STRATEGIC MANAGEMENT (SM)

GROUP ASSIGNMENT-3

Principles from Nonaka’s Article that Can be Applied to Improve Knowledge

Management in Mckinsey
&
Consultant's Report to Mckinsey Top Management to Improve Knowledge
Management at McKinsey

Group 06 Members

S.No. Group Members Roll Numbers

1. Vijay Mohan Sharma CCBMDO/19-20/A54

2. Raghubir Sinha CCBMDO/19-20/A34
3. Gautham YB Reddy CCBMDO/19-20/A59
4. Sushma Rawat CCBMDO/19-20/A51
5. Prabhakar Bhatt CCBMDO/19-20/A31
 STRATEGIC MANAGEMENT (SM)

GROUP ASSIGNMENT-3
CCBMDO – 16 (Group 06)

KNOWLEDGE MANAGEMENT IN McKINSEY

Statement

With justification, discuss some principles from Nonaka’s article that can be applied to improve
knowledge management in McKinsey.

Procedure Employed by Group No. 06 (CCBMDO-16)

1. Analysis of the case studies has been undertaken in the following manner:-

(a) Summary of McKinsey and their organisational philosophy as well as present challenges
(understanding the client).

(b) Identification of relevant principles from Nonaka’s article which could apply to
McKinsey (as well as auditing the extant status).

Principles from Nonaka’s Article to Improve Knowledge Management in McKinsey

2. Conceptual Framework. Following conceptual framework is highlighted from the case

studies:-

(a) Utilising Serendipity. McKinsey treats knowledge primarily as a as a resource –

to be developed in a laboratory (the Practice Areas) and utilised by field practitioners. Correctly,
Mr Rajat Gupta, the Managing Director of the company, realising this, is in most probability is
trying the grass roots approach. Nonaka postulates that the Japanese try to tap into the tacit
knowledge base of their employees on the ground and allow serendipitous development of new
ideas. This however mandates complete employee commitment and dedication to the
organisation. This could ensure that McKinsey could absorb this understanding of knowledge as
an implicit entity.

(b) Understanding of the Company. The Japanese view the company as an organism
that can grow and must evolve to thrive. They therefore lay great importance to the ideals and
not just the ideas. They believe that knowledge can be created by everybody not just specialists.
In McKinsey the trust is on knowledge development by “centres” and application by teams.
McKinsey could consider increasing knowledge contribution from the field.

(c) Tacit Knowledge. Understand the concept of tacit knowledge as well as its transfer
process (to tacit/explicit knowledge). It stems from professional commitment and expertise.

2 Group 06 (CCBMDO-16)
 McKinsey could understand this concept and apply it to its company especially the aspect of tacit
knowledge flowing from articulation of vision as well as mental models and beliefs. The article
does not seem to indicate any understanding of tacit knowledge or use of the “metaphor”,
“analogy “and “model” concept (The Japanese in order to give adequate freedom as well as
infuse creativity into problem solving, thereby paving the way for knowledge capture) have a
method wherein vision is expressed through a metaphor (where different and distinct ideas are
expressed together), analogy (reconciliation of the distinction between both ideas), and a model
(concepts are crystallized).

(d) Organisational Design to Achieve Knowledge Management. The organisational

structure of McKinsey has the following features:-

(i) Redundancy. McKinsey’s present structures are lean and their associates
are classified into a client or a research stream (although this is available on call).The
Japanese believe in a redundant organisation with overlapping responsibilities in
company information, business activities and managerial responsibilities. Redundancy
enables frequent dialogue and communication creating “common cognitive ground”. The
Japanese also encourage “duplication of effort” in product development so as to have
cementing ideas “face offs” and enable accelerated creation.

(ii) Strategic Rotation. McKinsey has segregated its teams into different
verticals. Whereas the Japanese ensure that their management teams rotate between
different areas of technology as well as between different functions.

(iii) Everybody’s business. The key takeaway from the Japanese philosophy is
that knowledge creation is not the exclusive responsibility of an expert group. Mr. Gupta’s
focus on the grass root programme is a step in this direction.

(iv) Creative Processes. The Japanese way of resolving ambiguities is not

necessarily by providing associates with readymade solutions or “steps”. It is more of a
mentoring approach with a conceptual framework being provided. In contrast McKinsey
clearly expects consulting directors to go in and resolve issues by giving templated
solutions.

3 Group 06 (CCBMDO-16)
Consultant's Report to Mckinsey Top Management to Improve Knowledge
Management at McKinsey

1. Introduction. A review of McKinsey’s Knowledge Management System has been

undertaken by us. The review process consisted of a detailed review of the Company’s sustained efforts
towards the knowledge management.

Review of McKinsey’s Knowledge Management System

2. Growth and Stagnation. McKinsey is a consulting firm founded by Professor James

McKinsey, University of Chicago. McKinsey personally trained the initial associates in an integrated
approach (called the General Survey Outline). The companies first set of values was elucidated by Bower
in 1937 and stressed upon Professional capability and the firm’s dedication to serving its clients. Further
in 1945 he stress that assignments were to bring the company something more than revenue
(experience/prestige). The company followed a concept of Whilst McKinsey enjoyed remarkable growth
early on stagnation set in the 70s.

3. Resurrection. Reacting to the stagnation McKinsey assessed that the issue was due to
excessive growth without comparable increments in knowledge. Hence the “Specialist” (T-shaped)
concept was introduced. Structural changes were also undertaken to created product based teams with
specialist knowledge in specific industries. Subsequently working groups were created to develop
knowledge (initial subjects Strategy & Organisation).

4. Focus on Knowledge. Fred Gluck created 15 centres of competence with an aim of

formalising knowledge development. Each centre was headed by a recognised experts (termed as
practice leaders) who were aided by a core group. These centres were to develop consultants as well as
renew intellectual resources. Centre were to develop knowledge using a core group of experts (as well
as other centres??)

5. Discover-Codify-Disseminate. In 1987 Gluck launched the Knowledge management

project and implemented common databases (each practice area), appointment of practice coordinators
to aid database curation and handling as well as appointment of “deep functional specialists”. Further
the implementation team also developed the highly successful Knowledge Resource Directory (KRD).

6. Engage–Explore-Apply-Share In order to refocus from merely creating knowledge to

building individual and team capability the number off practice areas were reorganised into
seven sectors and functional capability groups with a aim of shifting from a leader driven to a
“stewardship model” of knowledge development.

7. Client Focus/ Career Progression The Client Service Team concept was developed with an
intention to engage clients over an extended duration (a group rather than individually).Over tie the client
focus led to a dilution of the “specialist” initiative as well as a refocus of the specialists assessment from
a primarily “learning” mode to a performing one. Further career paths for practice-dedicated specialists
as well as the practice management track (primary task of transferring knowledge).

4 Group 06 (CCBMDO-16)
8. New Focus. In 1994 Mr. Gupta (as MD) introduced a grass roots knowledge-development
approach called Practice Olympics as well as multi-year internal assignments. He also intended
expanding McKinsey’s research based activities at the McKinsey global institute including establishing
a change centre. This was to be an investment in the future.

9. Knowledge Management on the Ground. The three cases provide the following insights as
regarding the practical impact of McKinsey’s extant policies:-

(a) Sydney Office. Stuckey’s team was able to effectively utilise data from PDNet as
well as tap into the experience of experts all over the world. When the expert arrived, he aided
them in the finalising of the end result. Stuckey whilst pleased with result, was concerned with
the excessive reliance on internal solutions and the fact that there was no radical breakthrough.
(b) Marketing centre. Dull is able to establish a new centre of competence but is
concerned about his own growth prospects (clearly indicating that at the ground level there was
concern as regards the importance given to the knowledge management specialist).

10. McKinsey Vs Contemporary Practices in Knowledge Management. The best knowledge

management practices in the world relevant to McKinsey are listed below as:-

(a) Tacit Knowledge. Tap into the tacit knowledge base of their employees on the ground
and allow serendipitous development of new ideas. This however mandates employee
commitment and relation to the organisation. McKinsey’s Culture of “Up or Out” is not ideally
suited for a knowledge creating organisation as it is unlikely to enable the deep commitment and
passion necessary for the development /transfer of tacit knowledge. Further even personnel
dedicated to knowledge management teams are not as sure of their jobs (Dull and the Marketing
centre).

(b) Understanding of Company. View the company as an organism that can grow
and must evolve to thrive. They therefore lay great importance to the ideals and not just the ideas.
They believe that knowledge can be created by everybody not just specialists. McKinsey has
entrusted knowledge development to “centres” and its application to teams. MC Kinsey could
consider increasing knowledge contribution from te field. It is however pertinent that Mr Gupta’s
recent efforts of Grass roots development are definitely a step in the right direction.

(c) Metaphor-Analogy-Model. Understand the concept of tacit knowledge as well as its

transfer process (to tacit/explicit knowledge) and utilisation of the Metaphor-Analogy-Model
concept (in order to give adequate freedom as well as infuse creativity into problem solving thus
paving the way from knowledge creation/capture). Express the company’s vision through a
metaphor (where different and distinct ideas are expressed together), analogy (reconciliation of
the distinction between both ideas), and a model (created concepts are crystallized). McKinsey
views knowledge as a resource to be developed in its various centres and utilised through the use
of CDs. There has been no use of the “Metaphor …Model’ concept to date. This implies that
whilst solutions to exiting problems will be easily found new innovative ideas are unlikely to be
created.

5 Group 06 (CCBMDO-16)
11. At the Organisational Level. Some practices at the organisational level relevant to McKinsey
are:-

(a) Redundancy. Have a redundant organisation with overlapping responsibilities in

company information, business activities and managerial responsibilities. Redundancy enables
frequent dialogue and communication creating “common cognitive ground”. Companies also
encourage “duplication of effort” in product development so as to have cementing ideas “face
off” and enable accelerated creation. McKinsey’s organisation commencing the resurrection
phase has been focusing towards specialisation. Tis implies that there is little interaction between
verticals (the Telecom case is proof of the same) and this could lead to a lack of knowledge
transference.

(b) Strategic Rotation. Contemporary companies Ensure that their management teams
rotate between different areas of technology as well as between different functions. McKinsey
does not have a policy of strategic rotation between both verticals as well as personal involved
with clients and CDs.

(c) Problem Solving. Resolve ambiguities not necessarily by providing associates with
readymade solutions or “STEPS”. It is more of a mentored approach with a conceptual
framework being provided. McKinsey’s approach to the problem seems to be one expecting field
teams to locate specialists who will provide answers to resolve issues. Tis leads to a transactional
relationship between the specialists and the field team and does not let the concept of mentoring
progress.

Recommendations. Following are the recommendations to McKinsey’s top management for effective
knowledge management:-

12. It is understood that there is already a movement within McKinsey realising that a change is
necessary and the initiation of the “grassroots” programme initiated is a step in that direction. To further
progress this transformation we recommend the following:-

(a) Articulation of the Vision by the Top Management (Metaphor), Middle Management
(Analogy) and Model development by the independent teams. Whilst this will have to be an
internal decision of the company itself.

(b) Undertake a cultural change. IF McKinsey truly wants to grow and transform it needs to
undertake a change in how it regards its human resources. Commitment is a primary requirement
for knowledge creation and transfer and the extant transactional model of the company does not
permit it.

(c) Whilst the new Knowledge centre can help in codifying knowledge its development must
shift downstream. To facilitate this a mentorship programme could be initiated with subject
matter to experts mentoring associates for an extended duration.

(d) Undertake strategic rotation of associate especially between industries thereby enabling
cross industry transfer of knowledge.

6 Group 06 (CCBMDO-16)