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Six paths to sustainable growth: A leader’s guide

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ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

Brought to you by Liz Hilton Segel, chief client officer and managing partner, global industry practices, & Homayoun Hatami, managing partner, global client capabilities

When it comes to goal setting, achieving company growth that’s sustainable over time sounds like a no-brainer for every organization. Yet in an era of constant turbulence and disruption, the “how” of growing and of outperforming the competition—over time, no less—may feel especially hard to pin down. A strategic approach to sustainable, inclusive growth requires a willingness to take risks, the ability to see beyond the current economic cycle, and, above all, an explicit choice to grow. This week, we explore the key components of growth that can set companies up for success in the long run.

AN IDEA

An image linking to the web page “Six strategies for growth outperformance” on McKinsey.com.

Choose to grow

To grow profitably, consistently, and sustainably in the long term, companies must be courageous , innovative, and bold. But only a select few are meeting this mark, according to McKinsey’s Jill Zucker , Kate Siegel, and Rebecca Doherty . After studying how more than 4,000 global companies pursue growth, they have identified six strategies that help organizations outperform over time. Among the six paths to growth, the first two (strong commitments to innovation and to sustainable, inclusive growth) foster an aspirational, growth-focused culture . Growing the core business with tech, expanding selectively into adjacent businesses, and divesting with discipline enable a company to set growth in motion . And lastly, giving employees ownership for growth initiatives helps people build the skills necessary to capture value quickly and on an ongoing basis.

A BIG NUMBER

28%

That’s the share of respondents in a recent resource allocation survey who say their companies’ top management encourages high-potential, risky projects—the very sort that help spur growth. In their research, McKinsey’s Andy West and Tim Koller also found that when management does support these initiatives, respondents are more likely to report outperforming on both revenue growth and return on capital. These findings confirm that much of the choice to grow depends on whether companies are putting resources against that growth and making bold moves.

A QUOTE

“Making big innovation bets may now be safer than investing in incremental changes.”

That’s senior partner Michael Birshan and his coauthors explaining why, perhaps counterintuitively, innovation is especially critical to growth during uncertain times. According to the authors, “Innovation has always been essential to long-term value creation and resilience because it creates countercyclical and noncyclical revenue streams.” So if your company’s not actively exploring new paths to growth, it’s already behind. To pave the way for outperforming over time, a company’s best innovation moves are revisiting its innovation portfolio (which should include both short-term and long-term innovations), seeking new insights and opportunities in adjacent markets, and adapting its business model.

A SPOTLIGHT INTERVIEW

An image linking to the web page “Author Talks: How you can future-proof your business for sustainable, long-term growth” on McKinsey.com.

When it comes to future-proofing the business, what does it take for companies (and their leaders) to change the game rather than just play it? According to Lucy Parker, partner at the Brunswick Group, it’s an “activist mindset”: that is, “making real the concepts that need to happen related to change.” In a McKinsey Author Talks conversation about her book on leadership for the long term, Parker describes the need for activist leadership—and the activist mindset that’s required for creating social as well as financial value. When leaders recognize their own role—and that of their companies—in tackling systemic, societal challenges that also affect the long-term prospects of their business, they’re better positioned to leave the company better than they found it. “You win by moving into the offensive and saying, ‘What’s needed here?’” Parker says. “That and then stepping toward it constitutes an activist mindset.”

IT’S EASY BEING GREEN

An image linking to the web page “Empty spaces and hybrid places: The pandemic’s lasting impact on real estate” on McKinsey.com.

If you’re pursuing growth of the horticultural kind, you’re in luck. The global network of plant influencers seems larger than ever, and some amateur plant lovers are even going pro, with book deals, stores, and their own lifestyle brands. Meanwhile, others are leaving jobs in media, fashion, and tech start-ups to care for corporate florae in New York City . Despite the postpandemic decline in office attendance, which seems like it’s here to stay, plant care jobs are in high demand among some urban dwellers who, in search of greener pastures, have traded in their laptops for watering cans.

Lead by committing to growth.

— Edited by Daniella Seiler, executive editor, Washington, DC

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 04:49 - 3 Jun 2024

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Six paths to sustainable growth: A leader’s guide

Choose to grow

“Making big innovation bets may now be safer than investing in incremental changes.”