Reinvention can be the key to a successful transformation. In this video, McKinsey senior partner Duncan Miller discusses how a carefully constructed portfolio of initiatives can conquer a disruptive business environment. An edited version of his remarks follows.
Uncovering growth opportunities can be a lot of fun. Most management teams are aware of some growth opportunities for their organization. We add an independent and rigorous perspective, using our best experts, tools, and capabilities. This combination of management experience and McKinsey perspective will identify the best portfolio of ideas and initiatives to grow the business.
Some ideas can be counterintuitive. For example, many organizations are looking to price up, and often that’s the right strategy. However, in situations where a company’s market share is low, we have recommended and executed price-down strategies to gain market share. That can be very compelling.
Beyond near-term performance improvements from sales and marketing levers, we also find that reinvention can be key. Much of what we do—in some cases half of the work—is thinking about building new businesses, many of them digital. This is especially true for clients that are in some state of being disrupted in their industries, which is, frankly, most of them these days.
We'll look at what the customers want. In many cases we’ll look at who the company should partner with to develop ecosystems to build new digital businesses. That’s a big part of a growth transformation. It's not just fixing the business that exists, it's reinventing the business for tomorrow.
When we think about identifying breakthrough growth opportunities, some of that starts with truly disruptive thinking. But it also requires a linear assessment of where the market is going, who's winning, how they're winning, what the unmet needs of consumers and customers are, and how businesses are evolving.
After you identify the opportunities for growth, you end up with a portfolio. It will include those initiatives that are adjacent to what you do today, but that meet the next horizon of customer needs. It also includes things that are truly breakthrough.
Most of our larger clients are under attack by digital disruptors. We help them figure out how to outperform the attacker, perhaps with partners and third parties. We help incumbents think about how to create consortia, and new businesses, and new business models. That’s a big part of the recipe for a successful growth transformation.
When we help a company pursue a program to take cost out of an organization and grow it in parallel, a good rule of thumb is to reinvest 50% of the savings into growth. Those can be very short-term growth initiatives, such as building new analytics or pricing capabilities. But they can also be more medium to long-term initiatives, such as creating seed funding to start a new business.