In this video, McKinsey senior partner Seth Goldstrom discusses McKinsey’s approach to enterprise-wide transformations, helping companies flip the odds to ensure that a transformation is successful and sustainable.
Interview transcript
The genesis of McKinsey Transformation started with a challenge. Over the years, we’ve found that most transformations don't deliver on their promises or their targets. Our data suggests that only 30 percent of transformations actually deliver on their targets.
We looked at this and said, “There’s got to be a better way.” So the mission of McKinsey Transformation is to flip the odds to ensure that a transformation is successful and sustainable.
When we studied this problem, we looked at situations with better odds for success. One area we identified is private equity, when investors acquire a business in distress.
We bring a similar approach to companies that are performing well and show them how to go from good to great. We’ve studied how to sustainably flip the odds and create a process so that every transformation succeeds.
We’ve found that when you apply a standardized approach based on best practices, companies do better. What we’ve done over the last ten years is develop a recipe for transformations that’s based on science and data.
We’ve been doing this for a very long time and we’re always revising and improving the recipe, just as any good cook would. We believe that our method is distinctive, and the results speak for themselves.
The critical elements
We’ve identified three characteristics of companies that succeed in their transformations, particularly those aiming to move from good to great.
First, they’re really good at getting things done in their daily operations. They can take an idea and develop it into something that shows up on the P&L statement or the balance sheet.
To enable all companies to do this, we’ve developed a set of benchmarking tools that help companies better execute on their operations during a transformation and can be applied across all industries.
Second, we help companies identify their full potential. We look at their business as if we were buying it. Let’s say a family-owned business needs a strategy to thrive in the future. We’ll focus on long-term value creation and ask, “How good could you be?” We’re not talking about a pie-in-the sky dream, but the realistically achievable potential. When we take that approach, companies end up setting targets that are more than double what they would be if the company set its goals by itself.
When that target is doubled, you dramatically improve the odds of reaching your goal. You’ll have more money to reinvest back in your business, allowing you to undertake new projects that you otherwise might lack the funding to do.
Third, we’re not just focused on performance and numbers. We’re also looking at organizational health.
Capability building
What do you need to do differently to inspire everyone from the senior team down to the frontline workers? Most important, you need to invest in building the skills and capabilities of your workforce. Companies that do this are more than twice as likely to succeed in a transformation.
Capability building will also really excite and inspire your people. They’ll feel that you’re investing in them and in their future for the long run, wherever they work, and make them more valuable. They’ll enjoy their jobs more, be more loyal, and show a willingness to go the extra mile for you.
Coaching and advanced analytics
Companies often ask, “Why can't I go do all of this myself?” In fact, they may view asking for help as a sign of weakness.
But think of people who are the best at what they do, whether they’re a top golfer or any professional athlete. The notion that they would reject expert coaching and the use of data and advanced analytics is crazy.
Why wouldn’t you use coaching, science and advanced analytics for a transformation? Over the last ten years, we’ve found that when you use all available tools and apply these proven practices in a rigorous way, you’ll see tremendous results.