The September Knowledge@Wharton newsletter covers an interesting interview with McKinsey’s Dominic Barton on Leadership. Clearly, McKinsey has been, and still is, the leading management consulting firm. While they advise many of their clients how to innovate, it turns out that they struggle to innovate themselves. So if you are wondering how to get the right processes in place to renew your professional services, you are not alone!
McKinsey’s innovation struggles
A quote from McKinsey’s Dominic Barton in the newsletter article:
“I think we’re very good at telling our clients what they should do, what medicine to take. But we don’t like taking it ourselves,” Barton said, on the subject of innovation and modernization at McKinsey. But these areas are big priorities for him. He noted, for example, that the firm is becoming more involved with technology, in ways such as providing software to clients and investing in, or building, technology companies. “We are partnering with people we never would have partnered with before. It’s only 12% of our activity now; I’d like it to be 40%. I think we’re on track to do that in the next three years.”
Barton also spoke about his concerns that McKinsey stay “relevant” in the global economy. The economic power is shifting to Asia and Africa, he said, and it is “happening fast.” He noted that his colleague Vikram Malhotra, McKinsey’s chairman of the Americas, has been a major driver of the firm’s awareness about this even though he runs the North American practice. “Vik is the guy saying, ‘What are you doing in Africa, what are we doing in China, India, hiring people, building it.’” Barton added, “I worry that we need to move faster. That’s why we need to innovate…. If we don’t challenge ourselves, we’ll get challenged in a big way.”
Why does McKinsey struggle?
What makes innovating difficult for McKinsey? For that we need to go back to what innovation is all about: an investment in the firm’s future with an expected return. While this generic definition holds true for all firms, not all firms have similar assets to invest in. Traditionally, innovation management has focused on firms that have products as their main assets. Innovation for those firms means investing in the next generation of products using innovation management approaches established in the 1980s.
Humans instead of products as the main asset
However, what if your main asset is human capital, as is the case with McKinsey? Then innovation becomes investing in your employees. You probably think, well isn’t that education and personal development? McKinsey certainly knows how to do that! True, education is investing in your people, but education does not necessarily mean innovation happens.
Innovation in a firm like McKinsey requires investing in your people and your organization – preparing the next generation of employees to serve your future clients and expand the scope of services the firm is currently offering. This process is certainly akin to education, but it requires its own processes and innovation management tools. Yet these tools are different from those which McKinsey offers their clients. Using the wrong tools explains why innovation is a challenge for all professional services, including McKinsey. No one gets cured when prescribed the wrong medicines!
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