McKinsey Digital, the old BTO along with some new capabilities, is the practice within McKinsey that advises clients on everything related to information technology (the old term for digital) and everything related to the movement of data. Digital is, after all, just the movement of data in 1s and 0s.
Today we will answer a reader question about McKinsey Digital.
“Thank for the great podcasts, Michael. They have definitely piqued my interest in McKinsey outside of the strategy practice. I was always going to consider joining the strategy unit but I am now more interested in McKinsey Digital. Do you any suggestions for someone trying to join McKinsey Digital. I have a Kellogg MBA and joined Amazon as a Product Manager after graduation. The work was interesting but the salary was lower than expected and I am not fully challenged. I have followed the Digital & IT Strategy Program and that is the type of work I want to do. What should be my strategy for McKinsey Digital?”
What is McKinsey Digital?
You cannot join the McKinsey Strategy Practice as an associate. It is not possible. So it’s really a question of joining the McKinsey generalist path to Partner (includes the generalist Digital path as described below and what you refer to as the strategy practice along with operations, org design, marketing etc.) or McKinsey specialist path in Digital on an expert track.
When Dominic Barton headed McKinsey he shepherded the firm into three priorities:
Recovery & Transformation Services
If you want to know McKinsey’s current priorities just look at their website homepage.
It is not possible for a practice to get any more prominent placement than McKinsey Digital. Even Climate Change is not as important as building the next Digital Disrupter.
Digital is defined as the movement of data. That is it.
You may have wanted a more sophisticated definition but if you think about it, an App is just the movement of data between some code on your phone and a server somewhere.
Netflix is just an App pulling in a video feed (data) from an Amazon server somewhere. And Amazon is saying Thank you Netflix! as they analyze the data stream and use the insights for Amazon Prime.
As an aside, Amazon will insist they keep a Chinese wall between everything, but we all know how outsourcing ends. The outsourcer eventually learns all the secrets and builds their own products. That is after all how Taiwan, Japan, South Korea, and China developed.
Digital Strategy is figuring how to move data around and manipulate that data while creating a business model that generates profits.
McKinsey Digital is a new initiative because the whole concept of a digital strategy is new. Neither McKinsey nor anyone else knows exactly what goes into Digital and how it will evolve.
When a field is new and still evolving everyone has to take bets on where to invest. McKinsey Digital is no different.
McKinsey first had McKinsey Analytics as a standalone support function. McKinsey Solutions was also a support function. Both have been folded into McKinsey Digital in an informal alliance versus a formal reporting structure.
McKinsey Digital is both function and the loose collective
There is a formal McKinsey Digital practice and a grouping of similar skills, belonging to different parts of McKinsey that all do digital work. That latter part is the loose collective. So if you want to join McKinsey Digital, you can join McKinsey Solutions and do some digital work even though you may not formally be part of the McKinsey Digital practice where you are on a formal partner track.
You could, for example, join one of the design firms McKinsey recently acquired. And thereafter work on a digital project to redesign the digital interface for the Norwegian Tax Agency. You would be doing digital work but you are not part of the McKinsey Digital Practice.
McKinsey Digital could be reorganized tomorrow and the design teams could be placed in digital. Yet, they are part of the loose collective right now and not the formal practice. And it is fair to say there will be a few more reorganizations of McKinsey Digital until the next big theme comes alone.
We define formal practice as that part of McKinsey Digital that leads one to the formal McKinsey partner track.
I am going to assume this is the part everyone wants to join. The formal McKinsey Digital practice with the path to the formal partnership.
McKinsey is not a partnership and this helps
McKinsey, like Bain and BCG, stopped being partnerships a long time ago. If a firm is a partnership it would have an LLP at the end of its name. Like law firms.
McKinsey is an incorporated entity where the partners are directors with shares in a private company.
They have to take out a low-interest loan to buy into the shares and they receive dividends from the shares in the form of profit sharing at the end of the year.
Your power in the firm is correlated to the number of shares you own. And the amount of shares you own is largely determined by the amount of revenue you generate. Seriously smart people who join McKinsey and generate mind-blowing insights, yet cannot sell end up as Principals who do not share in the profits of the firm.
This structure is important because McKinsey can create risky practices like Recovery & Transformation Services (RTS) and ring-fence those assets and liabilities in a separate company which is wholly owned by McKinsey or a trust that manages the partners’ assets on behalf of McKinsey.
So a McKinsey Partner on the McKinsey website who indicates he/she is in RTS may be a McKinsey partner of the main firm or just a partner in the ring-fenced entity. Most clients do not know there is a difference and that is deliberate. If McKinsey brought in the RTS partners into the main share structure they would likely not make them formal partners and the RTS partner titles would reflect this lower standing.
By doing this McKinsey both ring-fences the risk and gives the RTS leaders the title of Partner, which sounds a lot better to clients than the non-partners title they would have in the formal partnership.
McKinsey Digital is the same. Some of the pieces that McKinsey assembled to build its skill in digital, apps, analytics and design are kept in these ring-fenced entities. If you join the ring-fenced entity, you are joining McKinsey but not the part you really want to join.
In other words, many of the leaders in McKinsey Digital are leaders only within their ring-fenced entity. They are not formal partners of McKinsey though they may share very similar titles.
McKinsey Digital Analogy
There was a time when Goldman Sachs had an onsite staff of caterers and cooks on their payroll. They may even have had cleaners, couriers, assistants, researchers etc on their payroll.
Let’s take an extreme example to make a very important point about how to prepare for McKinsey Digital.
Let’s assume there was a department called Goldman Sachs Catering. If Goldman Sachs Catering placed an advertisement in the Wall Street Journal asking for a Michelin Starred Chef to lead their kitchen, whom do you think would apply? It may seem obvious in this example because chefs would apply.
Would a Morgan Stanley banker apply for the role because it was at Goldman Sachs?
We can clearly see that the skills to succeed in Goldman Sachs catering as the head chef are different from the skills needed to join Goldman Sachs Investment Banking.
The name at the front of the title tells you little. It’s the name at the back of the title that tells you the most.
Bringing that back to McKinsey Digital, forget about the name at the front.
Ask yourself if you are applying for the formal Digital practice.
Ask yourself if you are applying to one of the loose collectives within the digital skills area.
So just because you see the name McKinsey in front of McKinsey Digital does not mean you always need to prepare like this is a McKinsey interview. That would be the equivalent of a chef applicant learning how to build financial models because the name Goldman Sachs appears in front of Goldman Sachs Catering.
Applying to McKinsey Digital
It goes without saying that a chef who has a Michelin star is extremely talented and quite likely wealthy. He probably owns more than one restaurant, hosts a television show, publishes books and owns a culinary empire. The point is that not being a banker at Goldman Sachs does not mean you are not successful if you are a talented person in a non-core part of that company.
But you have to be talented.
When people apply to McKinsey Digital all they see is the word McKinsey and assume there is a uniform application process, uniform interview process and uniform set of skills sought.
They assume they must be joining the McKinsey on which the brand is built.
It is far from it.
McKinsey Digital Generalist
McKinsey Digital which tends to hire MBAs from universities and is led by partners who came through the formal McKinsey path – from associate to engagement manager to associate principal to principal to director – is the part of McKinsey which follows the formal case interview process.
If this is the part you are joining then you can apply on the McKinsey website or contact the McKinsey recruiters online. It is the standard process for the generalist part of McKinsey.
And you have to be good at all types of cases since this part of McKinsey advises on the business models and efficiency. They do not build Apps, work with big data etc. If an engagement requires this work to be done, they will bring in specialists from McKinsey Digital to do the work.
You can join the generalist McKinsey Digital practice at any level but the associate level is easiest. We once had an assistant to the CEO of a Big 5 Technology Company join McKinsey Digital as an engagement manager. It is very hard to join this practice at the Director level since that requires an ability to bring in a book of business.
Unlike the generalist strategy, operations etc., practices joining at the McKinsey Digital Principal level is a little easier since there is more emphasis on technical skills versus client relationships at McKinsey Digital. That gap will close as the practice matures.
McKinsey Digital Specialist
If you are joining McKinsey Solutions or McKinsey Analytics or one of the numerous specialist firms McKinsey is acquiring and if you are working on digital issues then you are a specialist.
You may be assigned to work within or alongside a generalist team at an insurance client working on a new app for a health insurance product, but you are still a specialist. You could be helping with slides, meeting clients and even generating storyboards but you are a specialist.
How do you know you are a specialist? A specialist is someone who does approximately the same work across clients and/or sectors, and is not part of the generalist career path.
So a specialist need not just do technical work. You could be doing market surveys for digital consumers or even building specialist models to track election data. If you do approximately the same work all the time you are a specialist.
Finding opening roles for specialist roles is not easy. Each part of the McKinsey Digital loose collective will have their own recruitment pages, processes and it is not aggregated in one place. Some will test applicants with case interviews and others will ask you to code.
The offices, culture, remuneration and everything else are quite different from McKinsey even though it is all collectively called McKinsey Digital.
It’s like living in the Beverly Hills 90210 Post Office code of Beverly Hills. It has the name Beverly Hills, the TV show made it famous, you paid millions for the location and all your friends are impressed. You think you will get the Beverly Hills City treatment and services.
But it is not part of the city of Beverly Hills.
It is part of West Los Angeles and when you have a problem the LAPD arrives, usually 7 hours late and not the BHPD.
This may sound funny and irrelevant but Demi Moore almost died because of this misunderstanding.
What does this mean? Just because it has the name McKinsey in front does not mean you are joining McKinsey nor even receiving the full McKinsey experience. Some parts are part of the formal McKinsey and will receive the same experience but many are not.
Expecting the full McKinsey experience is like buying a very expensive home outside the city of Beverly Hills, but within the Beverly Hills 90210 zip code, and expecting the service offered by the city of Beverly Hills. The names may look the same but the experience is different. Can you imagine how many people have made this mistake?
When it comes to McKinsey Digital Specialists, don’t worry about what McKinsey does or wants. Focus on the firm that McKinsey acquired to build that skill and apply, and prepare to interview in the way that the acquiree used to operate. The McKinsey name means little here.
McKinsey Digital Generalist vs McKinsey Digital Specialist?
The likely next question is where should you apply and/or which is better?
The answers are surprisingly easy.
You should apply to that part of McKinsey Digital where you have both the skills to apply and the interest.
A Kellogg MBA who works as a Product Manager at Amazon is probably not going to have the skills to pass the interview let alone work with the code for cryptocurrency specialist work done by that team within McKinsey Digital. Even if the MBA had the interest, the skill is just not there.
An associate professor from Carnegie Mellon who specialize in large datasets and spacial geometry could apply to the generalist path and/or the specialist path. They have more options. What matters here is their interests and preparation to pass both the generalist case interview and specialist interview.
My view is the associate professor should bypass McKinsey completely and go work at someplace like Uber and earn 3 to 4 times anything McKinsey could offer while solving incredibly important problems to mankind like how a retro-fitted Volvo could pick up a to-go coffee order at Starbucks and deliver it before the temperature drops by more than 5%.
In terms of prestige of the McKinsey Digital name on your resume, it matters where you want to work.
In the business world, the McKinsey name will carry more weight all things being equal. But all other things are not equal
Even in the business world, there are limits. Does the Chief Engineer at Spotify think working at McKinsey Digital will make you a better full stack engineer? Or does he think someone working at Disney+ in their new App rollout will be a better full stack engineer? He will probably go with the Disney+ guy.
Yet within Spotify, another part of the business may find the McKinsey experience very valuable.
The McKinsey name is only valuable to people who find it valuable. There are large parts of the business world where it is not helpful
Yet, the difference is that when it comes to a technical skill like coding we can check your skills in real time to know if you are good. Either you can solve the problem or not? Either you can code or not?
It will take us years to know if the advice you gave a client as a McKinsey Digital generalist was any good.
So a specialist will find it easier to prove their skill. Therefore, where you worked matters slightly less.
The McKinsey Digital generalist will get away with more since it is harder to prove if a strategy worked or why it failed. They often just blame the implementation.
Rules for navigating McKinsey Digital
Here are some simple guidelines to help you.
Do you have the base skills and resume to join McKinsey Digital Specialist or McKinsey Digital Generalist? If not, either do not apply or take the time to build your resume like completing an MBA or specialist coding program.
Do you have an interest in this type of work? If not, either do not apply or see it as a temporary career point.
Do you like being a specialist at general problem solving or being a specialist at one thing and doing it all the time? If not, do not do it or see it as a staging point for more interesting work.
All that said, I can short-circuit the answer for you.
If you are on this site you are probably interested in the generalist side of McKinsey Digital and want to learn about the business side. In that case, join McKinsey Digital Generalist.
Too many people join the specialist side hoping to impress the generalists and be invited across. That is most likely never going to happen mostly because you will rarely get opportunities to do the generalist work and prove you can be a generalist.
One of our best performing coaching clients worked in an administrative support function at BCG and transitioned to a consultant role. He is the rare exception that proves the rule.
McKinsey Solutions and McKinsey Analytics are two of the fastest growing areas of McKinsey. They are broadly grouped under McKinsey Digital. I recently had lunch with a group of ex-McKinsey senior partners. They were not pleased with the rapid growth of the non-traditional areas of McKinsey like McKinsey Solutions and McKinsey Analytics.
According to them, these non-traditional areas now make up more than 50% of McKinsey in terms of headcount and are growing faster than the traditional consulting headcount and revenue.
Those partners were upset because they believed McKinsey should not sell solutions. And yet we have McKinsey Solutions.
This article is not about the different types of work and recruiting within McKinsey Solutions, McKinsey Digital McKinsey Analytics etc. The McKinsey website provides all that information and because this part of McKinsey is changing so much, it is worth checking the site often. The work is far too varied to cover in one article.
We have also found it generally easier for our clients to join this part of McKinsey.
This article looks at what McKinsey Solutions, and McKinsey Digital in general, means for McKinsey. And it answers the question everyone is indirectly asking:
Is McKinsey Solutions hurting the prestige of McKinsey?
McKinsey Solutions Parallels to Banking
There was a time when investment banking primarily meant advisory fees for mergers, acquisitions and the like. There was a time when the school you attended, your family name and your pedigree determined your access to CEOs and your ability to advise them on their financing needs. Investment banking has operated this way forever. It still does to a large degree.
Advisory investment banking is like the traditional generalist side of McKinsey.
When a strategy takes 2 months to develop, 8 months to implement and possibly 2 years to truly assess, it is hard to know if the strategy is any good when it is presented to a CEO. The CEO cannot judge the quality of the strategy with 100% certainty, but he can judge the person presenting the strategy.
The pedigree of the management consultant becomes the determining factor. His employer, school, grades, experience, family, dressing, behavior and the like.
Yet, unlike management consulting, the last time a client wanted FIRMSconsulting to get them into Investment Banking, as a backup to McKinsey, was years ago.
Today, clients want to get into PE, VC, Trading, Quantitative Desks and the like. That is if they choose finance. Tech is much bigger of a draw.
If Sex and City was remade today Carrie would be living in San Francisco and Big would be a trader at DE Shaw or a VC partner.
When traders first arrived on Wall Street they were routinely ignored, vilified and treated like second-class citizens. They were considered the illegitimate children of finance. Even though Goldman Sachs had a trader as a CEO before most investment banks, traders themselves took a long time to be seen as equals across the entire banking sector.
Traders were people who could get things done and their pedigree did not matter. Their schools did not matter. Their trades mattered.
When the results of a trade can be verified in minutes or a day, pedigree does not matter. Results are your pedigree.
Then traders started looking for an edge. And a hedge.
Goldman Sachs’ J. Aron trading arm brought in Armen Avanessians who set up their stats group. The fixed income side brought in Emanuel Derman who built one of the most famous 2-factor models in the world.
These two men were part of a vanguard that changed banking. They automated trades, found patterns and, crucially, moved the quantitative work from advising to executing trades. Before long, Goldman Sachs was powered by trading profits and trading was the new investment banking.
Every bank, hedge fund etc., has tried to replicate that success.
Why wouldn’t any financial group not want to use algorithms to find patterns the human eye could not detect and execute trades the human mind could not find and at a speed faster than any human?
And, of course, traders have bad months and years with changing legislation and markets. But that they are a force that changed banking is hard to dispute.
McKinsey Solutions & Advisory
Right now, all the acquisitions and recruits McKinsey is making tend to operate around the periphery of advisory work. They produce tools to help clients analyze data. They scan market sentiment to check brand relevance. It is a long list. Limited only by their creativity.
And yet there is demand for this work. That is why they keep growing.
The jump McKinsey Solutions, McKinsey Analytics and McKinsey Digital have to make is to figure out how to rethink McKinsey’s core advisory work versus being an add-on to advisory.
Someone in McKinsey needs to be asking how can McKinsey rethink the way they advise clients in their core management consulting work by blending in data and analytics.
This is not about automating the current approach but redesigning the current approach.
Why are hypotheses and deductive logic the only way to conduct analyses?
Management consulting has not changed much for McKinsey. There are still management consultants developing hypotheses, storyboards and conducting analyses to prove their deductive logic.
Consultants have moved to power point, excel, database models and big data tests to prove and disprove hypotheses but the underlying approach is still the same. A consultant from the 1980s would recognize all the steps used today even if the tools have changed.
This is similar to traders in banking.
Traders used to sell bonds based on their gut knowledge and past experience.
Some moved to slide rules and eventually started using calculators.
Derman came along and developed a set of equations to predict prices.
Eventually, the bank began automating trades.
The core trading function had been changed.
McKinsey Solutions, McKinsey Analytics and McKinsey Digital will eventually figure out a way to change the advisory process.
Right now, there is incredible resistance to this change. Many McKinsey partners in the generalist side will quit as the change happens. I know some who did this. That is normal.
Many partners quit when banks began bringing in quants and automating functions. People always quit when change occurs. They resist it.
McKinsey Solutions will have to do it. If they do not, someone else will. BCG, Deloitte, Accenture have all gone down this path and, to be fair, some of them are farther along the journey.
McKinsey Solutions: Profits & Prestige
Every time change begins it is human nature to say a few things:
I don’t see how it can happen.
It will never happen.
Clients value personal human interaction.
Computers cannot replace judgement.
This is too complex to be automated.
In fact, those partners believe to succeed they need to be better at speaking to clients and understanding their needs. They will double down on improving the way they engage clients.
Taking better care of a horse and breeding better horses did not stop the automobiles.
This is a structural shift and it is happening and McKinsey is not the leader in this space. Yet, they are doing the right things by investing to figure out how to make it work and since no one has figured it out, they have as much chance of setting the standard as anyone else.
The mistake is to assume that McKinsey Solutions, McKinsey Analytics and McKinsey Digital will always be an arm of McKinsey. If they figure out how to bring data to the consulting side and even digitize the actual consulting process, the whole of McKinsey becomes digital.
That is not to say that there will be no strategy consulting. It just means it will be done in a different way. Just like spreadsheets did not make consultants obsolete, it did change the way consulting is done.
McKinsey Solutions will not be asked to play such a central role in consulting. McKinsey Solutions will become part of McKinsey’s DNA.
As McKinsey Solutions grows in size and brings in more profits, all partners will make decisions that cater to their needs since the partner profit distributions are heavily dependent on the success of McKinsey Solutions.
No one bites the hand that consistently feeds them. At the end of the day that will be the only thing that will matter.
McKinsey may turn away profits on one study, but no one is going to turn away a structural change in profits.
As McKinsey Solutions keeps growing, eventually a partner from McKinsey Solutions will be nominated to run the Firm. People have always thought of something wealthy and profitable as being prestigious. This will be no different.
McKinsey Solutions will be prestigious because in the future there will be no McKinsey Solutions nor McKinsey Digital.
It will just be McKinsey advising in a new way powered by the principals of Digital, Solutions and Analysis. It will all be blended.
McKinsey Solutions & Your Career
If you are considering McKinsey on the generalist side, McKinsey Digital and/or McKinsey Solutions, in the long term it will not matter. McKinsey is already a majority-minority firm. The generalists are a minority in terms of headcount and if the hiring trends continue they will be a smaller and smaller minority in headcount. Like anything in life the implications will take time to show through.
The generalists will argue this is not true. They have the relationships. They have the power. They run the executive committees.
What matters are the trends. And the trends show a shift in power. And the shift is not the generalists being displaced but a change in the way the generalist work is done.
McKinsey is not becoming less prestigious by going this route. This is what they need to do to survive.
Yes, it is true we do not have any idea how to yet blend digital, solutions and the like to rethink management consulting, but that does not mean someone will not figure it out.
It is hard to imagine so much can be digitized and automated but strategy consulting is the one thing that is immune to change.
So, join McKinsey Solutions, McKinsey Analytics or McKinsey Digital. In a few years it will most likely be McKinsey. And if you do a great job you will be one of the partners who reinvented management consulting.
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