At the end of 2023, the final McKinsey Talks Operations podcast of the year concluded that there was no such thing as normal for operations leaders. Looking back on the 12 months since then, it seems the sentiment holds true—both everything and nothing has changed. In this episode, hosts Christian Johnson and Daphne Luchtenberg reflect on four recurring themes from their discussions with McKinsey experts and industry guests: building resilient operations ecosystems, decarbonizing operations, winning with talent, and tech-enabling operations with digital and generative AI.
Christian Johnson: It’s been an exciting year for us. We brought together the best of the McKinsey’s Operations Practice blogs, events, and videos—as well as the podcast that started it all—under the same McKinsey Talks Operations name.
Daphne Luchtenberg: And recently, we launched a LinkedIn newsletter to bring you even more great content. There are so many ways to access our insights and join the conversation.
As the year draws to a close, we’re continuing our annual tradition by looking back at some highlights from 2024. We brought you four broad themes in the last 12 months: building resilient operations ecosystems, decarbonizing operations, ways that organizations can win with talent, and, of course, tech-enabling operations with digital and finding ways to introduce gen AI into the mix.
Christian Johnson: That’s where we’re going first. At the beginning of the year, we talked about new gen AI use cases and where we thought gen AI had the potential to add value. Let’s hear from McKinsey’s Marie El Hoyek and Nicolai Müller.
Nicolai Müller: I think it’s a question that clients have to ask themselves: What impact do I want to achieve? In the end, we have to solve one big question and challenge: how to increase productivity, which involves efficiency and effectiveness.
When we look into use cases, we try to explore different angles. One is the question of automation. Things that currently take hours can be done in seconds. But it’s also about augmentation, where a human may only be able to work with a certain set of data. Imagine being able to access all the data in the world that exist. This was one of the big revolutions; the internet gave us access to all data. Now, with machines, we can use and synthesize that data. So we talk about augmentation. And then we see innovation.
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Innovation is the capacity to come up with completely new solutions. Not just making an existing product cheaper or achieving faster product development, but now generating completely new ideas for features and services. So, what have we seen? Automation. I talked about how I’m fascinated by what we can now do in software coding and the whole field of engineering.
You also heard, for example, the CEO of Nvidia saying, “Hey, the era of software is over. I think we told all our kids to learn software; now you figure out software can be done by a machine.” It’s a huge evolution that we see, but not only in software—it’s also in parts and hardware development. Synthesizing a huge amount of requirements that your customer gives to you, and then asking generative AI to understand what the requirements are and how the requirements differ from the last product. How do the requirements vary between products? Are they similar or different? It will help to come to a better synthesis, better understanding of the requirement, and develop faster and better products.
In augmentation in pharma and research, I think we’ll see a humongous increase in effectiveness, output, and research. We have cases in pharma where you can imagine understanding each little molecule, what kind of effect it has, and how it reacts with other molecules. It’s something that is instrumental. So we see vaccines or other pharma products being developed faster than traditionally was expected by using generative AI. This augmentation leads to a better kind of solution.
As for innovation, you may have also seen one famous German OEM in the US that has integrated ChatGPT into its products. You can interact and speak with your car. This is innovation. But, Marie, you have also worked with me in this space. What have you seen?
Marie El Hoyek: My background is in industrials, very much deep in operations. Personally, I love all the copilot applications, especially in procurement. The idea that you can ask a friend who knows all your contracts and can answer any question by heart and in plain English is just mind-blowing to me. Instead of analyzing old contracts, price history, and external trends, I can simply ask the questions. I’m sure there are many more cool applications in terms of content generation, et cetera, but this one, in particular, blew my mind.
Daphne Luchtenberg: Marie recently presented at the Gartner CIO Symposium in Barcelona, and it was clear from her keynote that even in the past ten months, things have moved quickly.
Christian Johnson: As the year has gone on, we’ve seen rapid development of use cases, particularly in customer care, and we expect this to continue with the rise of agentic AI.
Daphne Luchtenberg: That’s a big word, CJ. Can you talk about what that means?
Christian Johnson: Agentic AI refers to a new form of AI that can start to act on its own as an agent, or as some of our colleagues have described it, a skilled virtual coworker. Here’s an excerpt from a conversation with McKinsey partners Brian Blackader and Eric Buesing on the topic.
Eric Buesing: The concept of speech-to-text isn’t new; organizations have been recording conversations for years. However, there’s been a shift in expectations regarding the quality of insights derived from these recordings, moving toward what’s now often referred to as conversational or voice intelligence. This advancement is crucial as it helps organizations explore the root causes of customer calls.
Generative AI plays a significant role here, particularly with the concept of multi-intent. This means recognizing that customer calls are complex and cannot be simply categorized as, for example, a “billing call” or a “policy inquiry.” Conversational intelligence enables organizations to understand the multiple reasons behind a customer’s call, which in turn helps in resolving issues more effectively and proactively sharing information across the organization to prevent future frustrations.
There’s potential to use customer care data beyond traditional confines, such as for improving product design or service delivery to reduce customer friction. This approach involves leveraging voice data more strategically than just for compliance and quality assurance.
Brian Blackader: Adding to Eric’s point, while many discuss using these insights for training models, the reality is that many organizations still have a basic understanding of why customers call. Often, the primary reason logged is simply the first option an agent selects from a drop-down menu. It’s vital to understand not just the primary reason for a call but also the second-, third-, fourth-, or fifth-level intent. This understanding is crucial for two reasons: it helps address root causes throughout the organization and enables more targeted training for agents on specific recurring issues, rather than a general overview of a category like billing. We can really be specific on the issue that they’re struggling with.
Daphne Luchtenberg: I really enjoyed that episode, particularly the way it looked at how Gen Z is engaging with contact centers in ways that might surprise us. Who knew they’d be so keen to pick up the phone for an actual live conversation?
Christian Johnson: This is true in my own family. My 17-year-old niece told me that for her and her peers, the phone is for serious conversations. If she’s not happy about something, that’s her go-to channel. I found it fascinating to see that this is playing out in real life—it’s not just something that our consultants are finding.
Moving on for a moment, AI and gen AI were key topics at the inaugural North America Research and Development Leaders Forum. Chief technology officers of several companies took to the stage, sparking vigorous conversation among 40 industry leaders on topics such as AI-driven innovation, accelerating product development, governance, and operating model selection.
Daphne Luchtenberg: It’s wonderful to bring people together in person again to discuss these complex problems. There were a number of key takeaways that we outlined in a blog post that followed this event.
Christian Johnson: What really struck me from that discussion, Daphne, is the idea that a day in the life of an engineer will soon look very different.
That brings us to the next topic, which is winning with talent. Ever since the COVID-19 pandemic, challenges with workforce availability—particularly in frontline operations, as we talked about in another blog post—have been making news. Several years on, there are still challenges in recruiting and retaining talent. McKinsey partner Julian Salguero framed the problem in an episode in July.
Julian Salguero: There’s a significant shortfall in the US labor market. Companies are struggling to fill roles, leading to shortages and operational challenges. Meeting customer demand is becoming increasingly difficult. Moreover, about one-third of manufacturing employees are considering leaving their jobs within the next three to six months. This issue is critical and demands attention at the CEO level. In my experience, clients have observed a 25 percent increase in throughput at sites where employee tenure is four times longer than at others, highlighting the performance benefits of workforce stability.
The pandemic exacerbated these challenges, but it’s not an excuse. The shift in workforce demographics was anticipated, though the speed at which it occurred during the pandemic was unexpected. Workers with over 35 years of experience are naturally starting to seek more flexibility, while newcomers are still learning their roles. These different generations have varying needs and levels of expertise that must be addressed.
Daphne Luchtenberg: In the same episode, Lindsay DeVagno, vice president of HR at Keurig Dr Pepper (KDP), talked about how this played out at KDP. It’s so interesting to hear about the impact of the pandemic on frontline workforces and the strategies they deploy to overcome talent shortages in the short and long term.
Lindsay DeVagno: I vividly remember a call in early January 2022 from one of our operations leaders. He said, “We can’t meet demand. This is a crisis, and it’s a people problem.” That conversation was a turning point. It provided a unique opportunity to engage regularly with our executive leadership and operations leaders in a way we hadn’t before, specifically focusing on our frontline employees. You need a clear business reason to initiate such discussions. Then, as you mentioned, it’s crucial to quantify the people-related issues. In frontline operations, the cost of people challenges essentially becomes the cost of doing business. So, how do you demonstrate that?
The first step we took was to listen extensively. We conducted roundtables and surveys to understand the root causes from our frontline employees. Simultaneously, we knew we had to stop the bleeding. If we didn’t have enough staff to operate our machinery and serve our customers, we couldn’t address longer-term issues. We started by quantifying the cost of lost sales and comparing it to the cost of investing in people to provide temporary surge labor. We also knew we needed to invest in upskilling our supervisors and in technology that would allow us to explore schedule flexibility, which we hadn’t considered for our frontline before.
Christian Johnson: Flexibility seems like a tough topic to explore in the frontline workforce, so I particularly enjoyed hearing about KDP’s success in that episode.
Lindsay DeVagno: This project is probably one of the most enjoyable ones we’ve worked on and continue to develop. When we returned to work, the concept of hybrid work was popular, and people embraced it. Initially, we thought too narrowly and assumed that such flexibility couldn’t apply to our frontline workers due to the nature of their work. However, listening to our frontline employees, we realized we needed to challenge this convention and think differently about how to make it feasible.
This shift from a mindset of “no, we can’t” to “how can we?” was a significant breakthrough for us. In terms of implementing flexibility for frontline workers, particularly regarding shift patterns, it required us to bring the operations team on board and engage in extensive change management. We began by exploring how we could test this concept. Our first step involved a market scan, leading to the purchase of an app that allowed frontline workers to swap shifts with each other. For example, if I needed to attend my child’s soccer game and was scheduled to work, I could easily swap shifts with someone. The app was user-friendly and intuitive, and employees appreciated the ability to adjust their schedules as needed.
Daphne Luchtenberg: This talent issue isn’t limited to manufacturing in the US. Recent reports from the McKinsey Global Institute underscore that demographic change has made talent a global issue, affecting advanced economies across almost every sector. That means it’s even more important for businesses to develop workers through training them. When you develop skills through structured programs, as well as give people the space to try new things and explore the art of the possible, real magic happens.
Christian Johnson: Engaging people and building their confidence is so critical to winning with talent. That’s why I particularly enjoyed this discussion on the topic of failing safe with Amy Radermacher from McKinsey’s Innovation & Learning Centers and Markus Hammer, our director of learning.
Markus Hammer: It’s the mindset of curiosity and continuous improvement. We’ve seen this a lot in our global training sessions and in our Innovation & Learning Centers. What truly enables all of this is the psychologically safe environment and the trust among team members. Also, as we transition to a more skill-centric world, developing leadership and problem-solving skills alongside operational expertise becomes even more critical for fostering innovation.
Daphne Luchtenberg: What I really liked from this conversation was the idea from Amy Radermacher that learning can be fun and empowering if it’s done in a safe environment.
Amy Radermacher: It’s not only about having fun and enjoying the process, but it also adds an element of excitement and enjoyment to the overall transformation the company is undergoing. Getting workers on board and motivated to make the necessary changes is incredibly important. So, that element of fun really drives things forward.
One last thing I’d like to mention is about stepping beyond skill building. One of the really neat and powerful aspects of capability centers is that for the teams and individuals who go through them, it serves as a shared reference point that helps build the glue between the team and individuals, even within the network. This cohesion is incredibly important for helping the transformation and ensuring the organization-wide new innovation approach sticks for the long run.
Christian Johnson: Labor availability has been challenging throughout the past 12 months, and organizations are working hard to mitigate it. In addition to building resilience through talent, companies need to build resilience against things like geopolitical and climate-related events.
Daphne Luchtenberg: At the beginning of the year, there was plenty of press coverage about how shipping disruptions were impacting companies around the world. In fact, we published a blog on the topic with a simple question as the opening line: “Can’t our supply chain just have a normal year?”
It offered advice on building resilience against increasingly frequent supply chain shocks, saying that it’s important for leaders to prepare by developing an understanding of their operations and the world in which they’re operating. They should establish an insights edge, with a granular view of their company, peers, other elements of the value chain, and the broader global context. In combination, those insights will give them a competitive advantage.
Christian Johnson: Of course, there is no normal now—that’s the answer to the question the blog posed—but there are lots of opportunities to build resilience. Gen AI and workforce planning are two routes into that, but regardless of the route a company chooses, they all lead to one fundamental destination—next-generation operational excellence.
We recorded an episode on that topic in 2023, and we followed it up this year with a fascinating, just-published episode in which the CEO of Minsur, a global mining company based in Peru, shared some insights into how the company is pursuing next-gen operational excellence and resilience.
Daphne Luchtenberg: While we’ve talked a lot about the theory, it’s great to hear more about how it works in practice and the successes companies can enjoy when they get it right. Here’s Minsur’s CEO Juan Luis Kruger talking about building an empowered workforce.
Juan Luis Kruger: The most important thing is that we have an organization today that doesn’t fear new challenges. We have moved to a culture where we all aspire to do more. Once we achieve a goal, we immediately start looking for the next goal, because we all know that whatever we think we can achieve is achievable. Today, it’s an organization that has been really empowered. We have a group of people who feel very proud of what they have achieved. And it’s not the boss who told them what to do; it was they who ran this process of change, who knew the changes that needed to happen. In the past, they were not being heard or taken into account.
Christian Johnson: It was such a pleasure to record that episode with Minsur.
Now, the last topic we want to highlight is sustainability and the need for companies to continue to focus on decarbonizing their operations. We covered the topic of decarbonization regulation in a blog post published this year on the launch of the EU’s Carbon Border Adjustment Mechanism. That post talked about the opportunities available to companies that are proactive in pursuing carbon reduction.
Daphne Luchtenberg: It’s clear that regulation is going to play a big part here, but there’s also room for innovation. That’s why one element of sustainability that I’d like to dive into is this idea of the circular economy and how procurement can support that. Dominique Lebigot of LVMH set that out in a recent episode.
Dominique Lebigot: We all know the business stakes of global warming and CO2 reduction, and we cannot ignore it any longer. We know that we can create value in those areas as well, not only through the customers and sales but also in the image that we can create for the company. Tomorrow, the major change for buyers in procurement is that we are going to start relocalizing most of our sources. We are going to reduce international sourcing year on year, avoiding more and more the international movement of goods and travel and generation of carbon footprints.
If we do relocalize and reshore our sourcing in the local economy—and we will—this will be more expensive. We know that labor costs are higher, and regulations are getting more restrictive and demanding. The only way for us to create these two realities—reducing carbon footprints and generating profit—is to organize the circular economy. In the past 200 years, the economy has been built linearly. You extract material, you transform it, you manufacture a product, you sell it, you consume it, and then, it’s garbage. We have been so poor at managing the garbage and ignoring that fact for so many years.
Today, we know that we can no longer live with that linear economic concept. We have to put our collective intelligence into organizing the circular economy—selling services and functions, not products, and then recycling, reusing, and reintroducing those products. It’s the only way to optimize and get a return on investment for manufactured products as soon as possible—limit extraction, and then reduce the overall cost.
Daphne Luchtenberg: If you’d like to see Dominique Lebigot in conversation with one of our partners, you can catch them on a recently published video.
I’d like to close this with our episode on the Global Lighthouse Network, which brings these four topics neatly together: gen AI, workforces, resilience, and sustainability. I encourage you to listen to the full episode, as there’s so much great content there.
Christian Johnson: It was so great to hear senior partner Enno de Boer talking to Kiva Allgood from the World Economic Forum and Jackie Jung from Western Digital about how they think operations jobs are the best in the world.
Kiva Allgood: For me, the most inspiring thing about the Global Lighthouse Network is exactly what Jackie mentioned: the fact that it is bringing technology to the factory for operational excellence. Having spent almost 30 years in supply chain and operational roles, I’ve seen that when you’re trying to motivate and encourage someone on the shop floor to do something differently, there has to be purpose and a focus on operational excellence. But it starts with the people.
One of the key things we’ve learned from the 700 different use cases we’ve explored across all of the different Lighthouses is that without leadership and the people component, you can’t drive that transformation. Often, it’s not about the technology; it’s about people’s willingness to examine a problem statement, think it through from an operational excellence perspective, and find a new way forward.
Jackie Jung: I want to echo Kiva’s point about people. People are the most important asset of the company, and Enno says that we get to develop technology. Most of our solutions are developed by our own people, for our own people, and with our own people. There are many opportunities for young people. Gen Z is particularly interested in technology and making a societal impact. More important, they want to maintain flexibility in their lives. Technologies such as robotics, AI, machine learning, IT sensors, and simulation are driving manufacturing toward autonomy.
Kiva Allgood: We’ve recently published an article on the facts and fiction of who’s doing what. One of the key points is that, especially for Gen Z, they are already digitally native. We had to go through this process of pilot purgatory and try to convince people to go digital. Now people are digital; they’re walking onto the factory floor. I have two kids in their 20s who just graduated from college and actually work on the factory floor. For them, it lacks that digital connection. They’ve grown up with it; they’ve never not had a cell phone. I grew up using a party line on a farm.
So, I think really trying to attract that community means that the technology on the floor has to change too; otherwise, it won’t be a job they are interested in doing. I think that’s the pressure we’re facing right now. It’s not just about how to keep the people we have but how to attract and retain folks who are digitally native, which means we have to talk about the noble work we do. Jackie’s job is probably one of the most exciting in the world. She gets to build things every single day. She gets to help save the planet. She figures out how to save water and energy. Not many jobs allow you to do that.
Enno de Boer: I like the point, Kiva, that you’re making about Jackie having the coolest job on the planet. All our Lighthouses have the coolest jobs. If you think about it, where else can you find a job that involves artificial intelligence, automation, 3D printing, IoT [Internet of Things], and all these technologies—ten to 15 very different technologies—coming together to make an impact? You need to create something out of this. That is the coolest job on the planet. So, to the young generation, hear my words: get ready. If you want to work in cool tech, come to the shop floor. This is the place to be in the future.
Daphne Luchtenberg: The coolest job in the world? Sounds great!
Christian Johnson: Although, I think our jobs come pretty close, getting to explore so much great content and talk about the great things we’re seeing in operations.
