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04 Feb 09

Hal Varian on how the Web challenges managers - The McKinsey Quarterly - Hal Varian web challenge managers - Strategy - Innovation

www.mckinseyquarterly.com/...e_Web_challenges_managers_2286 - Preview

innovation google mckinsey management knowledgeworker

We’re in the middle of a period that I refer to as a period of “combinatorial innovation.” So if you look historically, you’ll find periods in history where there would be the availability of a different component parts that innovators could combine or recombine to create new inventions. In the 1800s, it was interchangeable parts. In 1920, it was electronics. In the 1970s, it was integrated circuits.

Now what we see is a period where you have Internet components, where you have software, protocols, languages, and capabilities to combine these component parts in ways that create totally new innovations. The great thing about the current period is that component parts are all bits. That means you never run out of them. You can reproduce them, you can duplicate them, you can spread them around the world, and you can have thousands and tens of thousands of innovators combining or recombining the same component parts to create new innovation. So there’s no shortage. There are no inventory delays. It’s a situation where the components are available for everyone, and so we get this tremendous burst of innovation that we’re seeing.
So I think now, with what we’re seeing with mobility, we’re going to have a totally different concept of what it means to go to work. The work goes to you, and you’re able to deal with your work at any time and any place, using the infrastructure that’s now become available.
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- At the base, there’s the innovation infrastructure making better, faster, cheaper networks. There’s the improvement in the human–computer interface because the big challenge in mobile communication has always been dealing with this—quite limited—interface. But then, the kinds of innovations I think will arise on top of that will be innovations in how work is done. And that’s going to be one of the most exciting aspects, in my opinion.
- If you look at the beginning of the 20th century, we saw the rise of mass production. Henry Ford and the entire team were down on the factory floor raising this, lowering that, speeding up the assembly line, changing the way things were built, and were able to extract far more efficiencies than were available before. I think the same thing is happening now with digital technology. When we’re all networked, we all have access to the same documents, to the same capabilities, to this common infrastructure, and we can improve the way work—intellectual work, knowledge work—flows through the organization. And again, in my opinion, that will lead to a substantial advantage in terms of productivity.
- Back in the early days of the Web, every document had at the bottom, “Copyright 1997. Do not redistribute.” Now every document has at the bottom, “Copyright 2008. Click here to send to your friends.”
- So there’s already been a big revolution in how we view intellectual property. So it’s not so much the question of what’s owned or what’s not owned. It’s a question of how can you leverage the assets you have to realize the most value.
- I think that the availability of these very inexpensive platforms you’re creating, in disseminating content, means that it’s become intensely competitive. The content is as valuable as it ever was, it’s just the competition that’s pushed the prices down to something that approximates zero. So it’s not something that the content producers necessarily embrace, but it’s something they’re forced into by the nature of the technological change.
- In these models, there is typically a revenue-generating component somewhere in the value chain. And most commonly today we’re seeing it on the advertising side. To look at this from a historical perspective, it’s really not so new. If you look at the 1920s, the technological question in the ’20s was, “How can we build a business model around broadcast radio?” And nobody really had a good idea. And back in the mid-1990s we asked, “How can we build a business model around the Internet?” And the preferred model at the time was a micropayments system. That never happened, for some reasons, but what did happen instead is we moved into the advertising model, and the advertising’s model been phenomenally successful.
- We have to look at today’s economy and say, “What is it that’s really scarce in the Internet economy?” And the answer is attention. [Psychologist] Herb Simon recognized this many years ago. He said, “A wealth of information creates a poverty of attention.” So being able to capture someone’s attention at the right time is a very valuable asset. And Google really has built an entire business around this, because we’re capturing your attention when you’re doing a search for something you’re interested in. That’s the ideal time to show you an advertisement for a product that may be related or complimentary to what your search is all about.
- I keep saying the sexy job in the next ten years will be statisticians. People think I’m joking, but who would’ve guessed that computer engineers would’ve been the sexy job of the 1990s?
- I think statisticians are part of it, but it’s just a part. You also want to be able to visualize the data, communicate the data, and utilize it effectively. But I do think those skills—of being able to access, understand, and communicate the insights you get from data analysis—are going to be extremely important. Managers need to be able to access and understand the data themselves.

28 Jan 09

Market fundamentals: 2000 versus 2007 - The McKinsey Quarterly - market fundamentals - Economic Studies - Productivity & Performance

www.mckinseyquarterly.com/...amentals_2000_versus_2007_2050 - Preview

fundamentals mckinsey

Using power curves to assess industry dynamics - The McKinsey Quarterly - power curves industry dynamics - Economic Studies - Productivity & Performance

A new way of looking at industry structures reveals startling patterns of inequality among even the largest companies.

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McKinsey industry analysis tool industrydynamics

Using 'power curves' to assess industry dynamics
Major crises and downturns often produce shakeouts that redefine industry structures. However, these crises do not fundamentally change an underlying structural trend: the increasing inequality in the size and performance of large companies. Indeed, a financial crisis—for example, the one that erupted in 2008—is likely to accelerate this intriguing long-term tendency.

The past decade has seen the rise of many “mega-institutions”—companies of unprecedented scale and scope—that have steadily pulled away from their smaller competitors.¹ What has received less attention is the striking degree of inequality in the size and performance of even the mega-institutions themselves. Plotting the distribution of net income among the global top 150 corporations in 2005, for example, doesn’t yield a common bell curve, which would imply a relatively even spread of values around a mean. The result instead is a “power curve,” which, unlike normal distributions, implies that most companies are below average.

Such a curve is characterized by a short “head,” comprising a small set of companies with extremely large incomes, and drops off quickly to a long “tail” of companies with a significantly smaller incomes. This pattern, similar to those illustrating the distribution of wealth among ultrarich individuals, is described by a mathematical...
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Innovation lessons from the 1930s - The McKinsey Quarterly - Innovation lessons from the 1930s - Strategy - Innovation

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mckinsey innovation recession

Strategy under uncertainty - The McKinsey Quarterly - formulate strategic plans - Strategy - Strategic Thinking

Interesting article on the nature of strategic decisions under different levels of uncertainty

www.mckinseyquarterly.com/trategy_under_uncertainty_1064 - Preview

mckinsey decisionmaking strategicthinking strategicanalysis

At the heart of the traditional approach to strategy lies the assumption that executives, by applying a set of powerful analytic tools, can predict the future of any business accurately enough to choose a clear strategic direction for it. The process often involves underestimating uncertainty in order to lay out a vision of future events sufficiently precise to be captured in a discounted-cash-flow (DCF) analysis.
When the future is truly uncertain, this approach is at best marginally helpful and at worst downright dangerous: underestimating uncertainty can lead to strategies that neither defend a company against the threats nor take advantage of the opportunities that higher levels of uncertainty provide.
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- What follows is a framework for determining the level of uncertainty surrounding strategic decisions and for tailoring strategy to that uncertainty.
- Four levels of uncertainty
- strategically relevant information tends to fall into two categories.
- First, it is often possible to identify clear trends
- Second,
- many factors that are currently unknown to a company's management are in fact knowable
- The uncertainty that remains after the best possible analysis has been undertaken is what we call residual uncertainty
- we have found that the residual uncertainty facing most strategic-decision makers falls into one of four broad levels.
- Level one: A clear enough future
- The residual uncertainty is irrelevant to making strategic decisions
- Level two: Alternative futures
- The future can be described as one of a few discrete scenarios at level two
- Many businesses facing major regulatory or legislative change confront level two uncertainty. Consider US long-distance telephone providers in late 1995, as they began developing strategies for entering local telephone markets. Legislation that would fundamentally deregulate the industry was pending in Congress, and the broad form that new regulations would take was fairly clear to most industry observers. But whether the legislation was going to pass and how quickly it would be implemented if it did were still uncertain.
- In another common level two situation, the value of a strategy depends mainly on competitors' strategies, which cannot yet be observed or predicted.
- Here, managers must develop a set of discrete scenarios based on their understanding of how the key residual uncertainties might play out. Each scenario may require a different valuation model.
- Level three: A range of futures
  
  A range of potential futures can be identified at level three
- Companies in emerging industries or entering new geographic markets often face level three uncertainty. Consider a European consumer goods company deciding whether to introduce its products to the Indian market. The best possible market research might identify only a broad range of potential customer penetration rates—say, from 10 percent to 30 percent—and there would be no obvious scenarios within that range, making it very difficult to determine the level of latent demand.
- The analysis in level three is similar to that in level two: a set of scenarios describing alternative future outcomes must be identified, and analysis should focus on the trigger events indicating that the market is moving toward one or another scenario.
- A number of dimensions of uncertainty interact to create an environment that is virtually impossible to predict at level four.
- In contrast to level three situations, it is impossible to identify a range of potential outcomes, let alone scenarios within a range.
- Level four situations are quite rare, and they tend to migrate toward one of the others over time. Nevertheless, they do exist. Consider a telecommunications company deciding where and how to compete in the emerging consumer multimedia market. The company will confront a number of uncertainties concerning technology, demand, and relations between hardware and content providers. All of these uncertainties may interact in ways so unpredictable that no plausible range of scenarios can be identified.
- In predictable business environments, most companies are adapters. Analysis is designed to predict an industry's future landscape, and strategy involves making positioning choices about where and how to compete.
- In level two, a shaping strategy is designed to increase the probability that a favored industry scenario will unfold.
- If at level two shapers are trying to promote a discrete outcome, at level three they are simply trying to move the market in a general direction because they can identify only a range of possible outcomes.

27 Jan 09

The McKinsey Quarterly: The Online Journal of McKinsey & Co.

www.mckinseyquarterly.com/...d_recovery_across_sectors_2288 - Preview

mckinsey financialcrisis outlook strategicanalysis

Different sectors enter and emerge from downturns at different times. A look at past recessions suggests how some industries may fare.

10 Jan 09

Creative destruction: Interview with Richard Foster - The McKinsey Quarterly - Creative destruction Interview Richard Foster - Strategy - Growth

GReat article about fosters view on innnovation: \n- Schumpeters creative destruction\n- Companies will underperform the market over the LT, periods of exceptions may exist for longer but will revert\n- innovation spurs bubbles, bursts will occur when equity premiums are reaching unsustainable levels - resulting in more regulation which in turn spurs innovation\n- Best quote ever on what capitalism is!!\n"The essence of capitalism is capitalizing-bringing forward the future value of cash to the present so that society can grow more quickly by taking risks"

www.mckinseyquarterly.com/rview_with_Richard_Foster_2268 - Preview

innovation concept mckinsey creativedestruction

to endure, companies must embrace what economist Joseph Schumpeter called “creative destruction” and change at the pace and scale of the capital markets, without losing control over current operations.
In the 1970s, we had the “Nifty 50”—invulnerable companies that couldn’t possibly lose, and of course they all did. It will be the same today; there will be surprising losers, and survival will come down to simple things, like cash and margins. If you’re a low-margin company without a lot of cash or perhaps with too much leverage, you will not make it. Someone will figure out how to do better.
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- In the book, Sarah Kaplan and I show that over the long term, the market performs better than companies do. There can be periods—5, 7, 10, even 15 years—when that isn’t the case, but corporate performance always reverts to a lower level than the market because the economy is changing at a faster pace and on a larger scale than any individual company so far has been able to do without losing control.
- That’s the challenge: to create, operate, and trade—to divest old businesses and acquire or build new businesses—at the pace and scale of the market without losing control.
- The balance among creating, trading, and excelling operationally changes over time. When the economy is in a growth spurt, there’s more creating. Few companies are trading very much and operations are fine. In those circumstances, the newer companies in the economy tend to outperform the index, and the older companies that are only focused on operations underperform the market.
- As the market collapses, the weaker upstarts get squeezed out. The survivors are the cash-rich “operators,” which perform at levels closer to the averages, which themselves are lower. Companies that operate well shine in down times, as they are now. Every investor on the planet is looking for companies that have cash left. The turmoil will clear away the weaker companies—the companies that have taken too much risk. This doesn’t mean they’re bad companies; it’s just that they’ve taken on too much risk given their balance sheet resources.
- New, young companies that have conserved cash and have solid and often expanding margins surge ahead. When this happened in the ’70s, companies such as The Limited, The Gap, Home Depot, and John Malone’s TeleCommunications Inc. sprung from the burned forest. After the crash of 1987, Microsoft, Oracle, and Amgen took off. Then in the ’90s, we had the Internet companies. Creation will happen again and will again leave behind the big guys trying to rely solely on operations.
- The Quarterly: To what extent is today’s financial crisis different from earlier ones?
  
  Richard Foster: The granddaddy of cycles in this economy is the equity premium, which is the difference between the longer-term total returns to shareholders and the supposedly risk-free debt rate. It is the premium the equity investor gets for taking the equity risk. Looking back, we can see seven great cycles. During the boom times, when the equity premium goes way too high, everybody hocks everything to get in on the game, and this creates the conditions for a crash. When the crash occurs, the politicians come in and say it was this or that person’s fault. Then they create regulatory institutions, and virtually every one of those institutions—starting with the Federal Reserve, in 1913, as a result of the crash of 1907—has been quite productive for the nation in the longer term. This includes the formation of the Securities and Exchange Commission, in 1934; the Investment Company Act, in 1940; the beginning of the end of fixed commission rates in 1970; and the Sarbanes–Oxley Act, in the early 2000s.
- The new entrepreneur often seeks ways to innovate outside the scope of the newly established regulations. In the beginning, all that works out fine. We have innovations, we love the people who created them, they’re great heroes, the returns are strong, everybody says, “I’m going to be one of those guys.” Eventually, all the truly good guys who are going to get into that business have done so.
- The essence of capitalism is capitalizing—bringing forward the future value of cash to the present so that society can grow more quickly by taking risks.
- It goes back to the Dutchmen in the 16th century, sitting at their coffeehouses in Amsterdam and Leiden, loaning each other money for a guaranteed return. Someone said, “I’ll give you a little higher return if you give me a piece of the action”—and equity was invented. That had the effect of bringing forward, into real cash today, the net present value of future earnings. That levered society and allowed it to grow at a much higher rate than it would otherwise have. Equity was a very clever invention, and we are not going to give it up. This is the way people are. This is the way commerce works and will continue to work unless capitalism ends. And that won’t happen, regardless of what you read in the press.

09 Jan 09

Flaws in strategic decision making - The McKinsey Quarterly - Flaws strategic decision making - Strategy - Strategic Thinking

www.mckinseyquarterly.com/...sey_Global_Survey_Results_2284 - Preview

mckinsey

30 Dec 08

Leading through uncertainty - The McKinsey Quarterly - Leading through uncertainty - Strategy - Strategic Thinking

Fantastic article discussing scenario outlooks on what potentially lies ahead of us. McKinsey does the job, with excellent competece ond sclear-cut suggestions for executives, this is one of the best pieces I've read this year.

www.mckinseyquarterly.com/ading_through_uncertainty_2263 - Preview

McKinsey

senior executives confront a more profoundly uncertain business environment than most of them have ever faced.
The task of business leaders must be to overcome the paralysis that dooms any organization and to begin shaping the future. One starting point is to take stock of what they do know about their industries and the surrounding economic environment; such an understanding will probably suggest needed changes in strategy.
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- Even then, enormous uncertainty will remain, particularly about how governments will behave and how the global real economy and financial system will interact. All these factors, taken together, will determine whether we face just a few declining quarters, a severe global recession, or something in between.
- Strengthening these organizational muscles will allow companies not only to survive but also to seize the extraordinary opportunities that arise during periods of vast uncertainty. It was during the recessionary 1870s that Rockefeller and Carnegie began grabbing dominant positions in the emerging oil and steel industries by taking advantage of new refining and steel production technologies and of the weakness of competitors. A century later, also in a difficult economy, Warren Buffett converted a struggling textile company called Berkshire Hathaway into a source of funds for far-flung investments.
- By the grid, we mean the global capital market, which evolved over a 35 year period following the breakdown of the Bretton Woods accord, in the 1970s. No one designed the global capital market, but it has been a boon to humanity, stimulating globalization and growth by enabling the free international flow of capital and trade. The financial crisis of 2008 severely damaged this useful system.
- Through greed, neglect, or ignorance, the participants abused it until they broke some of its basic mechanisms.
- Banks until recently have been scrambling for deposits to replace sources of funding such as direct-issue commercial paper, medium-term notes, and asset-backed paper. The search for deposits is required to finance existing loans, and borrowers will need significantly more of them because all but the strongest have, like the banks, lost access to the securities markets.
- The global capital market crisis worsens this credit crunch by sending into reverse the dynamic of cross-border investment and trade flows.
- In short, global integration and growth will revive only if the global capital market does. Yet it has sustained a body blow that will have repercussions for years, even if international leaders make the necessary long-term adjustments.
- We can expect higher tax rates to pay for these moves, as well as for the reregulation of finance and many other sectors.
- In short, governments will have their hand in industry to an extent few imagined possible only recently.
- We may see not only old-style populist anger against business, high executive compensation, and layoffs but also the emergence of authoritarian populist movements.
- but also opens the door to new ventures that depend upon collaboration between the public and private sectors.
- The cheap credit of the past few years most likely won’t return for a long time. For many households, this will mean reducing consumption and postponing retirement; for financial institutions—increasingly, bank holding companies—much higher capital requirements, less freedom to operate and innovate, and probably lower profitability; for governments, even more limited resources for health care, education, pensions, infrastructure, the environment, and security; and for corporations, a different role for capital.
- More broadly, for many companies the high returns and rapid growth of recent years rested on cheap credit, so deleveraging means that expectations of baseline profitability and economic growth, as well as shareholder returns, must all be seriously recalibrated.
- Hardest hit will be business models premised on high leverage, consumer credit, large customer-financing operations, or high levels of working capital.
- Businesses with long or inflexible production cycles or very long-term investment requirements will find it especially difficult to manage their funding. Some won’t make it, so industries will restructure.
- They require a significant shift in thinking about government as a stakeholder, the value talent creates when it is harder to leverage, how to conserve capital, and strategies for sound risk taking—among other things.
- The winners will be companies that make thoughtful choices—despite the complexity, confusion, and uncertainty—by assessing alternative scenarios honestly, considering their implications, and preparing accordingly.
- Something extraordinary happened from mid-2007 to mid-2008: net new borrowing by US households and companies plunged 65 percent ($1.4 trillion). This drop abruptly reversed recent trends. During the previous eight years, borrowing had grown by 2.4 percent a year, much faster than it did from 1970 to 2000, when the rate was 0.9 percent.
- Credit growth has been correlated with faster GDP growth—consumer borrowing fuels sales of homes, autos, consumer electronics, and more; businesses issue debt to finance new plants and construction. Deleveraging will therefore have a significant effect on the real economy. To understand that impact, we assessed how much further borrowing by households and companies could decline over the next two years in each of the five channels they use to obtain credit and then modeled the resulting reduction in US GDP growth.
- US banks are still writing off credit losses and facing rising defaults on many types of loans. McKinsey analysis suggests that total credit losses on US loans could reach $1.4 trillion to $2.2 trillion, eroding bank equity.¹Although banks have raised new capital from the government and private investors, the credit crunch will continue for some time. After taking into account recapitalization, the reduction in bank leverage ratios, and taxes, we calculate that bank lending to US households and companies could decline by $1.9 trillion to $3.5 trillion from trend over the next two years.
- Loans from banks:
- Lending by nonbank intermediaries:
- Debt owned or securitized by government-sponsored enterprises, such as Fannie Mae and Freddie Mac:
- Corporate bond and commercial-paper markets:
- Securitization markets:
- Most companies acted immediately in the autumn of 2008 when credit markets locked up: they cut discretionary spending, slowed investment, managed cash flows aggressively, laid off employees, shored up financing sources, and built capital by cutting dividends, raising equity, and so forth. While prudent, these actions probably won’t produce the short-term earnings that analysts expect, at least for most companies. In fact, it’s time they abandoned the idea that they can reliably deliver predictable earnings. Quarterly performance is no longer the objective, which must now be to ensure the long-term survival and health of the enterprise.
- Companies must now take a more flexible approach to planning: each of them should develop several coherent, multipronged strategic-action plans, not just one.
- Every plan should embrace all of the functions, business units, and geographies of a company and show how it can make the most of a specific economic environment.
- .
  
  Greater flexibility also means developing as many options as possible that can be exercised either when trigger events occur or the future becomes more certain. Often, options will be offensive moves. Which acquisitions could be attractive on what terms, for instance, and how much capital and management capacity would be required? What new products best fit different scenarios? If one or more major competitors should falter, how will the company react? In which markets can it gain share?
- If capital market breakdowns make global sourcing too risky, for example, companies that restructure their supply chains quickly will be in much better shape. If changes in the global economy could make a certain kind of business unit obsolete, it’s critical to finish all the preparatory work needed to sell it before every company with that kind of unit reaches the same conclusion.
- companies desperately need to understand how their revenues, costs, profits, cash flows, risks, and balance sheets will fare under different scenarios.
- The answers should help companies to be better prepared and to recognize, as early as possible, which scenario is developing.
- Better business intelligence promotes faster, more effective decision making as well. Companies can often gain insights into the potential moves of competitors by weighing news reports about their activities, stock analyst reports, and private information gathered by talking to customers and suppliers.
- Such intelligence is always important; in a crisis it can make the difference between missing opportunities to buy distressed assets and leaping in to snare them.
- Assembling bits of information, facts, and anecdotes helps companies to make sense of what’s happening in an industry. Say, for example, that a supplier says it has no difficulties with funding, though first-hand knowledge from other sources indicates that the company is struggling to meet its payroll. Such warnings can allow executives to get a full picture much more quickly than they could by sitting in their offices and interacting only with direct subordinates.
- A crisis is a chance to break ingrained structures and behaviors that sap the productivity and effectiveness of many organizations.
- This may, for example, be the time to destroy the vertical organizational structures, retrofitted with ad hoc and matrix overlays, that encumber companies large and small. Such structures can burden professionals with several competing bosses. Internecine battles and unclear decisions are common. Turf wars between product, sales, and geographic managers kill promising projects. Searches for information aren’t productive, and countless hours are wasted on pointless e-mails, telephone calls, and meetings.
- Experience shows that streamlining an organization to define roles and the way those who hold them collaborate can greatly improve its effectiveness and decision making.

21 Dec 08

Managing IT spending - The McKinsey Quarterly - Managing IT spending - Information Technology - Management

Some key quotes I take along:
-As they cut near-term costs, these IT groups will need to reduce investments and rationalize organizations aggressively. One company in danger of violating debt covenants reduced its IT cash outlays by 22 percent in a year, excluding severance. ... As they cut near-term costs, these IT groups will need to reduce investments and rationalize organizations aggressively. One company in danger of violating debt covenants reduced its IT cash outlays by 22 percent in a year, excluding severance.
-As they cut near-term costs, these IT groups will need to reduce investments and rationalize organizations aggressively. One company in danger of violating debt covenants reduced its IT cash outlays by 22 percent in a year, excluding severance.
-They can use IT to increase revenues and reduce operational costs in the short term. Often, these improvements can be made with modest investments.

--> A technology company that can help in these troubled times will win. So how can we help companies save money? how can we help become more efficient? What is our contribution for companies that seek answers in the current turbulences?

www.mckinseyquarterly.com/Managing_IT_spending_2261 - Preview

mckinsey

Still, with sufficient management focus, it’s possible to cut costs dramatically and quickly. Companies can trim and rationalize demand for new applications. Existing IT capacity, like servers and storage, can be shared and application maintenance spending capped. Taking a “zero based” view of an organization (reimagining it from scratch) may help to peel away unnecessary management layers and eliminate non-value-adding functions. Meanwhile, companies can renegotiate some contracts to reflect changing market conditions and can accelerate efforts to move operations offshore.
Some businesses, however, face tougher challenges. They must substantially improve their cash positions just to survive. As they cut near-term costs, these IT groups will need to reduce investments and rationalize organizations aggressively. One company in danger of violating debt covenants reduced its IT cash outlays by 22 percent in a year, excluding severance. It made tough choices about which capabilities for which business units would be delayed and what kind of new, lower levels of IT service would be acceptable.
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- They can use IT to increase revenues and reduce operational costs in the short term.
- Often, these improvements can be made with modest investments.

19 Dec 08

Freeing up cash from operations - The McKinsey Quarterly - Freeing up cash from operations - Operations - Performance

www.mckinseyquarterly.com/g_up_cash_from_operations_2258 - Preview

mckinsey

The McKinsey Quarterly: Special on the Financial Crisis

Special on the financial crisis with lots of very recent (Dez 08) articles. Must read for the Holidays!

www.mckinseyquarterly.com/special_topics.aspx - Preview

mckinsey

These are no ordinary times. The venerable independent investment banks Lehman Brothers and Bear Stearns no longer exist. Central bankers and finance ministers are working in concert but struggling to keep up with events. China’s government is pumping hundreds of billions of dollars into the country’s economy. Chief executives in the US financial-services and automotive sectors have gone to Washington hats in hand.

Along the way, many core assumptions about the merits of globalization, markets, risk, and debt, long taken for granted in business, government, and academia, have come into question. One big shift already under way involves a far larger role for government in the economy, whether through outright ownership of former private-sector assets or tighter regulation. Also inevitable: massive changes in industry structures. Consolidation, effected either by bankruptcies or mergers, is already transforming financial services and seems bound to take place elsewhere as the impact of the credit crisis ripples through the real economy.
In this collection of articles by McKinsey consultants and outside contributors, we explore the managerial implications of the economic transition that has just begun. A critical theme running through much of the content is how to cope with the extraordinary uncertainty permeating today’s business environment. We have also distilled practical advice on issues—managing costs, obtaining financing, working with regulators, adjusting sales and marketing—that are more pressing and require fresher thinking than they did in past downturns.

Inspired leadership is urgently needed to renew the global financial system and avert a protectionist backlash or excessive regulation that could derail economic progress—especially in countries and regions emerging from poverty—or dampen the entrepreneurial spirit. Strong leadership is equally critical within organizations. Anxious employees, customers, suppliers, and shareholders are looking for a steady hand and clear, candid messages from corporate leaders, not for unrealistic pronouncements that may be overtaken by next week’s events. The world is watching.

McKinsey Global Survey Results: IT's unmet potential - The McKinsey Quarterly - IT's unmet potential - Information Technology - Management

Interesting study revealing the results from a McKinsey global survey among C-level decision makers. In particular interesting because results capture reactions to current market environment/recession

www.mckinseyquarterly.com/article_print.aspx - Preview

mckinsey study trends itspendings it

The global economic downturn complicates matters.
they are making trade-offs: reducing IT operating expenses so they can maintain high-priority new investments that support broader business goals, such as improved sales force or supply chain management.
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- Nearly two-thirds of respondents say their organizations are at risk from information- and technology-based disruption. Ranking highest among disruptive forces are potential shifts in customer expectations for better products or differentiated services enabled by information- and technology-based capabilities
- Another risk respondents noted centers on competitors using technology to significantly reduce the cost of manufacturing or delivering of current products or services.

18 Sep 08

Enduring ideas: Classic McKinsey frameworks - The McKinsey Quarterly - McKinsey frameworks - Strategy - Strategic Thinking

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McKinsey strategy

Enduring ideas: Classic McKinsey frameworks that continue to inform management thinking



In this interactive module, we present a series of strategic and organizational frameworks with audio commentary.





July 2008


<script language="JavaScript" type="text/javascript">

</script>

Ever since strategy arose as a managerial discipline in the 1960s, business leaders have been honing their analysis of where and how to compete, grow, and best manage their organizations. Strategic and organizational models or frameworks help inform these decisions, offering shorthand for qualitative analysis of potential scenarios and insight on what options to adopt.

Today's complex business environment has rendered some of these models obsolete, but others have endured. In this series of interactive presentations, The McKinsey Quarterly presents a selection of frameworks, highlighting their origin, utility, and lasting relevance.

Open the interactive module.

7-S: Lowell Bryan, a director in McKinsey's New York office, reflects on 7-S, a framework introduced in the late 1970s to address the critical role of coordination, rather than structure, in organizational effectiveness.

Read more about 7-S.

Explore this framework in a new window.

SCP: John Stuckey, a director emeritus in McKinsey’s Sydney office, comments on SCP, a framework whose origin dates to the 1930s. This framework depicts the influence of an industry’s structure (for example, the growth of demand and barriers to entry) on the conduct of producers (pricing, for example) and the performance of both the industry and the producers.
Read more about SCP.

Explore this framework in a new window.



GE–McKinsey nine-box matrix: Kevin Coyne, a McKinsey alumnus and senior adviser to the firm on strategy, describes the GE–McKinsey nine-box matrix.

Facebook | The McKinsey Quarterly

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The McKinsey Quarterly is the business journal of McKinsey & Company. Our goal is to offer new ways of thinking about management in the private, public, and nonprofit sectors. We aim to help business people run their organizations more productively, more competitively, and more creatively.

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Creative destruction: Interview with Richard Foster - The McKinsey Quarterly - Creative destruction Interview Richard Foster - Strategy - Growth

Flaws in strategic decision making - The McKinsey Quarterly - Flaws strategic decision making - Strategy - Strategic Thinking

Leading through uncertainty - The McKinsey Quarterly - Leading through uncertainty - Strategy - Strategic Thinking

Managing IT spending - The McKinsey Quarterly - Managing IT spending - Information Technology - Management

Freeing up cash from operations - The McKinsey Quarterly - Freeing up cash from operations - Operations - Performance

The McKinsey Quarterly: Special on the Financial Crisis

McKinsey Global Survey Results: IT's unmet potential - The McKinsey Quarterly - IT's unmet potential - Information Technology - Management

Enduring ideas: Classic McKinsey frameworks - The McKinsey Quarterly - McKinsey frameworks - Strategy - Strategic Thinking

Enduring ideas: Classic McKinsey frameworks that continue to inform management thinking

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