Moreover, the experts coached individual managers to help them learn, understand, and gradually feel comfortable with the new way of working. Successful enterprises take a balanced approach during the design and implementation of performance-improvement programs. McKinsey Global Institute. Noshir is the global leader of McKinsey’s Outsourcing and Offshoring practice and has assisted many clients in the areas of strategy development, organizational restructuring and operational performance improvement. This is evident in the way the main Supply Chain 4.0 improvement levers shown in the outer circle of Exhibit 2 map to six main value drivers (the inner circle). It uses a variety of process improve - ment and change management concepts and approaches to increase operational efficiency and reduce clinical variability; the ultimate objective is to drive down the total cost of care while maintaining or improving care quality. As marketing departments mature, they often are asked for more accountability from the C-Suite on the department’s value. hereLearn more about cookies, Opens in new
Managers attributed these results to the support they received, as well as to the new spirit of competition the program engendered (for example, by making the performance of individual departments transparent). Yet that is a mistake. McKinsey Quarterly. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Within six months, many back-office departments were meeting stringent productivity targets (a 20 to 30 percent improvement, in certain cases) and some were even surpassing them. Please click "Accept" to help us improve its usefulness with additional cookies. Published In 2018, a McKinsey study had revealed that “Africa has the second-fastest-growing … Senior executives therefore vowed to move the effort “out of the office and into the line.” The company created a “lean leader” profile—a list of desirable characteristics, such as problem-solving, coaching, and analytical skills. Operational Efficiency is the key to unlock Digital Transformation for Banks. The key is to start with just one or two operating areas and transform their performance completely, in essence creating the building blocks to be replicated throughout the company. ... even near-perfect execution on operational efficiency and utilization management will be insufficient to drive the necessary level of change and will never truly be sustainable. Line managers are better placed to lead change efforts and to serve as long-term role models—and should be held accountable for doing so. It works by applying McKinsey’s capabilities and by partnering with leaders from the private-, public- and social-sectors. People create and sustain change. Learn more about cookies, Opens in new
McKinsey Quarterly. This can include evaluating resource utilization, analyzing accounts payable processes, reviewing production efficiency, inventory management, and delivery and distribution. Recently, organizations as diverse as steelmakers, insurance companies, and public-sector agencies have benefited from “leaning” their operations with Toyota’s now-classic approach: eliminating waste, variability, and inflexibility. Reinvent your business. Reduce Operational Cost – Create Efficiency; ... Couch & Associates adopted version of McKinsey’s Horizon Model. With SaasRadar, a McKinsey proprietary benchmarking tool for financial and operational metrics, we compare you against relevant SaaS peers and make data-based recommendations that clear your path for growth. In addition, the company created a prominent visual tracking system to reinforce the new behavior by showing employees, in real time, when shifting workloads required their immediate attention. By approaching implementation in this fashion, with cross-cutting initiatives serving as the mortar holding together the building blocks of the program, top companies minimize the chances that poor timing or unanticipated events will return employees to the firefighting mode that characterized the old ways of working. After some initial resistance, the company found that this approach helped change the managers’ attitudes. Senior executives recognized that its success would require these managers to adopt their new roles as coaches and mentors for junior employees wholeheartedly, so they could bolster the skills of their direct reports and encourage them to find ways of improving constantly. Why did the company make this mistake? The result, in fact, was chaos: line workers later showed executives a schedule indicating that one machine, chosen at random, was to perform 250 hours of work during an 8-hour shift. That approach is understandable. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. These efforts have delivered tangible benefits over the last five years, but often in isolated pockets, and without dramatically reducing overall operations costs. The basic characteristics of regional commercial vehicle markets around the world are driving McKinsey’s analysis. Operations typically account for the largest number of a company’s employees and the widest variation in skill levels. The cards and related conversations generated creative ideas—including a new way to keep coal dry when it was shipped to the company’s power plants. Each facility may specialize in different products or services and face unique pressures from customers, competitors, and regulators. Soon, employees began carrying index cards listing the improvement priorities they had spotted during the previous week. Likewise, greater attention to corporate culture helped a global chemical company launch an efficiency-improvement program across its network of 300 plants. Use minimal essential
Against a backdrop of growing economic uncertainty, their success can be a source of inspiration and enlightenment for industrial and service companies and for public- and social-sector organizations looking to extract greater value from these efforts. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe, Brings digital-operations and lean-management expertise to help clients in the banking, insurance, retail, and healthcare sectors win in new ways, Helps large financial institutions define digital strategies and deliver end-to-end digital transformations at scale, Advises Retail financial institutions and telco organizations on breadth of topics covering digital and analytics strategy through to end-to-end ops transformation, Advises financial institutions on digital strategy, operations, transformation and product development. Likewise, enthusiasm often wanes when workers, who may receive training months before they apply it, come to view the program as distracting. Their rates of operational-equipment effectiveness are more than … The McKinsey 7S model is a useful framework for reviewing an organization’s marketing capabilities from different viewpoints. It managed to reduce costs through productivity gains by 35 percent and saw a 40 percent lift in its net promoter score. Manufacturing & Supply Chain. On the surface, the program was working: the number of projects and employees trained in the new approaches—two indicators the company tracked—were increasing. operational responsibility under another. Applying the Horizon Model for Marketers. While enhancements isolated ineach area can boost both effectiveness and efficiency, the true potential comes from tackling them in sequential order. Top companies, by contrast, attend to the softer elements of an initiative throughout its whole course, starting with the earliest, aspiration-setting phases, when senior leaders identify the key goals and start to communicate them. These brief sessions allowed workers to celebrate successes, share ideas, and measure progress in achieving the program’s goals. To achieve improvements in cost efficiency and customer experience that make a significant bottom-line difference, they need to rigorously apply the full set of levers across their entire operations cost base. The supervisors later reported that the integration and timing of these elements helped the program succeed by instilling in them the influencing skills needed to highlight the new system’s benefits (both to their teams and to individual workers) and to convince doubters that the changes were important. When companies tackle implementation in a more coordinated way, they get bigger, more sustainable results. Stefan Roggenhofer is a principal in McKinsey’s Munich office. Subsequent analysis suggested that about half of the productivity gains were attributable to the softer elements and about half to technical changes, such as more efficient warehouse layouts. A global IT services company took that kind of approach when it first scaled up its pilot effort, choosing to focus on all operational activities associated with serving an important customer. ... A recent McKinsey study found that these legacy systems account for 74% of a company’s IT spend while hampering agility at the same time. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility.
That undercut many of the efficiency gains the experts managed to create. To address these challenges, banks have deployed tools including lean, process digitization, robotics—and, in some cases, advanced analytics—to lower operations costs on one hand, and provide customers with experiences that match those delivered by digital natives like Amazon or Uber. Something went wrong. Need for Operational Excellence Moreover, a survey of workers found that their satisfaction levels had risen by 10 percent. McKinsey found that after more than a decade lagging the industrial sector, packaging solutions improved operational performance with a 2 percent EBITDA margin expansion. A step change in operational and clinical performance across the healthcare value chain is needed. As deployment times quicken and significant efficiency gains are realized, the pace of automation adoption is accelerating. At the heart of most big operational-improvement efforts are a company’s black belts, lean sensei, and other change agents brought in to lead programs, spur new ideas and practices, and champion the mind-set of continuous improvement. He has also authored external articles and reports, including in … In such cases, “initiative fatigue” and even distrust may set in, and efficiency gains fizzle out as the black belts move on to other projects. For more about the role of energy in performance transformations, see Josep Isern and Caroline Pung, “Driving radical change,” mckinseyquarterly.com, November 2007. The experience of a North American distribution company that sought to address higher customer expectations and eroding margins in its network of 70 distribution centers shows the virtues of a more balanced approach (Exhibit 1). ... in the case of renewables and efficiency improvements) or broader boosts Many companies are tempted to undertake everything simultaneously, often by launching a frenzy of loosely related kaizen1 1. In addition to improving customer satisfaction significantly, the company substantially lowered its labor costs and raised labor productivity by more than 40 percent. Operational Efficiency should be a continuous process in every organization because of the industry which has become highly competitive. The company’s executives found that the goals of the program were therefore initially unattainable. For instance, check that predictive maintenance … He advises companies in industries where operational efficiency … Without getting into a mini-course on strategy … Units often are scattered across dozens or even hundreds of sites throughout the world, function independently, and have distinct corporate cultures—particularly if M&A has fueled a company’s growth. Humayun has coauthored a number of publications, including the ‘McKinsey on Smart Grid’ publication as well as McKinsey's recently completed work on energy efficiency, and clean technologies. The company looked beyond technical changes, to the ways that organizational structures and processes—and even the mind-sets of employees—could affect its ability to meet the goals it set (see sidebar “Managers have feelings too”).