Professional Documents
Culture Documents
Todays discussion
Course overview
Questions?
Soft
skills
Leadership development
Hard
skills
Global perspectives
Dominic Barton
McKinsey Global Managing Director
Class 2: Organization
Jeff Hsu
Chief Innovation Officer
FarEastern Group
Kevin Sneader
McKinsey Director from Hong Kong office,
leader of McKinsey Asia
Nicholas Leung
McKinsey Director from Beijing office,
leader of McKinsey Greater China
Suja Chandrasekaran
Brad Brown
Wesley Walden
McKinsey Director from Melbourne office,
leader of McKinsey Asia RTS practice
Class 6: Operations
Fredrick Spalcke
Karel Eloot
Mark Wiseman
Conor Kehoe
CEO of CPPIB
Class 8: Closing
Dominic Barton
CEO of Khazanah
Format
Grading
Credits
2 credit units
Responsibilities
Responsibilities
business functions
Set the themes with
individual lectures and
maintain the global
perspectives of the
course
Invite and coordinate
schedule with lecturers
from both McKinsey
and other
organizations
Facilitate in-class
interaction between
lecturers and students
Dominic Barton,
Dean
Arthur Wang,
Partner
Associate Dean
Mei Ye,
David Pan,
External Advisor
Director
Qinzheng Tian
Engagement Manager
Faculty Coordinator
and content
Market the course on
campus
Select suitable top
students for the course
Handle academic
curriculum compliance
with the university
Provide venue and
facilities for each class
Facilitate class-related
activities
Collect student and
faculty feedback
Joint responsibilities
Refine the scope and content to maximize students learning, focus on balancing
between practice and academic
Review and grade students group assignments and class participation
Improve the quality and impact of the course, constantly incorporating meaningful
student feedback
McKinsey & Company | 6
Todays discussion
Course overview
Global forces
Implications for business
Implications for leaders
Questions?
The Great
Transition
~200BC
Qin Dynasty
begins first
imperial
dynasty in
China
Silk road
trade routes
begin during
Han dynasty
~600
~1100
~1500
India connects
Medieval warm
Columbus to
period improves
agriculture and
spurs massive
Division of Europe migration
and shift in focus Crusades
to land from sea
expose Europe
culture
to Far East
trading between
Middle East and
China
and Mongol
Conquests close
northern trade
routes
Americas
Reformation
splits Europe
Renaissance
and
innovation
(Gutenberg
printing
press, first
bank)
~1750-1850
2000-40
Transformation
from agrarian to
manufacturing
economy
2x growth in
GDP per capita,
U.S. and Europe
Massive
population
growth and
urbanization
Five forces are changing the world at an unprecedented pace and scale
2000
2010
1950
1940
2025
1500
0
130
36
+145%
53
94
29
24
2007
2014
McKinsey & Company | 11
2.8
Sub Saharan Africa
Middle East & North Africa
US & Canada
2.8
Latin America
2.1
Europe
Asia-Pacific
1.1
2013
2025
2030
30,000
China
2010
10,000
Brazil
2010
India
2010
1950
3,000
1950
1860
1820
1,000
1891
1930
1950
1920
1950
300
0
10
20
30
40
50
60
70
80
90
Urban population (%)
Shanghai in 1990
Shanghai in 2004
Shanghai in 2014
Puducherry, India
(Pondicherry)
Anshun, Guizhou,
China
McKinsey & Company | 17
21%
$2.4 trillion
in GDP
~1.1 billion
people
~$1 trillion
Household consumption
64
United States
of America
India
Argentina
Western
Europe
China
8% of oil reserves
60% of unused arable land
SOURCE: BP statistics; Metals economics Group; CIA world fact book; Global insights: World Market Monitor
Water
Energy
Food
Growth in population and the rise of the middle class will place significant
strain on global resources
Global agricultural
production will have
to increase 38% by
2030 and 60% by 2050
SOURCE: The 2030 Water Resources Group, "Charting Our Waters Future," 2009; FAO, World Agriculture towards
2030/2050, 2012; Energy Insights
2050
2030
2007
1.5
planets
2.0
planets
2.9
planets
With current
consumption, it will
take 3 years to
replenish our
annual use in 2050
we would need 3
earths to live
sustainably
High
XY
1
2
3
4
5
6
7
8
9
10
11
12
Mobile Internet
3.710.8
5.26.7
Internet of Things
2.76.2
Cloud technology
1.76.2
Advanced robotics
1.74.5
0.21.9
0.71.6
Energy storage
0.10.6
3D printing
0.20.6
Advanced materials
0.20.5
0.10.5
Renewable energy
0.20.3
In the 1950s, nearly all goods were shipped loose; today, nearly
100% of sea freight is packed in standardized shipping containers
Healthcare
Retail
Worldwide healthcare
data will increase 50x by
2020
Manufacturing
Transportation
Banking
The number of people
using mobile banking will
double in the next two
years
Agriculture
Acreage with geneticallymodified crops has
increased 100x in
past 15 years
Social sector
Energy
Over half of new
electricity generation
capacity added each year
is now renewable
Digitization enlarges the risk of missing trends and the upside from
predicting correctly
Locomotive velocity
Average miles per hour per day
22
Typical
Data analytics
optimized
scheduling
and predictive
maintenance
reduce
downtime,
increasing
velocity
1 mile per
hour increase
worth $250M in
annual profit
23
Digitalenabled
Accuracy
As accurate as $45,000 autorefractor
Ease of use
Globally...
40%
14%
2030
260%
216%
200%
Global government
debt will be larger than
world GDP ~2030
71%
100%
59%
2010
SOURCE: Standard and Poors
2025
2050
McKinsey & Company | 29
The world will is more interconnected than ever and the intensity of flows
has increased greatly in the last decade
Value (2012) and growth of cross-border flows, 2000-2012
Goods
Services
$17.5T 11%
Data and
communication2
$4.4T
10%
2012 value
Compound annual growth rate,
200212
Financial
$4.0T
6%
People1
194M
people
2%
21.2M megabits/second
52%
SOURCE: Comtrade; IHS Economics & Country Risk; World Bank; Bank for International Settlements; IMF Balance of
Payments; Telegeography; Web of Science, Thomson Innovation; Global flows in a digital age: How trade,
finance, people, and data connect the world economy, McKinsey Global Institute, April 2014
+$250-$450B
+40%
Difference in impact of flows on GDP growth for countries at
the center of the network compared with ones at the periphery
SOURCE: McKinsey Global Institute analysis; DHL Globalization Index
2010
2025*
X%
Change 2010-2025
X%
Change 1995-2010
+240%
51%
+26% 44%
+40% 35%
+20% 42%
+88% 35%
25%
19%
+114%
15%
+61% 11%
0%
3%
0%
3%
People
+29%
7%
5%
7%
3%
Services
Goods
Financial
* Note: Future growth rate modeled on historical trend; in practice, it might well diverge from this trend
3.3
6
60
4.9
6
56
6.5
10
48
10.4
15
41
14.7
17.4
17.5
22
23
24
32
31
31
North-South
44
46
46
45
34
38
42
1990
1995
2000
2005
2010
2011
2012
33
McKinsey & Company | 33
Growth rate
2002-12, %
25.9
13.5
5.5%
Foreign direct
investment
1.8
10.9%
R&D intensive
manufacturing
8.5
Knowledgeintensive
2.1
SOURCE: Comtrade; World Development Indicators, World Bank; International Monetary Fund Balance of Payments;
Telegography; McKinsey Global Institute analysis
7.9%
7.0%
34
McKinsey & Company | 34
The number of global refugees is at its highest level since World War II
Refugees, internally displaced people, and asylum
seekers worldwide
Millions
60
51
43
36 34 35 36
32 32 34
20 19 20
16
19 20
2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 2015
Intensification of
sectarian violence in
Iraq (Iraqi Civil War)
ISIS emerges
as an
autonomous
entity
Number of
migrants
surpasses
WWII level
Growth in the number of Internet users and per capita Internet use has led
to a surge in cross-border traffic
Growth of Internet population
Billion Internet users
2.5
2.0
1.5
+144%
1.0
40
35
0.5
30
0
2005
2012
25
20
+1,769%
15
15
10
10
+665%
0
2005
0
2005
2012
2012
36
McKinsey & Company | 36
Goods
Data and
communication
Services
2013
(digital
component)
Goods
(E-commerce share of
total goods trade)
Calls
(Skype share of international calls)
Services
(Digitally-enabled share of
total services trade)
3.0
12.1
3.0
39.0
51.0
63.0
37
McKinsey & Company | 37
22
United States
15
India
Micro-goods
Brazil
30 million buyers
and sellers
Micro-services
Russia
China
Spain
Mexico
United Kingdom
Canada
Nigeria
Colombia
Ukraine
Chile
Portugal
Greece
Other
SOURCE: McKinsey Global Institute analysis
32
38
McKinsey & Company | 38
Sep. 2014,
n = 1,367
Geopolitical instability
60
Increased economic
volatility
74
22
Increased economic
volatility
10
Jul. 2015,
n = 1,202
34
22
39
31
20
In an increasingly volatile world businesses must ask if they are ready for
the shocks
What if.
An epidemic goes global (SARs,
MERs, Ebola)
Terrorists (state-controlled or
insurgents) release a WMD with
global impact
Todays discussion
Course overview
Questions?
These global forces are creating a new normal for the business world
and result in several imperatives for businesses
New state of the business world
Design a flexible
organisation
Foster agility
Foster agility
Digitise
McKinsey & Company | 45
GRANULAR GROWTH
424 cities in emerging markets will fuel nearly half of the growth in
global GDP through 2025
Percent contribution to global GDP growth, 20122025
100% = $42.5 trillion
100
424 largest
45%
28
of global growth
25
315 cities
in Asia
31
0
China
region
Eastern
Europe &
Central Asia
Other
emerging
regions
Developed
countries
Global growth
In China, 15 MM people move to a city each year equal to adding New York City proper twice
SOURCE: McKinsey Global Institute Cityscope 2.55 (updated November, 2014) ; note: does not sum due to rounding
GRANULAR GROWTH
2025
Sales
Rank
Facial Moisturizers
Spirits
Chongqing
Tokyo
Shanghai
Tokyo
Shanghai
Beijing
Beijing
Beijing
Moscow
New York
Chongqing
Guangzhou
Shanghai
Osaka
Tianjin
Haerbin
Tianjin
Chongqing
Tianjin
Guangzhou
Shenzhen
Wuhan
Shenzhen
Tokyo
Nanjing
Wuhan
London
10
Bangkok
Chengdu
Wuhan
11
Xian
Dongguan
Rhein-Ruhr
12
Chengdu
Nanjing
Foshan
13
Los Angeles
Hong Kong
Hangzhou
14
Shenyang
Foshan
Chengdu
15
London
Seoul
Nanjing
Developed regions
Foster agility
Digitise
McKinsey & Company | 48
TALENT AND HR
A radically evolved future will mean that workforces are smaller and
more technical requiring new skills
Talent is the
next great
competitive
battlefield for
organisations
A radically evolved future will mean that workforces are smaller and more
technical requiring new skills
38%
Of global employers
can not find the
talent they need
38m 40m
Shortage of workers
with higher education
degrees by 2020
#1
TALENT AND HR
Telecom being
disrupted 2.6B will
AT&Ts challenge:
AT&Ts response:
skills becoming
obsolete
83% faster than just a
few years ago
2,200 employees at
$200/month
McKinsey & Company | 51
TALENT AND HR
TALENT AND HR
TALENT AND HR
Diagnosing
Monitor and maintain the social engine of
problems
Advanced
people
analytics will
support each
of these
goals
Integrating
digital HR
tools can
increase
productivity
9%
Foster agility
Digitise
McKinsey & Company | 55
FLEXIBLE ORGANISATION
The organisation
of the future has:
Fewer layers
Decentralised
decision-making
More
partnerships
Powerful data
and digital tools
Extreme fluidity
Collaborative
Traditional hierarchy
external
partnerships
FLEXIBLE ORGANISATION
17 direct reports
to Tim Cook
Tim
Cook,
CEO
VPs in charge of
critical pieces of work
will temporarily
report to CEO
FLEXIBLE ORGANISATION
FLEXIBLE ORGANISATION
Gaming company
Foster agility
Digitise
McKinsey & Company | 60
AGILITY
This years
allocation is
highly
correlated
with last years
allocation of
CapEx
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Year
1 Each years proportion of company CapEx in each business unit was correlated to previous years figure
SOURCE: McKinsey Corporate Strategy Service Line; Compustat
AGILITY
A company
growing at
10.0% CAGR
vs. 6.1% would
be worth twice
as much in 20
years
8.5
6.1
Dormant
(0-30%)
Drowsy
(31-49%)
Dynamic
(>49%)
Degree of reallocation
AGILITY
Several companies have moved agility levers to the top of their agenda in
order to make sure they can adapt quickly to external conditions
Agile capabilities
Preparation
Detection
Fast
response
Example lever
Description
Develop modularization
approach
Back-up sites
Forecast demand
AGILITY
This modularization
effort is expected to
reduce:
Unit cost by 20%
One-off expenses by
20%
AGILITY
Up-front investment is up to
40% less than traditional plants
AGILITY
Headquarters
Main international suppliers
Factories
250,000 tons of
product are
produced in 9
global factories
Packaging and
some ingredients
(e.g., skim milk)
sourced locally;
others e.g., sugar,
cocoa, vanillin, palm
oil, hazelnut)
sourced globally
AGILITY
17M
15M
10M
5M
2010
2011
2012
2013
2014
2015
Foster agility
Digitise
McKinsey & Company | 68
Probability
of outcomes
2010s - ?
Probability
of outcomes
Range of
outcomes
Range of
outcomes
Oil prices
Commodity prices
Equity markets
Exchange rates
McKinsey & Company | 69
Communication needs to be
between anybody at any time
President Ed Catmull
2015
11x
Investigations
Team
2010
Need to
Prioritize business risks and information assets align with
Foster agility
Digitise
McKinsey & Company | 73
DIGITISATION
Disrupting companies
v.
McKinsey & Company | 74
DIGITISATION
SOURCE: CB Insights
DIGITISATION
3%
56%
Majority of
impact from
digital is cost
(36% cost vs.
20% revenue)
13%
14%
20%
Digital sales
from outperformance
Digitize
Production
and
Servicing
Reshape
distribution
model
Reduce
material
cost
Streamline
overhead
functions
Total
impact
Cost
DIGITISATION
Strategy
Bold, long-term
orientation
Linked to business
strategy
Centered around
customer needs
Scored out of 90
Based on 1,000s of benchmarks
Culture
Organization
Capabilities
Risk appetite
Roles and
responsibilities
Connectivity
Speed / Agility
Talent and
leadership
Customer Experience
Governance / KPIs
Data-driven
decision-making
Automation
Digital investment
IT architecture
McKinsey & Company | 77
DIGITISATION
Reaction
1
Improve current
business using
digital tools
Build
a complementary
digital channel
Disown traditional
business, engage in
digitally aligned one
Description
Examples
DIGITISATION
Examples
2,000
1,000
500
2013
SOURCE: Gartner, CDO Club Network
2014
2015 (est.)
McKinsey & Company | 79
Todays discussion
Course overview
Questions?
Network
Receptor and
connector
Telescope
and a
microscope
Perception
and judgment
What
leaders do
Tri-sector
athlete
How
leaders
interact
Unlocking
drive
Influence
without
authority
Who
leaders
are
Strong sense
of purpose
Marathon
and a sprint
Set ambition
McKinsey & Company | 81
Jeff Immelt
Industrial companies are in the information
business whether they want to be or not we
want to treat analytics like its as core to the
company the next 20 years as material science
has been over the last 50 years
Made an fundamental, bold decision in 2010
to make rather than buy digital capabilities
within GE, entirely from scratch
Has overseen major investments into the
industrial internet and analytics spaces
hiring thousands of new people with new
skills, launching new products and services,
experimenting with business and innovation
models
How some
manage
Use calendar,
e.g., 3 days a
quarter only
on long-term
strategy
Stress test
the
organization
and team
(scenarios)
A 'tri-sector athlete'
Social sector
Private sector
Bill Gates
Balanced motivation: A
hybrid engine of selfinterest and concern for
others serves a much
wider circle of people
than can be reached by
self-interest or caring
alone
Transferrable skills:
leveraged public sector
experience with the
Foreign Service, the
Senate and USAID to
help Coca-Cola reduce its
water usage per liter of
Coke from 3 liters to 2
Michael Bloomberg
Public sector
McKinsey & Company | 87
Character is a
muscle a leader
must constantly
improve and build
Importance of
compartmentalization
Pole vaulting
Set ambition
independent of others
Pole Vaulting
Larry Page
Over time companies tend to get
comfortable doing the same thing, just
making incremental changes. But in the
technology industry, where revolutionary
ideas drive the next big growth areas, you
need to be a bit uncomfortable to stay
relevant
My biggest challenge
is now managing
energy, not time
Invest time to
understand others
motivations and pain
points
Be deliberate in use of
language and choice of
communication (e.g.,
email vs. phone vs. inperson)
Unlocking drive
Control leads to compliance,
autonomy
leads
tobasic
engagement
Move away
from
carrot
and stick models
of motivation
Daniel Pink,
Drive (2009)
(e.g., compensation, promotions)
and unlock drive through:
Difficult to assess
peoples leadership
potential, strengths and
weaknesses without
getting to know them
very well
Challenge people to
reach their full potential
Network
Understand and
anticipate potential
disruptions from
different directions
Networking
Shimon Peres
State of Israel
Always on
Radical transparency
and open data
Todays discussion
Course overview
Questions?
Questions