McKinsey & Company - Southern Office - How We Work

The Client
The client is a Southeastern retail chain with hundreds of locations. Historically, they’ve been very profitable, but the CEO has seen his company’s customer loyalty and brand perception erode as the retail landscape has gotten more competitive. Having worked with McKinsey on a number of cost reduction problems in the past, the CEO contacts Tim, a McKinsey partner with extensive retail expertise, for his advice. After discussing the issues, Tim and the CEO determine that the best course of action is a renewal of the company’s retail format. McKinsey is engaged and Tim pulls together a team.

The Team Players


Jason		Jonathan		Niall		Susan

Jason is the engagement manager. He’s in charge of leading the team on a day-to-day basis. He structures and facilitates problem solving, as well as helping team members develop professionally—and maintain manageable lifestyles.

Jonathan is a second-year associate. He returned to McKinsey after completing an M.B.A. program last year. Prior to business school, he spent three years at the firm as a business analyst, gaining exposure to many industries and functions. His interests now lie in retail marketing, where he focused much of his attention in graduate school.

Niall is also a second-year associate. He joined McKinsey last year after graduate school. Niall is already building his expertise in the retail sector, having worked with several clients in the industry on a variety of issues, including format renewal.

Susan is a first-year associate dedicated to McKinsey’s operations practice. She has extensive work experience and is an expert in lean operations. In fact, she ran her own independent consulting firm before joining McKinsey.

In addition to this day-to-day group, several other McKinsey people will be involved in building the best solution for the client.

Karen, an expert in lean retail operations from Toronto, offers extensive experience in the client’s sliver of the retail sector.
Andrew, a principal in Chicago, will help work through the tricky pricing and promotional aspects of the problem.
Ian, an expert in Cleveland, will assist with any supply chain issues that arise.
Lee, a human resources manager in Atlanta, will guide the McKinsey team in team learning exercises, where they share development goals, lifestyle needs, working norms, and general thoughts about how to perform best as a group.

Client Resources
There are several fully-dedicated client resources on this engagement, a fact that highlights its strategic importance to the company. The client team is led by Mike, a director with extensive cross-functional experience. He is joined by John from operations, Joan from category management, Steve from finance, and Barbara from pricing.

In addition, the team meets regularly with Matt, the project champion and Chief Marketing Officer. Matt also brings the team together every four weeks with a steering committee made up of the CEO and his 10 direct reports. These meetings keep the senior team abreast of the team’s progress and provide an opportunity to get feedback related to key decisions.

Digging In
Building a new retail format is a difficult strategic problem, with innumerable moving parts and interdependent issues. Jason leans on the expertise of the partners and his own retail experience to ensure that the team meets its objective.

Jonathan leads the consumer-based work, including key areas such as the development of the value proposition and branding the concept. He also guides the client in creating a management structure for the new format.

Niall uses his strong analytical skills to determine which products and brands will be offered in the new format, and at what price. Susan draws on her experience in the manufacturing environment to help deliver the best solutions in the store operations work stream.

Driving Impact
The McKinsey team develops a portfolio of potential formats targeted to different segments of the client’s customer base, and three options are identified as promising. Due to limited internal resources, the client decides to go ahead with just one of the three concepts initially. When the first pilot plan proves successful, leading to a 50 percent increase in store sales, the client decides to develop the second concept into a pilot as well.

One of the team’s main goals is to build a pilot that creates a learning environment for the client. Retailers have generally been slow to embrace a segmented approach to customers, so this is new territory for the client. Finding out how to create strong brand loyalty with one segment of the customer base will be invaluable as the competitive landscape intensifies. Through this engagement, McKinsey has outlined a plan for the client to capture this information as well as how to adapt the concept based on the results. In the end, the solution and its success belong to the client, but ownership for the success of the organization belongs to both of us. After all, that third concept in the portfolio is right around the corner.

Tim and Jason remain in regular contact with the client. The first pilot store is scheduled for a “10,000 mile checkup” soon, and the second pilot store will be completed in early 2005. The McKinsey team is still working hard to help the client push these new formats above and beyond the goal line.