligned with its operating model of human capital recruitment and development.
However, over the past few years, McKinsey’s competitors are not only companies like Bain or BCG. McKinsey is now competing against technology companies such as Palantir, who has the power of big data behind them. Client services, as we look ahead, will need to move beyond just human support; it needs to be a combination of teams on the ground and technical solutions that leverage big data, benchmarks, and a whole host of analytical tools. Because of this movement in the market, McKinsey’s historical operating model focused on human capital may not be sufficient for full value capture going forward.
Recognizing that, McKinsey has started to develop exactly these solutions, targeted at very specific content areas such as pricing, organizational health, sales force effectiveness, etc. The hope is that by developing these specific offerings, McKinsey is able to systematically synthesize learnings and insights on a specific sector or knowledge area, in addition to diversify its client offerings to be much more holistic. This is also interesting because recruiting at McKinsey is starting to shift to be much more diverse, as McKinsey is bringing on engineers, data scientists, and other technical talents to help build out its portfolio of technology offerings. This increased diversity in McKinsey’s talent pool, compounded with the increased diversity in product offerings, is shifting McKinsey’s operating model towards the development of comprehensive, end-to-end client solutions, as opposed to just the development of client-facing teams. After all, McKinsey’s business model still remains to be client service, but solutions-driven client service is the future, which is why McKinsey has shifted its operating model to match that.
Nevertheless, at the end of the day, consulting is a people business, because the advisor relationship that clients crave will never go away. Hence, I ultimately believe that going forward, McKinsey’s business model will still center around a strong human capital development model, towards which McKinsey devotes huge resources. McKinsey’s training programs are second to none, and really focuses on a continuous improvement process for its people. Right now, the critical next step is to effectively link up McKinsey’s human capital consulting piece to McKinsey Solutions from an organizational, process, and culture perspective. Perhaps it may be challenging to incorporate McKinsey Solutions into the legacy ecosystem of human capital development, but to deliver the most client impact, McKinsey Solutions and McKinsey’s traditional consulting arms cannot just co-exist, but need to be integrated.
Sources:
http://www.mckinseysolutions.com/about-us.aspx
http://www.mckinseysolutions.com/solutions.aspx
http://www.mckinsey.com/about_us
http://www.mckinsey.com/about_us/what_we_do/our_values
Great post, Cynthia. You’re right that there are a lot of challenges for firms like McKinsey, and clients seem to be asking for help in implementing solutions and not only in identifying them. Being a quintessential service industry, McKinsey seeks to respond to clients’ needs by adjusting their operating model to ensure that the business model continues to attract clients. One way that the operating model is being altered is that teams now may include “implementation coaches” and other more narrowly focused experts, a definite change from the traditional McKinsey model of teams that are solely composed of “generalists.” I think you’re right that high-level strategy consulting will always be a service demanded by business leaders who seek to inform their thinking, get an outside perspective, or simply validate their assumptions, and that McKinsey’s traditional business model still holds great appeal. Help in thinking through business problems is only becoming more needful as economies continue to globalize, technologize, and generally move toward greater complexity.
Thank you for sharing Cynthia! I have witnessed repeatedly client frustrations with consultants’ work that just gets put on a shelf never to be implemented. As clients ask for more end-to-end solutions and strategy-to-execution assistance, I believe we will see many changes in the space. This has already started with plenty of recent M&A in the field (PwC/Strategy&, Deloitte/Monitor, etc.) and it’ll be interesting to see where the industry will head in the future as corporate problems become more complex and more requiring of multi-disciplinary and hands-on solutions.
A very good view on where consulting is heading these days! One thing I would be truly interested in is how these changes will affect the day-to-day work of consulting companies. One of the greatest advantages of hiring consultants is that they run very lean teams. This allows them to quickly get to the core of the questions asked by their clients. However, as teams and solutions offered by the consulting companies become more complex (mirroring complexity of problems faced by the client), and more parties within the consulting companies become involved (e.g. expert on implementation is part of the team, big data team helps run some analyses while an in-house application design team works on some prototypes etc.), I wonder whether the consulting companies will be able to keep their ‘lean’ attitude for which they are so valued. Or will they slowly turn into mere coordinators of large scale projects that involve many different parties?