g-f(2)2359 Unleashing the Power of Productivity: McKinsey's Three-Sided Approach to Fostering Abundance

 

genioux Fact post by Fernando Machuca and Claude

Introduction:

As business leaders navigate the challenges of the current economic landscape, McKinsey's article "The productivity imperative" highlights the crucial role of productivity in fostering a new era of abundance. By focusing on increasing productivity through a comprehensive approach, companies can not only boost their own growth and profitability but also contribute to the overall economic well-being of society.

genioux GK Nugget:

"By pursuing the three-sided productivity opportunity – upskilling workers, offsetting higher input costs, and better targeting investments – companies can generate higher wages, accelerate growth, and position themselves for outperformance." — Fernando Machuca and Claude, May 10, 2024

genioux Foundational Fact:

The three-sided productivity opportunity, as presented in McKinsey's article, involves operating with excellence by adapting management practices and directing resources to high-value initiatives, optimizing capital leverage by striking the right balance between investing in talent, physical assets, and software, and accelerating growth by enhancing current offerings and introducing innovative customer experiences. By focusing on these three areas, companies can transform themselves and contribute to the creation of a future of abundance.

The 10 Most Relevant genioux Facts:

1. Pursuing productivity is crucial for companies to manage uncertainty and boost growth and profitability.
2. The three-sided productivity formula underpins the performance of leading players across sectors.
3. Lackluster growth expectations, intense competition for talent, and high capital and labor costs are key challenges that productivity can help address.
4. Comprehensive productivity efforts, including upskilling employees and changing management practices, are essential for success.
5. Productivity growth at the economy level is challenging, as evidenced by the declining rates in G-7 countries.
6. Businesses are sources of productivity growth through the value added in products and services.
7. Operating with excellence requires resetting resource allocation and changing culture to harness technology effectively.
8. Optimizing capital leverage involves scrutinizing the balance sheet and maximizing the return on talent.
9. Accelerating growth through innovation, such as linking it to an aspirational mindset and pursuing multiple pathways, is crucial for productivity gains.
10. Productivity gains not only improve company performance but also translate into GDP growth and higher living standards.

Conclusion:

The golden knowledge extracted from McKinsey's "The productivity imperative" article serves as a valuable guide for business leaders seeking to navigate the challenges of the current economic landscape. By embracing the three-sided productivity opportunity and focusing on operating with excellence, optimizing capital leverage, and accelerating growth, companies can not only boost their own performance but also contribute to the creation of a future of abundance. While sustained productivity growth is not easy, management teams that internalize the lessons learned and offer incentives that encourage the right behaviors can significantly raise their odds of outperforming and help make 2024 the advent of future abundance.

REFERENCES

The g-f GK Context

Ezra Greenberg, Asutosh Padhi, and Sven Smit, The productivity imperative, Productivity and the next age of abundance, McKinsey Quarterly: Digital Edition, Vol. 60, No. 2.

ABOUT THE AUTHORS

Ezra Greenberg is a partner in McKinsey’s Stamford, Connecticut, office; Asutosh Padhi is McKinsey’s managing partner for North America and a senior partner in the Chicago office; and Sven Smit is the chair of the McKinsey Global Institute and a senior partner in the Amsterdam office.

The authors wish to thank Matt Banholzer, Vincent Bérubé, Rebecca Doherty, Steven Eklund, Arvind Govindarajan, Sebastian Kohls, Alina Malinauskaite, Jake Matthews, Jake Milner, Nicholas Pingitore, Erik Schaefer, Scott Schwaitzberg, Richard Sellschop, Zachary Silverman, Sarah Walker, Joris Wijpkema, and Shubo Yin for their contributions to this article.

Classical Summary:

McKinsey's article "The productivity imperative" emphasizes the crucial role of productivity in helping business leaders navigate the challenges of the current economic landscape and foster a new era of abundance. The article argues that by focusing on increasing productivity through a comprehensive approach, companies can boost their own growth and profitability while contributing to overall economic well-being.

The authors identify three key challenges that productivity can help address: lackluster growth expectations, intense competition for talent, and high capital and labor costs. To tackle these challenges, the article presents a three-sided productivity opportunity, which involves operating with excellence, optimizing capital leverage, and accelerating growth.

Operating with excellence requires adapting management practices and directing resources to high-value initiatives. This includes resetting resource allocation and changing culture to harness technology effectively. Optimizing capital leverage involves striking the right balance between investing in talent, physical assets, and software, which can be achieved by scrutinizing the balance sheet and maximizing the return on talent.

Accelerating growth is crucial for productivity gains, and the article highlights the importance of innovation in this context. Linking innovation to an aspirational mindset, pursuing multiple pathways to growth, and investing in innovation and growth capabilities are identified as key practices of "innovative growers."

The article also acknowledges the challenges of creating productivity growth at the economy level, as evidenced by the declining rates in G-7 countries. However, it emphasizes the role of businesses as sources of productivity growth through the value added in products and services.

Ultimately, the article concludes that productivity gains not only improve company performance but also translate into GDP growth and higher living standards. While sustained productivity growth is not easy, management teams that internalize the lessons learned and offer incentives that encourage the right behaviors can significantly raise their odds of outperforming and help make 2024 the advent of future abundance.

Ezra Greenberg

Ezra Greenberg is a partner at McKinsey & Company, based in their Stamford, Connecticut office¹. He is a global leader in McKinsey’s work on macro scenarios and trends, advising clients on how these forces can be used in critical strategy and investment decisions¹. He also co-leads McKinsey's strategic transformation services in North America¹.

Greenberg has been instrumental in McKinsey’s global response to the COVID-19 crisis, leading the development of McKinsey’s COVID-19 scenarios and serving clients globally¹. He has co-authored some of McKinsey’s core publications during the pandemic¹.

His expertise lies in engineering, construction, and building materials, where he works with leading manufacturers and distributors across their agenda¹. His recent work includes helping a top US building products distributor develop and implement comprehensive organic and inorganic growth, and digital innovation strategy¹.

Before rejoining McKinsey in 2013, Greenberg worked for three years at one of the world’s largest hedge funds, where he helped manage the client service research team¹. During his first ten years with McKinsey, he was a senior fellow at the McKinsey Global Institute and co-founded the North American Knowledge Center¹.

Greenberg has led research on a range of topics including the emergence of China and India, demographics, and consumer behavior¹. He played a principal role in the development and client dissemination of McKinsey’s global macro scenarios during the 2008-2009 financial crisis¹.

Source: Conversation with Bing, 5/10/2024

(1) Ezra Greenberg | McKinsey & Company. https://www.mckinsey.com/our-people/ezra-greenberg.

(2) Procurement leaders on fighting inflation | McKinsey. https://www.mckinsey.com/capabilities/operations/our-insights/inflation-fighter-and-value-creator-procurements-best-kept-secret.

(3) Ezra Greenberg – CME STEM. https://www.cme-stem.org/people/ezra-greenberg/.

Asutosh Padhi

Asutosh Padhi is the North America Managing Partner at McKinsey & Company, leading the firm across the United States and Canada¹. He is a member of McKinsey’s global leadership team and its Shareholders Council, which is the firm's equivalent to a board of directors¹.

Throughout his career, Padhi has helped high-performing companies achieve transformations by leveraging his expertise in corporate strategy, operations, and organizational health and effectiveness¹. He previously led McKinsey’s advanced industries sector globally and founded the McKinsey Center for Future Mobility¹.

Currently, Padhi orchestrates McKinsey’s client service and research initiatives focused on helping CEOs and board members thrive amidst economic uncertainty¹. He is the bestselling author of "Titanium Economy: How Industrial Technology Can Create a Better, Faster, Stronger America" and his perspectives on industrial technology, macroeconomics, and leadership have been featured in various media outlets¹.

Padhi is the executive sponsor for McKinsey’s work with the Rework America Alliance, a Markle Foundation initiative that seeks to advance opportunities for millions of unemployed and low-wage workers to transition into better jobs¹. He also sits on the boards of the Aspen Institute, the Field Museum, and the Conference Board, and is an active member of G100 the Fortune CEO Initiative, and the Fast Company Impact Council¹.

Padhi regularly convenes CEOs to explore solutions to their most pressing challenges, including at major events like the World Economic Forum, and McKinsey-hosted summits across North America¹. He also led the introduction of McKinsey’s US Board Excellence Forum and has been a featured speaker at various conferences¹.

Source: Conversation with Bing, 5/10/2024

(1) Asutosh Padhi | McKinsey & Company. https://www.mckinsey.com/our-people/asutosh-padhi.

(2) Asutosh-Padhi | Strategy & Corporate Finance Blog - McKinsey & Company. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/the-strategy-and-corporate-finance-blog/author/asutosh-padhi.

(3) Asutosh Padhi | CEOI - Fortune. https://fortune.com/ceoi/asutosh-padhi.

(4) Asutosh Padhi | Hachette Book Group. https://www.hachettebookgroup.com/contributor/asutosh-padhi/.

(5) Asutosh Padhi - The Aspen Institute. https://www.aspeninstitute.org/people/asutosh-padhi/.

Sven Smit

Sven Smit is a senior partner at McKinsey & Company and the chair of the McKinsey Global Institute (MGI), the firm's business and economics research division¹. He also chairs McKinsey's insights and ecosystems work¹. He is a member of the firm’s global leadership team and the Shareholders’ Council, which oversees the firm's knowledge development¹.

Smit leads research on economic and business trends and works with companies to develop business strategies and transformations¹. He serves all industries, analyzing the success factors required for business growth, examining the way megatrends influence it, and defining the lessons of diversified growth¹.

He has co-authored two books, "Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds" and "The Granularity of Growth: How to Identify the Sources of Growth and Drive Enduring Company Performance"¹. As chair of MGI, he leads research and authors MGI reports on global economic trends and topics such as productivity and growth, urbanization, innovation and technology, labor markets, the future of work, emerging markets, and Europe's economic outlook¹.

Before his current role, Smit led the firm’s work in Western Europe and the global Strategy & Corporate Finance Practice¹. He holds a degree in mechanical engineering and an MBA¹. Prior to joining the firm, Smit worked in measurement and control as an engineer and researcher¹. He contributes to society through NL2025, an initiative committed to a better future for the Netherlands¹.

Source: Conversation with Bing, 5/10/2024

(1) Sven Smit | McKinsey & Company. https://www.mckinsey.com/our-people/sven-smit.

(2) What’s Sven Smit reading? | McKinsey & Company. https://www.mckinsey.com/featured-insights/we-still-know-what-you-are-reading-this-summer/sven-smit.

(3) Sven Smit - Bruegel. https://www.bruegel.org/people/sven-smit.

(4) Sven Smit - Agenda Contributor | World Economic Forum. https://www.weforum.org/agenda/authors/sven-smit/.

(5) Sven Smit | CEPR. https://cepr.org/about/people/sven-smit.

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REFERENCES

“genioux facts”: The online program on "MASTERING THE BIG PICTURE OF THE DIGITAL AGE”, g-f(2)2359, Fernando Machuca and Claude, May 10, 2024, Genioux.com Corporation.

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