McKinsey frameworks for founders

This piece doesn't summarize a book, but six tools used every day in strategy consulting. None is complicated. Their value lies in forcing you to think with structure and letting a team discuss with everyone on the same page.

Executive communication: the Minto pyramid and the MECE principle. Barbara Minto, the first woman consultant at McKinsey, formalized in The Minto Pyramid Principle a simple rule: start with the answer.

• The conclusion comes first, then the arguments that support it, grouped, and the data last.
• The introduction follows the order situation, complication and question, so the reader understands why it matters to them.
• The arguments must be MECE, mutually exclusive and collectively exhaustive: they don't overlap with one another and together they cover the whole topic.
• Each distinct idea goes in its own bullet.

The logic behind it is that of memory. If you're sent to the supermarket with a list of nine items, you're more likely to forget one than if you organize them into three departments with three items each. In executive communication it's the same: grouping ideas makes them understood and remembered.

The 7-S model. It was developed by McKinsey consultants, and holds that an organization works when seven elements are aligned:

• Three hard: strategy, structure and systems.
• Four soft: shared values, leadership style, staff and skills.
• Shared values go at the center, because they connect the others.

It helps diagnose why a change isn't moving: very often a hard element was moved and the soft ones were neglected.

The GE-McKinsey matrix. It was born to help General Electric decide where to invest among dozens of businesses. It's a nine-cell matrix that crosses industry attractiveness with the company's competitive strength in it:

• In strong businesses in attractive industries, you invest to grow.
• The intermediate ones are managed selectively.
• The weak ones in unattractive industries are harvested or sold.

It's the tool for deciding a portfolio of products or investments. And the concept of matrix evaluation applies to many other topics just by changing the axes.

The three horizons (or "waves"). It comes from the book The Alchemy of Growth, written by McKinsey consultants, and divides growth into three horizons, also called waves, which are managed at the same time:

• Horizon one. The current business, which generates today's cash flow and must be defended and optimized.
• Horizon two. The emerging businesses, which already have traction and need investment to scale.
• Horizon three. The future options: experiments, pilots and small bets that could be the core business in a decade.

The common mistake is devoting all attention to the first until it runs dry. A healthy company always has something in each horizon.

Structure, conduct and performance (SCP). It comes from industrial economics and is widely used in consulting to understand an industry:

• Structure: how many competitors there are, how concentrated they are, what entry barriers exist, etc.
• Conduct: how companies set prices, how much they invest and how they compete, conditioned by the structure.
• Performance: the industry's results, which depend on that conduct.

It helps explain why two similar industries have very different margins, and anticipate what changes when a competitor enters or regulation changes.

Mission, activities and products (MAPs). It's a tool for defining a role:

• Mission: what that role must achieve, the end result of its work, not how it does it.
• Activities: what is currently defined to achieve that mission, and they change with technology or with a reshuffle of the team.
• Products: the indicators the role is measured by, ideally with the expected standard for each one.

As a founder they will serve you at different moments. The Minto pyramid, from the first email to an investor. MAPs, when hiring each person on your team. The 7-S, when the company grows and change management is required. And the GE-McKinsey matrix and the three horizons, when you already have more than one product and have to decide where to put the next dollar.