The Australian - The Deal - - Contents - In­ter­view by: Glenda Korporaal

McKin­sey’s John Ly­don says con­sul­tants are life coaches

AUS­TRALIAN arm of McKin­sey & Com­pany, the world’s most fa­mous man­age­ment con­sul­tants, found it­self in the spotlight re­cently fol­low­ing the an­nounced de­par­ture of Wool­worths’ chief ex­ec­u­tive Grant O’Brien. O’Brien was re­ported to have re­lied heav­ily on McKin­sey ad­vice as he bat­tled to turn around the com­pany. Wool­worths’ new chair­man, Gor­don Cairns has stepped down from an ad­vi­sory role with McKin­sey to avoid a con­flict of in­ter­est. There were re­ports the firm was paid tens of mil­lions in fees each year by Wool­worths with some es­ti­mates putting it as high as $45 mil­lion. But what does McKin­sey do? The Deal spoke to the chief ex­ec­u­tive of the Aus­tralian busi­ness John Ly­don who has a big vi­sion for the firm in Aus­tralia – but re­mains tight lipped about clients “even if it is to set the record straight”.

What do com­pa­nies want from con­sul­tants?

Aus­tralia is go­ing through a huge pe­riod of change. For the past decade 90 per cent of our growth came from ris­ing terms of trade and our re­source in­vest­ment. Both are re­vers­ing or stop­ping. Real wage growth will come from in­creas­ing pro­duc­tiv­ity and in­creas­ing our com­pet­i­tive­ness in a world where ev­ery­thing is glob­ally traded. You don’t have to do fi­nal assem­bly any more; you can be part of a global sup­ply chain, or a knowl­edge sup­ply chain. There are po­ten­tial op­por­tu­ni­ties for Aus­tralia but there are, at the same time, these forces of dis­rup­tion. There is mas­sive tech­no­log­i­cal change and there is a big de­mo­graphic change where we are all liv­ing longer. Our clients need a bit of a guide to help them see into the fu­ture, to see around corners. Like a coach or a per­sonal trainer who helps them ad­just quickly.

How big is McKin­sey in Aus­tralia?

We are the fastest grow­ing of­fice – coun­try – in our global firm. We have a to­tal staff of about 300 in­clud­ing 196 pro­fes­sional staff. But, cur­rently, we have 320 con­sul­tants work­ing in Aus­tralia. We have peo­ple here from over­seas on tem­po­rary as­sign­ments who are ex­perts in bank­ing or min­ing or tech­nol­ogy. Un­til about two or three years ago we had about 100 con­sul­tants here. Our growth has come from in­no­vat­ing the busi­ness. But we don’t judge our­selves by num­bers, we judge our­selves by our clients’ suc­cess and by our coun­try’s pros­per­ity.

You come from Bri­tain. How did you end up here?

I came here in 1997 to do a pro­ject for a min­ing com­pany and loved the place. I have al­ways had lots of Aussie friends. So I came back in 1999 with my then girl­friend (now my wife) on a one-year pro­ject for McKin­sey. We loved it. It was the Olympics and Aus­tralia was on a high. We wanted to stay. It has been the best thing we have ever done. We now have two won­der­ful chil­dren who are Aussies. We took out Aus­tralian cit­i­zen­ship and I even sup­ported Aus­tralia in the cricket this year.

How ef­fi­cient are to­day’s big Aus­tralian com­pa­nies?

I re­ally rate the Aus­tralian ex­ec­u­tives of com­pa­nies. Some of the global com­pa­nies are be­ing run by Aus­tralians. There are some great Aus­tralian cor­po­rate lead­ers who are very highly re­garded. Many of Aus­tralia’s com­pa­nies, such as the min­ing com­pa­nies, are the most ef­fi­cient in the world. The next leap for­ward for them is learn­ing how to use data and an­a­lyt­ics to be smarter about how they do their busi­ness and trans­late that into in­creased pro­duc­tiv­ity and com­pet­i­tive­ness. But there are other parts of the econ­omy where there is more dis­tress and a need for re­cov­ery and trans­for­ma­tion. What I am most ex­cited about is the op­por­tu­nity for our com­pa­nies to leapfrog a lot of their global com­peti­tors by tak­ing ad­van­tage of tech­nol­ogy, digi­ti­sa­tion and an­a­lyt­ics. Don’t con­sul­tants these days have a bit of a bad im­age? We read about CEOs bring­ing the man­age­ment con­sul­tants in and sack­ing lots of peo­ple. You al­ways see bad press in any in­dus­try. We have high stan­dards of con­fi­den­tial­ity and pro­fes­sion­al­ism. We will never talk about our client’s work, even if it is to put the record straight. We are not go­ing to dis­cuss our clients and we don’t like our clients to dis­cuss us ei­ther. When we look at a po­ten­tial en­gage­ment we don’t want to be do­ing things that man­age­ment can do on its own or that other pro­fes­sional firms are bet­ter placed to do. If some­one comes to us, say, and just wants to save $100m from their global sup­ply chain just be­cause they feel like mak­ing more money, it is less ap­peal­ing to our team. If they want to save $100m from their sup­ply chain so they can grow their busi­ness and maybe ex­pand into new mar­kets – that’s a mis­sion we would like to ac­cept.

The past few years have seen the de­cline of the man­u­fac­tur­ing in­dus­try. What can be done?

Aus­tralia’s man­u­fac­tur­ing in­dus­try was al­ways very ad­vanced. We al­ways had very lean man­u­fac­tur­ing. I would go around plants here which would of­ten look as good as any plants around the world. But we were prob­a­bly never go­ing to be able to com­pete with some of the low­est cost coun­tries with their more re­cent in­vest­ment in new tech­nol­ogy. We need to look at the niches where Aus­tralia can lead – it will take the pri­vate sec­tor, the public sec­tor, the right ed­u­ca­tion and the right re­search and de­vel­op­ment, and in­vest­ment.

What’s the mood in cor­po­rate Aus­tralia?

I think there is more op­ti­mism than you might ex­pect look­ing at the num­bers. Peo­ple are be­gin­ning to see that there is all this dis­rup­tion. But dis­rup­tion can also be an op­por­tu­nity as much as a threat. There was a pe­riod when ev­ery­one was say­ing re­form was needed but they were look­ing to oth­ers to lead the re­form. Now I think busi­ness is recog­nis­ing that we all have to be in­volved in re­form – busi­ness, gov­ern­ment and the so­cial ser­vices sec­tor. The re­cent re­form sum­mit hosted by

The Aus­tralian and The Aus­tralian Fi­nan­cial Re­view was a ter­rific ini­tia­tive. The mood is cau­tiously op­ti­mistic but re­al­is­tic at the same time. Peo­ple know change is hard. But for them to make their busi­nesses thrive over the next 10 or 20 years they have to make changes and in­vest­ments for the long term.

What are the main traits of suc­cess­ful busi­ness lead­ers?

Our re­search has shown that great lead­ers have three qual­i­ties: cu­rios­ity, agility and op­ti­mism. I am an op­ti­mist. Win­ston Churchill once said that he was an op­ti­mist be­cause there didn’t seem to be much point in be­ing any­thing else. Cu­rios­ity, agility and op­ti­mism; we are start­ing to see a lot more of that in Aus­tralia.

“Our clients need a bit of a guide to help them see into the fu­ture, to see around corners; like a coach or a per­sonal trainer who helps them ad­just quickly.”

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