Companies that choose to adopt a cautious approach to business during turbulent times may survive to see another day, but often fail to achieve their growth potential.
That’s the assessment given by McKinsey & Company’s researchers, who analysed the performance of the 10,000 largest global organisations from 2016 to 2022 to find out what is setting continuous growth outperformers apart.
They found that corporate chiefs who courageously pursued and stuck with through-cycle growth strategies were the ones exceeding their anticipated level of performance.
“No matter how opaque the outlook, or the pressures they face, CEOs who outperform remain committed to innovation and society-positive growth strategies,” reads McKinsey’s report.
“They invest boldly in data-led digital transformations, analytics and AI to grow core businesses and strategically pursue adjacent and breakout ones. They reallocate resources fearlessly, shrinking to grow when necessary. And they mobilise people throughout the organisation to capture value quickly.”
The latest instalment of McKinsey’s landmark research series offers six key strategies for CEOs who aspire to reach the growth pinnacle of their industries and stay there.
1. Build an innovation culture and mindset
Innovation excellence enables companies to excel beyond even other outperformers, says McKinsey.
To cultivate new sources of growth and excel beyond other outperformers, these firms are building an innovation mindset and culture powered by investments in R&D, digital capabilities, analytics and AI.
Innovative outperformers are “fully committed to innovation” and mastering eight essentials identified in McKinsey’s past research: aspire, choose, discover, evolve, accelerate, scale, mobilise and extend. They also discuss innovation on earnings calls at twice the rate of their peers, convey achievable aspirations to employees, set clear targets and foster a culture that is not afraid to take risks.
2. Commit to sustainable, inclusive growth
Pursuing ESG goals may not feel like a priority when budgets are tight, and McKinsey’s research shows strong ESG scores won’t compensate for weak fundamentals.
However, the consulting giant finds that “triple outperformers” – those that grow revenue and profit while improving sustainability and ESG scores – are better positioned than other outperformers to reach peak growth performance.
Between 2017 and 2021, when fewer than one in four companies topped 10% annual revenue growth, half of “triple outperformers” reached or exceeded that benchmark. It proves companies can not only do well by doing good, but also do better than their peers.
3. Grow your core with data, analytics and AI
It’s not altogether unexpected that, in this age of digital transformation, growth outperformers are found to accelerate core growth through a robust capability-building programme that energises people and fundamentally changes how work gets done.
McKinsey says these companies devote more resources to boosting sales and marketing productivity through digital-led transformations, analytics and AI that have clear customer use cases and robust business cases.
What’s more, they courageously invest in people, processes and innovative technologies to create an “institutional superpower” – in other words, functional capabilities that enable a company to gain and maintain an edge.
4. Expand into right to win businesses
Complacency is the enemy of growth, McKinsey contends, which is why outperformers are pursuing adjacent and breakout business opportunities in discerning fashion.
The report adds that C-suite leaders who pursue adjacent businesses where they have a “right to win”, leveraging unique capabilities and customer or value chain connections, position their companies to generate the strongest shareholder returns.
5. Shrink to grow when necessary
McKinsey points out that, for some companies, the journey to growth outperformance starts with getting smaller. For example, some organisations may spin off a certain division because its fundamentals do not complement the core business.
No matter the underlying rationale, the strategy of shrinking to grow requires a disciplined approach to how resources are allocated and a supporting model that enables a successful transition.
Research shows that companies engaging in dynamic portfolio management to regularly assess whether they are the best owners of a business have a better growth track record than those making acquisitions to leap into a high-growth segment.
6. Mobilise people to capture value quickly
Through its research, McKinsey was able to detect that outperforming CEOs not only envision ambitious growth transformations, but also mobilise employees from the C-suite to the front lines, building skills and capabilities to realise value quickly.
These companies are fostering bold mindsets and creating appropriate strategies to determine which growth pathways have the greatest value-creating potential.
They also mobilise employees and instil ownership by investing in building their skills and deepening their functional expertise with a focus on customers and the external ecosystem.
Read the full report: Courageous Growth by McKinsey & Company
You may also be interested in the Business Chief US & Canada website.
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