How McKinsey Lost Its Edge

As it nears 100, is the world's most illustrious consultancy past its prime?

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"Business has been forced to adjust itself to staggering acceleration in the rate of change," observed McKinsey, a consultancy, in a promotional pamphlet it published in 1940. "What period in history has ever presented more difficult problems for the executive?" Naturally, demand for McKinsey's advice was soaring, it wrote.

These, too, are times of upheaval. Geopolitics is forcing companies to rethink where and how they operate. Artificial intelligence (AI) is filling bosses with excitement at the opportunity to replace costly humans with bots, and fear that their business models may be disrupted.

And yet McKinsey, the most illustrious of consultancies, finds itself in the doldrums.

McKinsey has long regarded itself as operating in a league of its own. Mr Ron Daniel, its boss from 1976 to 1988, talked of an "organisation of genuine greatness" filled with "superior people". Mr Bob Sternfels, McKinsey's leader today, prefers to describe it as "distinctive".

This sense of superiority, though nauseating, is not entirely without justification. McKinsey is the biggest and best known of the strategy advisers. Its alumni run 24 of America's 500 most valuable companies, according to Altrata, a data provider; the figures for Bain and BCG, its two principal rivals, are seven and five, respectively.

Until recently, "the Firm", as it calls itself, was growing at a stunning pace. Its revenue last year, at a little over US$16 billion (S$20.6 billion), was more than double the figure in 2012. Yet after a phase of rapid expansion, its revenue growth in 2024 was a meagre 2 per cent, according to estimates from Kennedy Intelligence, an industry watcher. Since the end of 2023, it has shrunk its workforce from 45,000 to 40,000.

Economic uncertainty is only partly to blame; McKinsey has bled market share to rivals. How did the legendary consultancy, which turns 100 next year, lose its edge?