Organising for the future

Dr. Thomas Goh, FHKIOD

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company is strictly prohibited
Disruptive
forces
Organising
for agility
Change
architect

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Major forces are disrupting your organisation
outside-in and inside-out

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Outside-in
disruptive I Urbanisation in developing economies
forces
II Disruptive technologies

III An aging world

IV Greater global inter-connections

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I Urbanisation in developing economies

Organisational Implications
More Asian/dual headquarters
Rise of Asian middle class

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Rapid urbanisation is driving global GDP and consumer demands

By 2025

Cities in emerging economies will contribute

47% of globalgrowth

1 billion new consumers in emerging market cities

One in four of the global top 200 cities will be Chinese

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II Disruptive technologies

Organisational Implications
Quicker decision making
Faster resource re-allocation
More frequent organisation
transformation
Less rigid industry distinctions

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Twelve technologies have significant potential to disrupt
IT and how we use it Changing the building blocks
of everything

Mobile Cloud Internet of Automation of Next-generation Advanced

Internet technology Things knowledge work genomics materials

Machines working for us Rethinking energy comes of age

Advanced Autonomous and 3D printing Energy Advanced oil and Renewable

robotics near-autonomous storage gas exploration energy
vehicles and recovery

SOURCE: McKinsey Global Institute analysis McKinsey & Company 7

Globalisation and technology are changing the face of business

Adoption of new technologies is accelerating

Time to reach 50 million users, years

38

13
4 3 1 0.75

Radio TV iPod Internet Facebook Twitter

SOURCE : McKinsey Global Institute McKinsey & Company 8

III An aging world

Organisational Implications
Smaller workforces impacted by
automation and aging
New technical skills with a
shorter shelf life
Perpetual productivity drive

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By 2030, about 1 in 4 people in advanced economies and
China will be 65 years old or older
Share of population 65+, 2040E

Global life expectancy is increasing A graying workforce

The share of older workers (age 55+) will increase dramatically
1950 47 years

2014 69 years 2010 2030 2030

Global 14% Global 22% China 31%
2050 76 years

Without productivity increases, GDP growth will shrink dramatically Employment Productivity
GDP growth, rolling 5-year periods, CAGR, %
6
5 Projected
4
3
2
1 Productivity growth at 1.8%
1969 2014 2064
0
SOURCE: UN Population Division; McKinsey Global Institute analysis McKinsey & Company 10
IV Greater global inter-connections

Organisational Implications
Merger/ cultural integration
Intensified competition
Greater geographic and
business spread
Global citizen expectation

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11
Networks of global flows are expanding and becoming USD 50100 billion
USD 100500 billion
much more interconnected USD 500 billion or more

Lines show total trade flows1 between regions, figures in bubbles show participation in world trade
1990 2013
100% = $1.8 trillion 100% = $17.2 trillion

4%
2%
2%
5%
12% 41% 32%
8% 8% 4%
3%
6%
32
2% 22% %
4%
5%
7%

Interregional Interregional
trade, 19902: trade, 20132:
$1.9 trillion $11.2 trillion
SOURCE: UN Comtrade; World Bank World Development Indicators; International Monetary Fund Balance of Payments; Telegography; McKinsey Global Institute analysis McKinsey & Company 12
Inside-out
disruptive I Fundamentally different workforce
forces
II Warping the way we work

III Total Transparency

IV Behavioural Science breakthroughs

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I Fundamentally different workforce

Organisational Implications
Millennials
Women
Global citizens

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By 2025, at least 3 out of every 4 workers will be Millennials,
driven by different motivations

Idealist Want-it-alls Money seekers Breadwinners Family-focused

19% 13% 18% 32% 18%

Core Meaningful Meaningful work International Salary Flexible working

value work International exposure Career arrangements
drivers Prestige exposure Salary advancement Meaningful work
Flexible working
arrangements
Prestige

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II Warping the way we work

Organisational Implications
Automation
Social technology
24x7
Open architecture
Contingent workforce

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Automation of knowledge work worth 110-140 million FTEs

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III Total Transparency

Organisational Implications
Less secrets
People analytics

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Total Transparency

750,000
classified documents

3 million views

Im not destroying my career over

a minimally talented spoiled brat
Scott Rudin on Angela Jolie

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Big data is transforming employee engagement

Employees traits
Individual data

Employees environments
Location data Employees results
Machine Financial and
learning
operating data
Employees perceptions
Survey data

Employees behaviors
Behavior

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IV Behavioural science breakthroughs

Organisational Implications
Life-long learning
More than money
Rocks not pebbles

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Digital platforms also allow opportunity for life-long learning across economies
Nearly 40 percent of Coursera visitors are from emerging markets
% share of site visitors by country
United States 22
India 15
Brazil 6
Russia 4
China
Micro- 4
Spain 3
education Mexico 3
United Kingdom 3
Canada 2
600+ courses offered
free online in Nigeria 2
12 languages Colombia 1
Ukraine 1
Chile 1
Portugal 1
Greece 1
Other 32
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Disruptive
forces
Organising
for agility
Change
architect

McKinsey & Company 11

Four paradoxes of agile companies

1. Become highly stable and highly dynamic at the same time

2 Change less by changing constantly

3 Move faster by getting more people involved

4 Get more control by giving up control

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 Become highly stable and highly
1 dynamic at the same time

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To adapt to the new normal, organisations need to be agile

New agile ways of working

The ability of an organisation
to adapt rapidly and flexibly
to market, environmental or
internal changes in a cost-
effective way

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Agility is about being dynamic AND stable at the same time

Strong
Start-up Agile
Dynamic capability

Trapped Bureaucratic

Weak
Weak Strong
Stable backbone
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Typical elements of an Agile organisation

Stable backbone Dynamic capability

Structure Top team sets Built up by small

direction modular cells

Process Processes support Fluid

value-adding work reconfiguration to
keep ahead

People Values hold Engaged people

company together drive results
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Haier Continuously evolves its operating model

Reorganised 80,000-person workforce into 2,000 independent units

Each unit manages its own P&L
Employees paid on performance

Most valuable brand in China for the past 13 years

Market cap doubled from 2011-2016 (ytd)
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 Change less by
2 changing constantly

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Alibaba uses a planet building model to oversee
investments in new ventures

Alibaba secures minority share in new ventures with promise

Ventures run by entrepreneurial teams which are controlling shareholders

Alibaba provides resources and advice

Can withdraw investment in event of changes to structure, scope or team

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 Move faster by getting more people
3 involved

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35
Huawei disperses decision-making by rotating its CEOs

CEO role rotates among a team of 8 top executives

CEO leads strategic planning

Other 7 members of top team focus on operations

Dual reporting structures for functional and regional divisions

Each business group overseen by highly autonomous

executive management teams

SOURCE: Company website; Press, analyst opinions McKinsey & Company 36

 Get more control by giving
4 up control

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Kyocera adopts amoeba-type organising units

Independent financials

End-to-end responsibilities

Aligned with overall business objectives and guidelines

SOURCE: McKinsey analysis McKinsey & Company 38

Disruptive
forces
Organising
for agility
Change
architect

McKinsey & Company 11

Change architect

From To Boxes and

lines less
important,
Top-down focus on
hierarchy action
Bureaucracy
Leadership
shows Teams
direction built
+
and around
Detailed enables e2e
instruction action account-
ability

Silos
Quick changes,
flexible resources

SOURCE: McKinsey McKinsey & Company 40

 Disruptive
forces
Organising
for agility
Change
architect
For more information, please contact Thomas Goh
https://www.linkedin.com/in/thomasgoh/
McKinsey & Company 11