While many companies today are attempting some sort of transformation of their core business, long-term success requires reinvention across multiple fronts. 

Most industries are facing profound and accelerating disruptions: digital attackers, ecosystem plays that redefine industry boundaries, and the regionalization of value chains, to name a few. Mix in geopolitical tensions and economic woes and many C-suite leaders don’t have the time to think in a fresh and bold manner, falling victim to incrementalism instead. 

In our conversations with CEOs, we try to help them step out of the day-to-day by asking, “What do you want your company to become? What will it take to get there?” We also remind them that difficult times can present an opportunity to go beyond incremental strategic and operational changes to reinvent the company and make it fit for the future.

Examples abound of companies that are shifting their portfolios, operating models, and talent strategies significantly—the media and payments industries come to mind. Others have pivoted toward sustainability or omnichannel. What these companies have in common is the ambitious and holistic nature of their transformations, which require employees throughout organizations to work in a coordinated manner toward a common goal.

While each reinvention will necessarily be different, five actions are crucial. 

Separate the “what” from the “how.” To define the “what,” think beyond your traditional industry boundaries to look at your organic growth potential. During a big M&A move, for example, may be the right moment to begin reinventing the newly combined entity. Consider important portfolio moves and anticipate new businesses. According to a McKinsey Global Survey, business leaders expect that by 2026, half of their companies’ revenues will come from products, services, or businesses that haven’t been created yet. Building a new business is difficult, and less than one in five scale successfully. On the upside, the survey revealed that the more new businesses you build, the better you get at building them. Joining the ranks of the successful requires learning by doing.

Involve your teams in the “how.” Allow them to dream big and define what they need to make the transformation happen. This applies to the operating model, which can become more agile, more outsourced, or more integrated. It could mean a very different level of digital and data processes, tools, and skills; a transformed economic model that has lower costs and is less capital intensive; and a transformed people model as it applies to talent and culture. Take stock of your starting point, plan for the transformation journey in a very structured manner, and pilot progress.

Be open about the leadership journey. It takes imagination to dream that tomorrow can be different from today. That means changing the mindset of leaders and managers, as well as bringing your board and investors with you early on. The best leaders and companies are prudent about managing the downside while aggressively pursuing the upside. These leaders are thinking about the next decade, not the next month. 

Tackle the skills gap. Bringing in the right talent is critical for changing the trajectory of your company. The mindset must be growth-oriented and innovative. CEOs can build these capabilities internally, through upskilling and reskilling, and by hiring externally. Matching talent to the right opportunities is more important than ever as a way to keep employees engaged and feeling like their career objectives are being taken seriously. 

Define the reinvention’s success broadly. This is a great opportunity to reground your company in a set of objectives that are better aligned with today’s stakeholder reality. Environmental, social, and governance (ESG) principles can play an important role at a time when most Fortune 500 CEOs believe their companies have a responsibility to address social problems. Most employees also take a company’s ESG commitment seriously when choosing a place to work, as do customers, McKinsey research shows. 

Organizations that embrace reinvention have higher ambitions for achieving innovation, making bold bets, and building successes. Companies can overcome today’s business challenges if they have the right framework in place and believe that reinvention is not only necessary but welcome. 

ABOUT THE AUTHOR

Sandra Sancier-Sultan is a senior partner in McKinsey’s Paris office.

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