Yahoo turns to McKinsey for cost reduction strategy

07 December 2015

Marissa Mayer, the CEO of internet giant Yahoo, is buckled under increasing pressure. In a bid to turn the company’s fortunes and suppress internal struggles the former Google veteran has brought McKinsey & Company on board. Key task of the renowned management consulting firm: develop a cost reduction strategy and support the firm with the exploration of new business models.

Yahoo has undergone considerable challenges in its recent history as online competition for its chief product, advertising, has heated up. Today, new entrants like Facebook, as well as giants like direct rival Google, make holding on to, and leveraging, market share more and more challenging. This year has been turbulent for the company, as its share price tumbled 30%.

Yahoo has turned to McKinsey

To keep pace the company, founded in 1994, has undergone a number of transformations of late. First former CEO Scott Thomson reformed the company around the principle of putting customers first, while at the same time he downsized the company with 2,000 staff. In 2012 Thomson was replaced by Marissa Mayer, a veteran at Google, and she has since been seeking to reimagine the purpose Yahoo! serves.

The task has not proven to be an easy one however, with the company continuing to face stiff competition as Mayer sought to bring a turnaround to the company’s fortunes. One area of acute difficulty has been in keeping executive talent on board long enough for the respective functional areas to become effectively run. In the recent past executives, like Lisa Licht, the firm’s marketing partnerships head; Alex Stamos, the firm’s chief information security officer; and Scott Burke, Yahoo's senior vice president of advertising and data platforms, have made tracks. Another area of discussion is Mayer’s M&A strategy. She has spent hundreds of millions to buy among others Tumblr en Polyvore, yet the return has yet to materialise on a large scale.

In a bid to stem the tide of executives washing out of Yahoo, Mayer has asked current executives to make a medium term commitment to the firm, requesting that they stay between three and five years. Following the request, among others, European boss Dawn Airey and marketing and media head Kathy Savitt both declared their departure from the firm, as well as development chief Jackie Reses.

The McKinsey Quaterly

Further efforts to halt the losses, and to breathe new life into the transformation process, has seen Yahoo call in the world’s most prestigious strategy and management consultancy McKinsey & Company. The firm has been tasked with considering how best to turn around the now three year turnaround of the firm, with a focus on rationalising various functional areas. The consultancy will focus on strengthening the company’s core business, with the chances of closure for the company’s more satellite projects. More details have not been unveiled – the analysis by McKinsey is expected to take a few months.

“As we move into 2016, we will work to narrow our strategy, focusing on fewer products with higher quality to achieve improved growth and profitability,” said Mayer in the firm’s third-quarter earnings statement.

The turn to McKinsey comes at a critical time for Mayer. Shareholders have been grumbling in recent months, and their patience may now have reached a tipping point. Last week the Wall Street Journal unveiled that Yahoo has opened negotiations to possibly sell its internet activities, the activity which made the firm big.


How data insights helped Network Rail improve the South-East route

11 April 2019

Amey Consulting has leveraged data insights to assist Network Rail with the improvement of its South-Eastern route. Using the Quartz tool, which monitors train movement, Network Rail will now be able to commit to data-enabled interventions to quickly improve underperforming train stations.

With rail services in the UK coming under strain from the demands of modern commuter life, while the infrastructure and service delivery of the nation’s railways has come in for sustained criticism in recent years, a period of regeneration is on the cards at last. Network Rail is the owner and infrastructure manager of most of the railway network in Great Britain, and has subsequently tapped the consulting industry on a regular basis to help find areas of improvement.

The group recently drafted in consultancy BearingPoint to conduct a thorough organisational evaluation and advise Network Rail (High Speed) on attaining a ‘fit for purpose’ organisational standard – for which the consultancy was nominated at the 2019 MCA Awards. Meanwhile, ArupArcadis and Aecom have been contracted to help Colas Rail and Babcock Rail implement a decade-long framework for Network Rail, aimed at supporting the delivery of the next generation of rail systems, with the contracts said to be worth as much as £5 billion

How data insights helped Network Rail improve the South-East route

As Network Rail further aims to improve its performance and customer service offering, another area it has sought help from the consulting sector for is its South-East route. The network of railways connects London with the southern parts of the country, as well as with Europe, making it the busiest in the country, with more than 500 million passenger journeys per year. This crucial expanse of rail was plagued with small minute delays, which were impacting millions of passengers every day, while reducing the efficiency and capacity of the overall network – something Amey Consulting was selected to help solve.

Amey Consulting soon determined that with the sub-threshold delays to services only lasting for 1 or 2 minutes, most were not the subject of detailed root cause analysis, and this made their corrections almost impossible – with dire consequences. Without addressing these delays, passenger satisfaction would fall, while the capacity and efficiency of the network would be reduced, stinging the income of Network Rail even before a host of delay-related fines would hit the company.

In order to help the client gain a better understanding of where, how, when and what these small delays occur, Amey Consulting looked to demonstrate the value of data-led consulting, with a significant reduction in delays within the first month of rolling out changes to key stations. The consultants embedded themselves in Network Rail’s team, helping them learn the key skills needed to support and apply data-driven solutions.

Agile transport

This involved the deployment of the Quartz tool. The system utilises to-the-second train movement data to present the performance of individual stations across the South-East route. It allows users to effortlessly understand station performance with a high level of detail, and use this information to identify losses caused by small-minute delays. The granular data allows for targeted actions to drive efficiency savings and performance improvements. More importantly, it allows users to understand the impact of small process changes on performance. 

Steve Dyke, an Executive Partner at Amey Consulting, said of the project, “We looked to identify the physical root cause on the infrastructure, building a case for change then managing that project implementation and tracking the benefit/value.  In doing so we are working to define a data performance improvement service to the operational and infrastructure owners.”

Just as important for the project as the technology, however, was teaching the Network Rail team how to leverage it after the consultants were gone. The Amey Consulting team worked to develop an agile working culture within Network Rail’s South-East division, helping staff to be confident in using data to improve the journeys of millions of people per year by attacking the problem from the ground up.

Dyke concluded, “This is less about the tools and about the approach to managing performance.  It meant using by-the-second analysis, data science, and then agile development to visualise and identify areas where improvements can be made.  We then worked with NR to change the way they approached the management of the infrastructure changes.  So rather than pass the information down the value chain, any of which could have been missed, we managed the change end-to-end.”

The project was so successful that Amey Consulting was also among those honoured at the recent MCA Awards. The firm scooped the Performance Improvement in the Public Sector prize for its work with Network Rail, at the 2019 ceremony in London.