Annabelle Low, GMBA Class of 2018
McKinsey & Company Global Managing Director Dominic Barton and Tsinghua Professor Xiqing Gao jointly conclude the Leadership in a New Era course.
In its fifth season, the McKinsey Global Leadership Course is one of the Tsinghua MBA Flagship courses, taught by one of our school’s Advisory Board members, McKinsey & Company’s Global Managing Director, Dominic Barton, and Tsinghua SEM’s Professor Zhirong Duan.
The course’s objective is to develop future leaders among top students at Tsinghua through McKinsey’s unique approach. It aims to equip students with new knowledge and theories drawn from leading business practices in key functional areas, with an emphasis on building students’ capacity for problem solving with deeper insights. The course provides exposure to and interaction with distinguished business leaders for leadership development purposes, with an end goal of expanding students’ grasp of broad yet concrete leadership concepts such as leading organizational change, driving innovation, and decision-making in crisis. For the first time, this year the course had a “Lead in China” theme, which meant that the contents were further contextualized to the business environment in China while still retaining a global perspective. Another first: the course was accompanied by a digital classroom.
The response to the course was enthusiastic, with students actively participating in the robust Q&A sessions that followed each class. Some of the key takeaways from the course are as follows:
Class 1: Core Themes of Leadership: Dominic Barton, McKinsey Global Managing Partner
Mr. Barton set the frame by emphasizing that we are at the start of a unique time in history – economic power is shifting to the East and South. The world is moving faster than ever before, creating an incredible pace of change within the business world. In the new era, who a leader is (i.e., their character) matters perhaps more than what a leader does.
The next 20 years, he argued, will be some of the most disruptive and exciting our world has seen, driven by four global forces: shifting economic power, accelerating technological change, the aging population, and underpinning this all, system-wide transformation.
In 21st Century leadership, leaders will be defined by what they do and who they are. Leaders must set bold ambition. They need to anticipate the second bounce, prioritize and compartmentalize, keep a dual “telescope and microscope” perspective, and manage their energy, not their time. Meanwhile, leaders are also “Chief People Officers.” They need to possess a sense of purpose, selflessness, decisiveness, and resilience.
Mr. Barton delivers the opening lecture for the Leadership in a New Era course to a packed-out Weilum Auditorium.
Class 2: Technological Disruption: Winston Ma, Author of China’s Mobile Economy: Opportunities in the Largest and Fastest Information Consumption Boom; Alan Lau, McKinsey Senior Partner from Hong Kong Office, Leader of McKinsey Asia Digital practice
Mr. Ma and Mr. Lau shared that innovation is a must for China. They offered evidence that previous growth engines are stalling due to an aging population and lower return on assets. Innovation is also falling: it drove 40-48% of GDP from 1990-2010, but only 30% in the last five years. Digital adoption in enterprise has been lagging, which means that this could be the next big wave for Internet-driven value creation. There are many “disruption” opportunities in China – for example, Internet-driven innovation, experimentation with new business models, B2B Internet/digital applications, open innovations, and hackathons.
Class 3: Investor’s Perspective: Mark Wiseman, Senior Managing Director of BlackRock
Mr. Wiseman stressed that encouraging long-term behavior across the investment value chain is critical for success. However, he acknowledged that getting this done was easier in the past 30 years due to relatively high returns and that returns over the next 20 years could be significantly lower than long-term averages. He also shared that the asset management industry would be driven by these four key trends: rapid growth, as institutional investors, who already have an estimated $82 trillion USD in assets under management, are entrusted with a greater share of households’ wealth; changing product demand, with growth being driven by passive/ETF, multi-asset solutions and alternatives; new clients, where emerging markets account for a large share of global flows; and regulations in both mature and emerging markets that affect market structure and competitive dynamics.
Class 4: Operations: Fredrick Spalcke, Chief Procurement Officer of Royal Phillips; Karel Eloot, McKinsey Senior Partner from Shanghai Office, Leader of McKinsey Asia Operations practice
Mr. Spalcke and Mr. Eloot turned our attention to operations, reminding students that operations excellence is essential to competing today, as it can increase revenue and hugely reduce costs, directly boosting profits. This is even more important to China, where the key to success is becoming efficiency-driven, instead of growth-driven. China’s economy is at a turning point, and operational excellence is key to increasing productivity and addressing rising costs, increasing consumer expectations, and volatility.
Operations excellence comprises two dimensions – an advantageous strategic footprint and superior execution. Industry 4.0 will become increasingly important to operations as it disrupts the industrial value chain and requires companies to rethink their way of doing business. Achieving Industry 4.0 requires work on the digital operating system, management infrastructure, and ecosystem. However, despite all the hype about Industry 4.0, many companies in China feel unprepared when implementing Industry 4.0 strategies. While there is not a “one size fits all” solution, achieving Industry 4.0 still remains key.
Setting the stage for the next two sessions, Mr. Spalcke and Mr. Eloot highlighted that the most difficult part of improving operations is creating behavioral change. Experiential learning is the preferred approach for adult learning and capability building.
Class 5: Organization: Neil Anthony, Former Chief Human Resources Officer of Novartis; Mary Meaney, McKinsey Senior Partner from Paris Office, Leader of Europe, Middle East, and Africa Organization practice
Mr. Anthony and Ms. Meaney kicked off the class by sharing a few startling facts and statistics: that the world is changing faster than companies are becoming resilient; half of all companies on the S&P 500 in 2010 will be gone by 2017; 70% of all change efforts fail, and of these, 70% are due to organizational issues. As such, change requires a rigorous approach.
Using Novartis as a case study, Mr. Anthony and Ms. Meaney broke down how they managed to implement large-scale change at Novartis with McKinsey’s proven five-step approach to making change stick:
1. Aspire: Decide where the organization wants to go. Set a clear vision and compelling case for change.
2. Assess: Take an honest look at how ready the organization is to get there. Develop a rigorous, fact-based diagnostic of the organization’s performance.
3. Architect: Devise an executable strategy on what the organization needs to get there, taking into account the need to change and reinforce mindsets and behaviors.
4. Act: How do we get started? Engage all levels when implementing change.
5. Advance: Plan how to keep moving forward.
Class 6: Corporate Transformation/Restructuring: Christina Zhu, President of Fonterra Greater China; David Pralong, McKinsey Senior Partner from Sydney Office, Leader of McKinsey Strategy and Corporate Finance practice
Continuing from the previous session’s trajectory, Ms. Zhu and Mr. Pralong left us with five principles for successful turnarounds:
1. Wake up: Distress and turnaround situations are common, and denial is the norm. Acting early is beneficial and increases the likelihood of success.
2. Question everything: Companies in crisis often have many issues; managers often focus on the wrong thing with wrong conventional wisdom.
3. Aim for the “impossible”: Successful turnarounds include aggressive targets.
4. Fix the plane while staying aloft: Cash flow improvements create a “cash runway” with likely business model changes.
5. Sustain by changing mindsets: Performance management is very intense in a turnaround; changing behavior requires a change in mindset.
Class 7: Corporate Finance: Lincoln Leong Kwok-Kuen, CEO of MTR Corporation; Nicholas Leung, McKinsey Senior Partner from Beijing Office, Leader of McKinsey Greater China
Mr. Leong and Mr. Leung shared key trends in global infrastructure investment:
1. Infrastructure investment as a share of GDP is much higher in emerging markets than in developed economies.
2. China spends more on economic infrastructure annually than North America and Western Europe combined.
3. The world needs to invest $3.3 trillion USD in economic infrastructure per year through 2030 to keep pace with projected growth.
Rapid urbanization in China and other emerging markets requires investment in new forms of urban mobility. They predict that the metro, combined with bikes, cars, and walking, will form the backbone of urban mobility in dense, developed cities. Out of this arises a need to explore innovative models for funding railway projects, which require large upfront investment and considerable maintenance and asset replacement over time. Using the example of MTR Corporation, to bridge the funding gap, external social benefits need to be internalized in order to achieve financial viability for the rail operator.
Class 8: Tri-Sector Leadership – Leading in the Public, Private, and Social Sectors: Xiqing Gao, Former Vice Chairman and President of China Investment Corporation; Dominic Barton, McKinsey Global Managing Partner
Mr. Barton and Mr. Gao brought what we had learned so far together by giving insight to what it means to lead in the public, private, and social sectors. Mr. Gao expounded on the Confucius framework for leadership, which advocates leading oneself before others so that one can lead better and further. Different priorities can be developed and exercised within each sphere of influence as follows:
1. Personal character: Daily self-reflection, loyalty, trust, practice, modesty, health and energy, and virtuousness;
2. Family & community: Compassion, respect, and friendship;
3. Corporate leadership: Ruling by promoting virtues, leading by example, and governing from within; and
4. Global mindset: Peace, trust, aspiration, and sharing with the aim of achieving equality.
With those insights and a few final words of personal advice, Mr. Barton closed the eight-week Flagship course and left students to ponder and apply the course’s rich array of perspectives.