Martin Dewhurst and Suzanne Heywood
June 2015
This issue of the Quarterly, available here as a PDF download, explores strategies for successfully operating at scale when it comes to innovation, R&D, human resources, and other areas.
Download the full issue of McKinsey Quarterly 2015 Number 2 (PDF–4MB).
When companies grow, they enjoy advantages such as economies of scale, global reach, interconnected capabilities, brand recognition, and a deeper bench of talent. But scale also creates challenges. Corporate leaders frequently struggle to replicate the actions of fleet-footed entrepreneurs, to cut through corporate bureaucracy, to stay customer-centric, and to marshal the skills and talent of far-flung operations effectively.
This issue of the Quarterly offers fresh ideas for confronting scale-based obstacles to innovation, organizational effectiveness, and talent development. It’s conventional wisdom, for example, that large companies are better at execution than at innovation. But in “The eight essentials of innovation,” Marc de Jong, Nathan Marston, and Erik Roth demonstrate that this does not have to be true. Drawing on an exhaustive analysis of 2,500 executives in more than 300 companies, the authors present a comprehensive operating system for innovation—practices that can help companies both set the ground rules for innovation and deliver results.
One impediment to innovation at many large companies is the opacity of R&D’s performance, which creates friction between R&D managers trying to articulate their case for funding and other executives, frustrated by the rising cost of product development. In a separate article, “Brightening the black box of R&D,” our colleagues Eric Hannon, Sander Smits, and Florian Weig propose a simple formula for lifting the veil by quantifying R&D’s productivity.
A quite different challenge facing large organizations is what we called (in our 2011Quarterly article) “the globalization penalty”: the tendency in many global companies for cost structures to soar, for local operations to buckle under organizational clutter, and for responsiveness to customers to decline. In “The globally effective enterprise,” Pascal Visée, a former senior executive at Unilever, revisits this problem through a case study of that company’s effort to create a new architecture for global services. A key theme is the potential of new technology solutions, though he also recognizes their limitations.
Leading-edge digital platforms similarly take center stage in Arne Gast and Raul Lansink’s “Digital hives: Creating a surge around change.” Based on four case studies, the article illustrates how executives can harness the power of social media to engage large and widely dispersed groups of employees by encouraging new ideas and ways of working, driving organizational change, and even helping to formulate better strategy.
A common feature of many large organizations is a well-developed human-resources function. As McKinsey’s Neel Gandhi and Bryan Hancock say in “Getting beyond bureaucracy in human resources,” HR organizations, at their best, help drive talent strategy while establishing useful guardrails for management. There’s also a danger, though, of paper-pushing sluggishness that handcuffs instead of helps. McKinsey alumnus Peter L. Allen, who leads human resources at a fast-growing Asia-based online travel company, describes an alternative vision, for an HR function that helps managers focus on managing their business and developing their people. Combining scale and agility, in this area as in others, isn’t easy, but it’s a critical need for organizations in today’s fast-moving business environment. We hope this issue of the Quarterly provides you with inspiration as you embrace that imperative.
Download the full issue of McKinsey Quarterly 2015 Number 2 (PDF–4MB).
About the authors
Martin Dewhurst and Suzanne Heywood are directors in McKinsey’s London office.
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