'We Make A Difference'
Kito de Boer, a principal at McKinsey & Co, talks to Nandini Lakshman about the firm's consultancy business in India.
Why are management firms making a beeline for India?
For all the management consultancies who have aspirations to be global, India is regarded as the last major untapped frontier. Also, part of it has been the seemed success that Mckinsey's has had. So, most others felt that they should be here. The fundamentals are here for a very attractive consulting practice. Indian businessmen think of themselves as very entrepreneurial unlike other places. They recognise that they've got some real areas they can improve on. On the one hand, they want to be large and successful, on the other, they know that they've been in a pretty isolated economy and they are going to be part of the world economy rapidly. They want to understand how they can strengthen themselves.
What are some of the common issues that companies come to you for?
When we first came here, our focus was largely on corporate strategy, which industry should we move into, the whole portfolio issue, what are core competencies. Today, a lot of people are still asking that question and they need to be answered quite profoundly. The capital markets are going to force them to answer those questions.
Today, what we are doing here is what we do in the rest of the world. Elsewhere, less than 10 per cent of our work is corporate strategy, most of it is just helping companies in the basics of performing better. We also do work in terms of organisation, how should companies be organised, what is the appropriate corporate governance in India, and how can you strengthen that.
The basic point that we make is many markets will grow 10 times in 10 years. It is less important how big you are now, the question to ask is how are you going to emerge in 10 years time, being the dominant player. There is no such thing as an unattractive industry, just unattractive players. Our analysis shows that the only people who get attractive returns are the people who are leaders in their sector. These are very elementary points but they are ones that people need to be coached on to come to decisions.
How different is it working with the private and the public sector?
Seventy per cent of our client base is Indian. We tend not to do much work for the public sector and that is because we are the most expensive. In a public sector environment, it's very hard for them to justify why they didn't select the cheapest. As an institution, we are very impatient. We look for impact, action and change, and we tend to find that the pace of change and the ability of PSUs to absorb and respond to what we are saying is slower than we are normally comfortable with.
Do Indian corporates have a mindset about consultancy fees?
The Indian entrepreneur-owner has a very good understanding of value. They will buy a Mercedes if they think it will buy them good value. And in many respects, we've had less resistance to fee levels here than elsewhere in the world.
In the US or the UK, it becomes a different way of purchasing. Companies have been buying $ 400 million worth of consultancy services per year. When they are buying so much, they put them into buying departments and bureaucratise the purchasing process for consultants. That sort of thing happens in a public sector environment. But the Indian entrepreneur is not answerable to anybody. He talks to consultants and at the end of the day, he makes his decision based upon what he thinks. If he prefers a BMW to a Mercedes, he'll buy a BMW.
A charge against McKinsey is that it does not implement its recommendations?
People don't pay us tens of millions of dollars year after year because they like our suits, or because they think we are nice people to have beer with, or they like our conceptual frameworks or enjoy the reports on their shelves. This is a myth which needs to be exploded. We don't do implementation. We do great conceptual frameworks. I think we bring to bear, in any situation, a considerable degree of theoretical and conceptual knowledge. But our objective, and what our clients pay us lots of money for, is improved performance. We make a difference. Many of my studies have a single report. There really is a difference between doing work that is implementable, which makes a difference, and doing implementation. We are coaches.
When I first saw Boris Becker at Wimbledon, he came in with one coach. He could serve at 125 mph and he became the youngest Wimbledon champion. The second year, he came with three coaches"" a backhand coach, a serving coach and a masseur type of person. Now he comes with 17 people. He just wasn't happy to be at 125 mph. He wanted to serve at 145 mph. Even though he was the world's best, he was always pushing himself and trying hard.
It is the same with our clients. Most of them are very strong and successful. They are not satisfied with just being good, they want to be better, and McKinsey is only one source of expertise. We help them to be better. Boris Becker's serving coach does not serve faster than him. Nor does he get up to the court to serve Becker's serve for him. His coach knows about the construction of racket heads, the tensile strength of catgut, how he should hold his grip. It may seem repetitive and boring. That's why racquets have changed shape. Not because of tennis players, but because of the coaches and consultants.
It is the same with us. We are there with our clients. We help them serve better, do better backhands, but we are not at work playing the game for them. We are too expensive for that. Other people may want to do that. By the way, we also think that adding shadow management is entirely the wrong thing. A consultant should be there to make your management stronger not weaker. And if you start doing the implementation for them, occasionally that's necessary, but by and large, what is done by everybody may be a bad thing to do. So implementability yes, but implementation no, because the management is responsible ultimately for the actions in their business. So that is why we make a very clear delineation of our clients.
Why are consultancy firms always talking about products?
We have never had a product and we will never have a product. We serve clients. If you have products, then you are product-led. There's only one thing that's important, and that is to improve the performance of our clients. Products come and go, fundamentals remain. There's an expression: If the only tool you have is a hammer, every product looks like a nail. And there are a lot of people walking around there with a hammer trying to beat on anything, and they believe it is a nail.
What are some of the challenges of working in an emerging market?
We are learning. India is going to be an epicentre of learning for us for strategy. That's because the whole new emerging thrust in strategic thinking is moving away from the utopian system prosaically to chaos theory and quantum mechanics. There is an observation made all the time in quantum mechanics that new organisms form on the edge of chaos and India is, in a sense, on the edge of chaos. That's where the new learning is coming from. It's a meeting point between oriental and occidental thinking. We came here with a lot of orthodox thinking about strategy, about economic evaluation, which does not hold true in India. We've often had to throw away the rule book, go back to the basics and ask questions rather than come up with formulas.
India is distinctive. If you look at some of the other emerging markets, I don't think they have those distinctive set of characteristics and attributes "" high intellectual calibre, great curiosity, fine learning "" that Indian senior management have. They recognise value at the basic level but they are also very demanding. So we are being forced to learn a lot here.
McKinsey outsources some key jobs...
I think that any professional advisor that you have, needs to recognise the limitations of his capability. He has to understand that there are others with distinctive skills who could do the same job offering better value. That's part of the trust that we build up with our clients, that when they ask us something, we believe that when there is somebody else who we think is very good, we'll use them.
How are you coping with competition.
We don't feel we compete with others very much. We always try to focus on demonstrating what our capabilities are and then leave it to the client to make a decision whether they want to use us or somebody else.