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Monthly Highlights, December 2022

Managing complex organizations is much harder today than it was just a few years ago, write Homayoun Hatami, McKinsey global leader of capabilities practices, and Liz Hilton Segel, McKinsey global leader of industry practices. How can CEOs  decide what needs to be done now and what can wait? Our  featured stories this month outline six priorities that feature  prominently on worldwide CEO agendas, as well as five core  actions to help CEOs meet dual imperatives—resilience and net zero—at the heart of a new sustainability strategy. Other highlights in this month’s issue include the following topics: • a framework to help companies prioritize actions and  collaborations that can contribute to sustainable,  inclusive growth • a view of the flows driving global integration and an  assessment of interdependency and concentration risks • why companies will need to begin building many more  businesses than they have thus far to meet their revenue  expectations in the years ahead • how a skill-based approach can help US employers expand  talent pools and retain great workers

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New from McKinsey & Company How to unlock the full value of data? Manage it like a product Creating reusable data products and patterns for piecing together data technologies enables companies to derive value from data today and tomorrow. Unlock data’s full value

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New from McKinsey & Company

A CFO’s perspective on sustainable, inclusive growth

In the current challenging environment, how can CFOs and other business leaders continue to deliver sustainable, inclusive growth?

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How to unlock the power of learning

The call for investment in learning and development has never been more insistent. But how do you learn best? Consider our 3x3x3 model of learning: It’s 3 ideas, 3 months, 3 other people—and a proven approach to maximize your time while hitting your personal development goals. Explore more on the 3x3x3 method and other insights to level up your learning, with topics including: the Goldilocks zone of effective learning how to get ahead on the S-curve the three critical attributes of a learning organization how P&G turned learning into a “team sport”

Read more

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This week, how to think about starting a new business before you start one. Plus, the State of Fashion 2022 report on the industry’s uneven recovery, and Frank D’Amelio, the CFO of Pfizer, on the all-hands-on-deck approach to a COVID-19 vaccine.

Bridge to the future. The more new businesses you build, the better you get at building them. That’s the key takeaway from the latest McKinsey Global Survey of more than 1,000 C-level executives and other senior managers across regions, industries, and company sizes. Business leaders predict that by 2026, half of their revenues will come from products, services, or businesses that haven’t yet been created. New-business building helps bridge that gap.

More urgency. Launching new businesses was the top strategic priority of more than one-fifth of the leaders surveyed, with 55 percent naming it as a top three priority—nearly double the share who said it was a high priority for their companies between 2018 and 2020. CEOs are now twice as likely to say it’s the top priority than they were in previous years.

Organic growth. Unlike when they pursue M&A or invest in external start-ups, companies that undertake new-business building can make the most of existing assets and capabilities to create new products, services, or business models. It can help them diversify revenues and keep pace with shifting customers and markets. What’s more, new businesses generate organic growth, which often creates greater excess returns to shareholders than dealmaking does. One example is RXR Realty, which has reimagined the tenant experience across residential, commercial, and mixed-use properties.

Failing to scale. Still, only a small segment of companies capture most of the growth from new-business building—less than one in five new businesses achieves annual revenues above $50 million. Joining their ranks requires learning by doing, which isn’t necessarily a comfortable place for incumbents. A smart approach includes these four factors: understanding how the CEO of the parent company plays a crucial role, striking the right balance between autonomy and centralization, clarifying the rationale for making acquisitions, and generating the deeper customer insights needed to succeed.

Validation. One way to start new businesses and make sure they’re on the path to success is to create a dedicated “growth engine” team to manage the businesses from launch to scaling to maturity. This team, a separate entity from the parent company, facilitates the free flow of new ideas and focuses support in each stage of a venture’s growth. Validation must also come from outside the parent company: McKinsey surveyed 50 equity analysts to gain a better understanding of the value at stake for new-business building and found that a chief concern was that companies have to demonstrate that ideas are not simply “backyard success stories.” Less than half the respondents believed that internal-only valuations were sufficient proof of a new business’s value.

Longevity wins. Business building is no longer an optional way to generate organic growth: it has become essential. Organizations that embrace a start-up mentality and adopt three tech approaches can create a business-building capability that powers continual organic growth. How’s your company progressing? Here’s a way to score your ability to scale new ventures.

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The role of ESG and purpose

Answering three questions about purpose and environmental, social, and governance issues can help business leaders zero in on what matters most for their organizations.

Pursue purpose

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		1. The top trends in tech Which technologies have the most momentum in an accelerating world? We identified the trends that matter most. Make the most of them

		2. How do you measure success in digital? Five metrics for CEOs As organizations launch more and more digital initiatives, CEOs must monitor whether they are delivering business results. These metrics are ones to watch. Dive deeper

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What to read to get ahead of 2022’s big stories

Big tech, supply-chain disruptions, climate change, and COVID-19. These are some of the themes likely to continue making headlines in 2022. But which topics will be under-covered, and why do they merit more of our attention? Journalists and media leaders around the world shared their perspectives with McKinsey on what will be covered and what should be covered in global media in the coming year. Explore this interactive to see their predictions for 2022, and dive deeper with recent insights on some of the key topics, including: how senior executives expect their supply chains to evolve in the coming months the practices of the companies seeing the biggest earnings boost from AI how companies can navigate the current labor mismatch the fundamental requirements of solving the net-zero equation

View the interactive

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New from McKinsey & Company

How to be cyber smart The pandemic amped up all things digital and accelerated the need for innovation, while also creating fertile ground for cyber attackers. Now, more than ever, protecting your organization and its digital assets is crucial. As Cybersecurity Awareness Month begins, here’s the intel you need to #BeCyberSmart, including: ways to develop cyber resilience and safeguard digital infrastructure where industries stand on protecting information assets, and what cybersecurity leaders do differently the role of third parties and supply chains Read more

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The future of work: Managing three risks of the hybrid workplace

These three risk areas deserve careful attention.

Support your people

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New from McKinsey & Company

Manufacturing process innovation for industrials

Industrial manufacturing levels in the United States have been falling for decades, but process innovation is gaining steam and could reinvigorate this struggling sector.

Tap into the opportunities

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New from McKinsey & Company Organizational cyber maturity: A survey of industries Ours is proving to be the century of cyber insecurity, yet few organizations have made sufficient progress in protecting information assets. Protect yourself

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Pricing and promotions: The analytics opportunity

Many retailers underestimate the value of coordinating decisions on pricing and promotions. A new analytics approach can help.

3 prerequisites for success