McKINSEY & COMPANY - KNOWLEDGE MANAGEMENT COMPANY BACKGROUND AND CURRENT SITUATION SS Founded by James McKinsey in 1926, the firm recruited experienced executives and showed them the general sequence of analysis that they should work by, but also encouraged them to expand and analyze for themselves. SS In 1932, Marvin Bower decided he needed to upgrade the firm's image to be more 'professional'. His main objective was to spread the 'One Firm' policy in order to exploit their intangible resources. Huge domestic growth occurred through the 1950's and provided the platform to expand globally.
SS However, after Bower's departure, the growth of McKinsey's slowed quite rapidly and seemed to stall due to the appearance of new competitors (thanks to very low entry barriers in the industry and demand outstripping supply) as well as the economic disturbance of the oil crisis. SS Management established that the firm had been growing too fast, and that "consultants lacked the deep industry knowledge or the substantive specialised knowledge that clients required", hence the drop in their business. To overcome this, McKinsey's focused on developing their associates and slowed the growth of the company. SS In 1976 Ron Daniel was elected. As the company was losing both clients and staff to competitors, especially BCG, he believed McKinsey's needed further commitment to developing the skills and expertise of their consultants. Daniel also made some significant structural changes by creating industry based clientele sectors and also moved the company towards a more product driven approach.
SS In 1987, Fred Gluck became MD and believed that the firm's organisational infrastructure needed a major overhaul, thus, he developed a Knowledge Management project. This project put forth recommendations which were developed and implemented over a number of years into the company. SS By 1994 the company had grown to reflect a profit estimated at $1. 5 billion annually.
Raj at Gupta was elected as the new MD. He continued with the emphasis on Knowledge Development that had been a key focus for many years and looked to expand into new markets. In 1995, the company had grown from having 24 various office locations in 1975, to having 69 offices all over the world. SS Over its history, McKinsey's unique bundle of resources and capabilities have enabled it to shape successful business strategies and target niche markets. Presently, McKinsey & Co. is worth $3.
4 billion, has 82 offices in 44 countries and are under the leadership of their tenth MD, Ian Davis. The firm is at the forefront of the consulting world and has a vision to become even stronger and provide even greater customised service to all of its clients. INTERNAL ANALYSIS Strengths: SS The McKinsey brand name / reputation . The high regard of the firm has a two-fold effect. Firstly, it attracts the largest and most lucrative clients (they serve 85 of the top 100 countries) which not only brings in immense revenue but also valuable experience and prestige which further enhances its reputation.
Secondly, as one of the world's premier firms, there are hundreds of applications for every position, which leaves the firm in the advantageous position of being able to recruit the brightest and best suited applicants. McKinsey's has recognised the strategic importance of human capital and the enormous value that better talent creates in terms of client satisfaction and the extensive distribution of valuable knowledge throughout the firm SS The organisational culture within McKinseys is thought by competitors, clients and analysts to be a primary source of competitive advantage. The guiding principles set forth by former MD Marvin Bower are the backbone of the company's unique and enigmatic culture which is both historically valuable and cannot be imitated by its competitors very easily. Thus, according to Hanson et al, McKinseys culture is able to create a positive dissatisfaction among those working within it to challenge themselves to perform in ways that will continuously generate greater levels of value for their clients (Hanson et al 2002; 101).
SS The continual pursuit of knowledge maintenance and innovation. The firm serves its short-term needs by having dedicated research staff in each office complex as well as a global research service in India (for the provision of basic global business analysis). To overcome the problem of knowledge leaving the firm over time, McKinseys has invested in several large, internal databases of knowledge that have been accumulated from client work and developed in practice areas. The Firm Practice Information System and Practice Development Network allow for the continues and effective dissemination of knowledge throughout the firm. Finally, there is the McKinsey Quarterly Journal which includes many cutting edge articles on management practices (such as their work on the 'War for Talent' in the 1990's which redefined the way companies look at HR).
Weaknesses: SS The reliance on old strategies to new problems. In an ever-changing global environment no two businesses are alike and the firm is in danger of losing its grip on cutting edge knowledge. This would see its competitive advantage eroded by more innovative competitors who are continually updating their knowledge. Successful knowledge management requires a dedication to thinking outside the square and adapting to market needs and competitive challenges, yet McKinsey's dependence of its own knowledge base may lead it "to fall into the trap of being too introverted and too satisfied with their own view of the world." SS Communication / global barriers. Despite having the largest network of any consulting firm there is a trend for both management and consultants to under-utilise the services of its practice groups. Lack of proper communication often leads to decisions being made without consulting all available knowledge and expertise and this suggests that the firm is not making the most out of its core competencies.
The linkages between most functional practices should be better and it has been said that, "they (the consultants) should probably reach out more." SS McKinsey's culture of generalists. While some consultants with deep technical expertise were recruited, most found it hard to assimilate into the main stream. The firm seemed uncomfortable as how to evaluate, compensate or promote such individuals and many became disaffected or isolated. These specialists have valuable tacit knowledge that can help facilitate the targeting of specific market areas.
Without such specialists, the firm is failing to further convert their capabilities into core competencies and this may affect the sustainability of their advantage. EXTERNAL ANALYSIS Opportunities: SS Recruitment. McKinseys has a real opportunity to not only consolidate its impressive talent pool but also acquire knowledge that is not already present. By aggressively attracting such human capital, management can renew the organisation through the fresh ideas and approaches of new employees. There is also the possibility of competency building in new and emerging fields which will not only lead to varied clients but also greater recruitment opportunities. SS Integration and informal organisation structures.
By redeveloping the guiding principles to be more inclusive and reflective of the firm, McKinsey's organisational culture will be able to be maintained as a source of competitive advantage over its rivals. In doing this they will also be able to broaden the value system to better incorporate knowledge development (especially of specialists) into the mainstream. The creation of interdependent networks will see the firm move away from the structure of 'discover-codify-disseminate' to a more inclusive and dynamic 'engage-explore-apply and share' approach. SS Virtual Firm. Build on the current infrastructure and tie it in with the 'One Firm' policy.
McKinseys is in the enviable position of being able to take advantage of its global operations and state of the art management systems, which means that knowledge can be quickly and efficiently transferred to a client regardless of their location. This will allow the firm to expand without having to set up a large physical presence, saving both time and capital. Threats: SS Self-interest / internal rivalry. There is the threat that employees (and their egos) will guard proprietary concepts and intellectual property rather than share it, which will inhibit long-term knowledge development.
Moreover, the firm does not reach out for firm wide knowledge as much as it should (due to complacency and rivalry) and this may harm the dissemination of information, especially of tacit knowledge. SS Technology. McKinsey's over-reliance on its knowledge databases will be a major threat should a malfunction ever occur. Apart from the technical danger, the firm runs the risk of basing its entire knowledge and thus its advantage on databases which can be no substitute for the knowledge that is held individually. By focusing on the virtues of codified knowledge, the firm will spend less time on innovating and thinking creatively (which is what led to the databases being a success in the first place) while its competitors will be adapting to market changes and customers' needs. SS Competition.
In an industry where knowledge is the key determinant of success there is the possibility of the theft of ideas and the headhunting of key employees to rival firms. This would see the firm lose valuable knowledge which they may not be able reproduce easily thus giving their rivals the edge. There is also the threat of McKinsey's clients starting to use their own internal strategy groups in order to cut costs and this would further diminish the firm's profit margins.