Interview“A mess is great if you want to innovate, but it undermines the ability to become truly big”
Interview
“A mess is great if you want to innovate, but it undermines the ability to become truly big”
After gaining experience in security consulting and in the health industry, David Chinn, Managing Partner at McKinsey Israel, has his sights set on the local high-tech industry with new methods and pricing that suits startup budgets
The Whisperer to Corporations: McKinsey & Company is the first name that comes to mind when discussing corporate re-organization processes, at least in Israel. The global firm operates a local Israeli branch that, while having already worked with most of the country’s largest corporations, has also from time to time made less flattering headlines, such as in the case of the Israeli consumers’ cottage cheese boycott, when it advised Tnuva to raise its prices. McKinsey’s local managers tend to stay out of the limelight, maybe in line with the firm’s global policy, but in the framework of the firm’s intention to enter the high-tech industry and advise corporations during various stages of their development, David Chinn, McKinsey Israel’s Managing Partner has made an exception to the rule.
McKinsey is commissioned by CEOs or Directors to lead organizational changes or to provide ongoing consulting services, mainly for large corporations. The firm, established in 1926, launched its Israeli branch about two decades ago, and during its first years of operation it worked mainly with government ministries and traditional industries – a strategy that Chinn is currently attempting to change. Chinn (55), immigrated to Israel three times.
The first time was when he was 22 and joined the IDF as a lone soldier. He met Nili, a young Israeli woman from Rehovot, whom he later married. Years later his son also enlisted as a lone soldier and served as an officer in the IDF’s Paratroopers Brigade. Chinn has been with McKinsey since 1996, with a 2-year break from 1999 during which he worked at Credit Suisse where he took part in an attempt to establish a digital bank. In 2002 he returned to McKinsey to lead the firm’s Security and Cyber departments and later also the Public sector and health organizations areas in Europe – a position that he also held during the Covid-19 pandemic.
Defending ourselves from a cyber attack begins with overcoming our internal mess
"I worked with military organizations in dozens of countries, and I am apparently the only Private that is a consultant to Chiefs of Staff and Ministers of Defense," Chinn told Calcalist. As to his management of the firm’s public sector and health areas in Europe in 2019 he says: “It happened at a wonderful timing, as we all know what happened in 2020. Throughout that entire year I sat at home and managed the work around Covid-19 with governments across Europe. Governments were assisted by firms like ours, who are used to working quickly in uncertain situations. At the end of this year I was offered to move and manage the office here in Israel. I realized that this is my chance to make my Zionist dream a reality by returning to Israel.”
During your career you jumped between fields and geographic areas. This may be an advantage in terms of diversification and perspective taking, but isn't it sometimes better for a consultant to specialize in a specific area over time?
“It suits my nature and that of the firm. My strong expertise is in helping senior managers navigate complex systems, whether at mega-organizations, governments, militaries, or complex market ecosystems. When you examine ways for protecting a company from cyber attacks, the first thing you need to do is cope with the internal mess. All the perpetrator needs is a small puncture, so beyond the technological challenges there are also heavy organizational ones. It is important to also remember that cyber came to the civil world from the military one, so that what I have done in the past and what I am doing now are certainly connected, even if from afar it seems that I have made great leaps. As to my career at McKinsey Israel, I was here shortly before we opened the office. I worked with clients, and used to arrive here on flights with only a carry-on bag. I was part of the office here, and now I came back as its Managing Partner.”
And yet, it is difficult to specialize in a new area every time.
“There are areas I know well. For instance, in the field of management in the military world and in security industries I have 15 years of experience. Beyond that, consulting to CEOs requires an expertise in itself, which is acquired over the years. It is true that new areas must be learned, but in a large firm such as ours we have experts in every field, some of whom came from the industry. I learn so as to remain relevant, but next to me or in front of me there is someone at McKinsey who has been dealing with the topic for 10 years and more.
“The case of the Israeli office is interesting. We Israelis have a special nature and a specific culture – on the one hand we want to speak Hebrew, but on the other hand we want to have international knowledge. Our method integrates between a high quality local team and the ability to adjust our work methods. In Israel everything is straightforward and fast, but here, through McKinsey, a customer can get the most advanced management methods in the world and an in-depth knowledge of the industry, translated into a local culture and recommendations that are relevant for Israeli society. Working with some of the largest corporations in the market is different from working with startups, and we make that leap. We have offices in 50 countries around the world, not because the expertise exists in each country, but because our customers need a local interface that is culturally, linguistically and commercially suited to their needs.”
Is the Israeli manager different from the European one?
“First of all, there is no uniform European manager — there is no relation between the German, French, British or Portuguese — and second, I think Israeli managers are different. All my colleagues, who worked with an Israeli customer, at the end of the process wanted to do it again. Israeli managers are committed to their role. They don’t agree to things just because a large international institution says so. They ask, investigate and challenge, and when they are convinced — they are the most goal-oriented there is. Incidentally, there are not many other places in the world where a customer invites a foreign consultant to his home on a Friday night, introduces him to his family and acts as if he is part of it.
“On the other hand, the main tendency of global managers is to create order, and when you want to build a truly large organization, order is important. So that the amazing companies here can become large corporations, it is important that they learn to make this balance. Having a mess is great if you want to innovate and advance quickly, but it undermines the ability to become truly big. Part of our mission is to help Israeli companies make the transition from Startup to Corporation. It will be good for the country when there are large corporations here, because this would create lots of workplaces — quality positions, not only for tech whizzes, but for lots of people. It’s good for the economy. These types of corporations, like Intel or Teva, create more startups.”
McKinsey Global understood that companies starting out can become market leaders
McKinsey Israel’s activities were based so far on traditional companies, but as Chinn says, “five years ago McKinsey realized that the world was changing, and that not only mega organizations were important, but companies starting out and which could, in five years from now, become market leaders or create completely new markets.”
Wanting to leverage that, he established McKinsey Israel Tech Hub together with Jay Jubas, head of McKinsey’s global Fuel program, which works with startups and scale-ups. That program also immigrated to Israel last year. The Tech Hub includes international experts from all technology fields and provides oversight to venture capital funds, high-tech companies and startups. “We wanted Fuel’s foundation to be in the innovation nation, Israel, and for one of the two leading global frameworks to live here. Jay’s a Zionist Jew and was really happy to come,” Chinn says.
Can startups afford McKinsey’s services?
“Firstly, startups these days have money and secondly, we've adjusted the work method and payment method. In a large organization, once you’ve reached conclusions about what needs to be done, you need to convince a lot of people to change their opinions. In a startup, by contrast, everything moves fast and the problems are usually specific: the board of directors isn't up to par or the product doesn’t fit the market, and there's no shortage of other examples.
“We help startups for brief periods and with specific issues, because they don’t have the time to wait. For example, let’s say one of them wants to sell to vehicle industry manufacturing plants. We work with that entire industry. We've helped them build the plants, and we help them operate and improve them. So we’re familiar with them. If a client wants to understand what’s important for the vehicle industry, we can provide a list of experts who can get into the finest of details on how and where the product can integrate into work processes. We’re set up to give highly focused assistance in a short time frame, and short projects are much less expensive.
“Additionally, we set a different pricing model. New startups race towards recruitments and we help accelerate that. We adjust the payment, and most clients prefer to pay after they’ve received the value. Currently we give out less reports and more results. Does the startup want to get to recruitment and accelerate sales? We’ll find the payment solution that will suit everyone and reflect the outcomes we’ve gained for the client. There are funds we work with on company portfolios, and others prefer to pay us because they have the money in the kitty. We’ve adapted ourselves to the startup and hi-tech world, especially in Israel.”
Are there examples of startups that suddenly took off in the past 18 months?
“I can't divulge names of clients, but some recruited five times more than their previous value after working with us. There are examples of 30% - 40% spikes in income. All our clients continue to liaise and consult once the job’s over. We continue to be part of the companies’ lives even after the last bill has been paid.
“We’re trying to integrate Israeli companies into addressing the needs of clients abroad. We can take advantage of Israeli innovation to benefit McKinsey clients worldwide. We don’t open doors: rather, we help startups understand which door to open, how to enter through it, and how to sell to mega corporations. We’re the counselor to small companies, advising on how to work with large corporations.”
McKinsey and the opioid crisis: “We’ve invested so that something like that will never happen again”
McKinsey’s history also contains several unpleasant affairs, one being its part in the U.S. opioid crisis which has caused countless addictions and overdose deaths as a result of too easily accessed prescriptions for painkillers. “We’re not proud of it,” Chinn admits. “We’ve invested in new processes, new understandings, to ensure nothing like this will ever happen again.” By contrast, McKinsey was involved in the 2011 Tnuva cottage cheese incident. The Apax Fund took the heat from that one: Apax was the controlling party in the company at the time, and Tnuva itself, but McKinsey was the one that suggested raising the price of cottage cheese. Chinn: “I wasn’t here at the time, so I can't really say if that’s right or not. But in the past two years we’ve been looking differently at our influence. In the past we focused on economic impact, whereas currently we’re still assisting businesses but we examine each project and how it will affect employees, the environment and the company. We also examine the risk to disadvantaged populations. We give consideration to these issues as a way of ensuring that we’re a force looking to help, not to harm.”
But isn't the business’s interest sometimes different?
“The world’s changed a bit. In the past, companies were only interested in driving profits for shareholders. Now they recognize, and I think the environment also demands, that they must bear broader responsibility. We want to be part of something that improves the world rather than causes damage. We’re a private company belonging to partners, and we have the option of choosing what to do and what not to do. We also refuse certain projects and clients. Mostly, if you show a client that they can take a decision that has economic impact on the company but can simultaneously benefit the company’s employees, the environment, and the population in which the company operates, the client is happy to choose the best option.”
There's a claim leveled at you that you tell managers what they want to hear, that you're actually just a rubber stamp.
“My experience from arguments with clients is not that,” Chinn breaks into laughter. “Sometimes the manager doesn’t ask us to tell her or him what to do, but how to do it, and a ‘how’ question is in many cases far harder to answer than ‘what’, because we can offer the most advanced technology management methods available worldwide which the client can't gain only from experience as a manager. As for the ‘what,’ I have a client who tells me: ‘When I know what I want to do, and only the final stamp is needed, I'll bring a cheaper company because what’s the point of paying you for what I already know! But when I don’t know what I want to do, it always pays for me to take the best there is.’ Sometimes I also agree with the client, and that’s okay.”
Does it ever happen that a report drafted for a client ends up stuck in the drawer?
“More than 20 years ago we drew up reports. These days most of the work is in helping companies produce results. It’s a huge change. The remuneration method changed accordingly. For example, if a company wants to save money in an acquisition we don’t provide reports but help the company sign new contracts. When the company signs a contract that saves it money, it pays us a portion of that saving. Nothing annoys a consultant more than when hard work produces good advice but no one implements the advice. What we didn’t understand when we were younger is that instituting change in a large organization takes a long time. I badger clients when the work is over, reminding them not to forget the ambition they had during the process. In high-tech, by contrast, the work period’s short, and recommendations are implemented the next day. There’s nothing more thrilling for a consultant than to see that your recommendation has led to the client’s success being reported in the media.”
Did any clients halt a project midway?
“Yes. For example, if the CEO leaves. There are also less successful projects, and cases where I returned money to a client because we both felt we didn’t give optimal value. Bottom line, I'm committed to the outcome. It’s a matter of trust, and you need to give good results. That’s why clients aren't with us for months, but for years.”
Rumor has it that numerous people terminated their jobs at McKinsey and joined the companies they were advising.
“A lot of people in high-tech came from McKinsey. Some 200 Israelis worked with us, most of them in Israel, but some also in McKinsey abroad. Of some 70 Israeli unicorns, six were established by former McKinsey people: Global-e, Via, Hippo, Waze, K-Health, and At-Bay. That’s a crazy statistic. Almost half the Israelis who worked at McKinsey are now in high-tech, and 12% of them are founders, 20% work in the funds, and the overwhelming majority are partners or in senior roles. When someone asks me if it’s worth coming to McKinsey, I say that McKinsey is the best high-tech college in the world.”
Aren't you ever tempted to switch to management?
“I did that once, when I moved to Credit Suisse in 1999. I was tempted,” Chinn admits, “and it was an amazing experience, but I bring my strongest abilities at McKinsey. I love solving new problems, I love helping people navigate. Here I'm privileged in a way I wouldn’t be anywhere else. For example, providing consultancy to Chiefs of Staff. Personally, I could never be a Chief of Staff, firstly because I don’t think I'm suited to it, but also because I missed that moment in my life when I should have started that kind of track. McKinsey is a fantastic work environment, with the best quality people and freedom of action. We really do work with the most senior people and help them with the most complex problems at their most critical junctures in time. There’s just about never an ‘ordinary’ project. We don’t get called in for things that aren't important.”
