This week, taking the long view on China’s changing relationship with the world. Plus, why innovation is a team sport, and Dan Lovallo, a McKinsey senior adviser, on what rock bands teach us about how to collaborate in business. (All you need is love?) |
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Statistics show that China’s economic engine is cooling down. Yet the country is still firing up one of the fastest rates of economic growth in the world. For instance, this year China will add the equivalent of the entire Australian economy to its GDP. China and the world: Inside the dynamics of a changing relationship, a new report from the McKinsey Global Institute, takes an in-depth look at this crucial moment. |
The world’s relative exposure to China has increased, while China’s to the world has fallen. A great deal of value is at stake depending on whether there is more or less engagement in critical areas such as digital and technology, trade, and the environment. |
Recent global tensions aside, a quick snapshot shows opportunity abounds across many sectors. Luxury goods, for instance, represent a powerful form of social capital for young Chinese consumers, but winning in this segment requires that companies adopt a savvy, customer-first mentality. |
From autonomous vehicles to biopharma to chemicals, industries looking to grow are making China central to their strategy. Masahiko Uotani, CEO of Shiseido, is one leader who has readily embraced Chinese consumers. Shiseido’s new strategic partnership with Alibaba shows that China will serve as the engine for the iconic Japanese cosmetics brand’s growth. Likewise, Rebecca Wei, chair of Christie’s Asia, told us how the 253-year-old auction house is betting on the Chinese art market as a source of growth. |
A tectonic shift is occurring in global asset management as the world’s largest fund managers seek to muscle in on China’s long-shielded financial markets. Last year, Chinese regulators gave the green light for overseas financial companies to establish wholly owned entities or take majority stakes in joint ventures, opening the door for multinational companies to compete on a level playing field with domestic incumbents. |
In these dynamic times for asset managers in Greater China, McKinsey spoke with Cheng Hye Cheah, co-chairman and co-chief investment officer of Value Partners, Hong Kong’s longest-standing listed asset manager. He offered a measured perspective on an industry he has been a part of for more than 30 years. |
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OFF THE CHARTS |
Sustainability reporting: A values approach |
As evidence mounts that the financial performance of companies corresponds to how well they contend with environmental, social, governance, and other nonfinancial matters, more investors want to know whether executives are running their businesses with such issues in mind. Investors and executives both say that reducing the number of sustainability reporting standards would be beneficial—and even that there should be legal mandates for reporting. |
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INTERVIEW |
A billion glasses of milk |
Since its first milk bottle appeared on Shanghai supermarket shelves just six years ago, the New Zealand–based Fonterra brand has become the leader in imported milk in China. Its China portfolio now spans almost 50 products, available across more than 13,000 stores—and the landmark sale of its billionth glass of milk in the country is fast approaching. Christina Zhu, Fonterra’s president for Greater China, talked to McKinsey about leading organizational change and a digital transformation. |
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MORE ON MCKINSEY.COM |
Innovation is a team sport | In this podcast, McKinsey experts discuss the challenges leaders face in identifying the right combination of players within their organization—those capable of developing winning products and taking them to market. |
The Internet of Things goes mainstream | The share of businesses that use IoT technologies has increased from 13 percent in 2014 to about 25 percent today. Maturing underlying technologies are helping companies and investors seize new opportunities. |
A quantum leap for chemicals | The chemical industry is poised to be an early beneficiary of quantum computing’s vastly expanded modeling and computational capabilities. Companies must act now to capture those benefits. |
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ESSAY
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Shiny happy (collaborating) people |
Dan Lovallo, a professor of business strategy at the University of Sydney and a senior adviser to McKinsey, helps executives make better strategy and investment decisions. In a recent conversation, he shared his thoughts on the “right” way to collaborate. What better model than rock ‘n’ roll?
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The members of R.E.M., one of my favorite bands, once shared their songwriting process, which was basically three steps: Bill Berry (drummer), Peter Buck (string instruments), and Mike Mills (keyboards) wrote the music. Lead singer Michael Stipe wrote accompanying lyrics based on how the music inspired him. The band members then gathered in a rehearsal room to try everything live and provide feedback, which at that point was focused on relatively minor points—the tweak of a word or phrase, or a chord change, perhaps. |
By contrast, The Eagles, a band from an earlier rock era, featured numerous song writers, including Don Henley, Glen Frey, Joe Walsh, and Randy Meisner. They worked in various songwriting combos—from writing alone to everyone pitching in. |
Meanwhile, Trent Reznor was Nine Inch Nails: he wrote every lyric and played every instrument on his debut album and worked with touring musicians only to recreate the songs live. |
Three bands, three very different paths to creativity and collaboration. But, as I’ve learned in my own work, it really pays to understand exactly which path you’re on. How do you like to manage interactions with colleagues and clients? And, more importantly, how do colleagues and clients like to collaborate? In our role, we need to be flexible, but the key is to tailor our way of working in specific situations. |
As an academic, I’ve had the great fortune to write about a dozen papers with Nobel Laureate Daniel Kahneman and MacArthur Fellow Colin Camerer. Each has his own preferred way of working, so I’ve had to adjust my approach accordingly. Kahneman likes to work with one coauthor (although he occasionally writes with more authors or alone). He is forever editing his words; two recent papers we worked on, neither more than 7,000 words, each took more than two years to develop. |
Why? The dozen or more times I thought we were finished, Danny had other ideas, changing his mind about the theory or other elements of the manuscript. I don’t think we have ever written a paper in less than two years. By contrast, Camerer is comfortable writing alone or with any number of coauthors, and his process is almost as fixed as a German train schedule: once a section is written, it is largely done. |
When I asked Danny about his process, he said he enjoyed changing his mind because he felt like he was learning something new every time. “Even when you change your mind back again?” I asked. Without hesitation he said, “Yes.” |
Thinking more broadly about these rules of interaction, I realize they are critical in today’s business environment, in which employees are now empowered to become “process owners” and former competitors are now business partners. We’re all in the matrix now. There are multiple paths toward collaboration, and it’s incumbent upon all of us to identify which road we’re on and set everyone’s expectations appropriately. |
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BACKTALK |
Have feedback or other ideas? We’d love to hear from you. |
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