Growth & Innovation
We help companies to build their businesses by identifying granular growth opportunities and to improve their performance through innovation in products, services, processes, and business models.
Growth is vital for funding new investments, attracting great talent, and acquiring assets. It is also a critical driver of overall company performance (Exhibit 1).
Our research consistently shows that looking for growth broadly in dynamic or mature industries can be misguided or even downright wrong. Many so-called growth industries, such as high tech, include segments that are not growing at all. And industries that most consider mature, such as consumer goods, often have segments that are growing rapidly. Similarly, even geographies that are perceived as "emerging" typically have some sectors that are already mature, while other sectors are still in the "land grab" phase.
We help our clients develop a more detailed perspective on trends, future growth rates, and market structures. By looking across all the possible directions of growth—growing the core, expanding geographically, diversifying into adjacencies, and taking opportunities that arise from value-chain disruptions and integrations—we help companies choose where to compete, and we support them as they execute their growth strategies.
We look at four levers when working with clients to define how to capture the growth opportunities they have identified:
Innovation is critical to growth, particularly as the speed of business cycles continues to increase. Most companies understand the importance of innovation but fall short when it comes to execution (Exhibit 2).
We define innovation as creativity plus delivery, helping our clients transform their innovation performance by focusing on four requirements for innovating at scale: strategy, pipeline of ideas, execution, and organization.
A clear strategy
We support clients as they develop a clear innovation strategy that meets their business-growth targets and strategic objectives. We do this by helping clients understand the gap between actual and aspirational performance that innovation needs to fill, then set financial targets related to innovation, the metrics required to measure performance, and the strategic areas on which to focus investments.
A strong pipeline of profitable innovation
Innovation depends in part on a company's ability to get better, more profitable ideas into its pipeline. We help clients identify the areas of their business that are ripe for innovation and mine those areas for ideas. We then support them in rapid prototyping and business-case development to build those ideas quickly into profitable businesses. We also help clients reap the benefits of "open innovation," positioning them to look beyond their own boundaries to gain access to ideas, knowledge, and technology that add to the value of their own resources.
Smart, fast, and consistent execution
We have a variety of exclusive approaches for helping clients get higher returns from their investments in research through better execution. Using proprietary benchmarks along with in-depth diagnostic tools and capability-building methodologies, we support clients in improving and sustaining the productivity of their R&D functions. We also help clients build the types of repeatable, error-free, scalable processes that are necessary for both incremental and breakthrough innovation.
A capable, mobilized organization
To create an environment that promotes innovation, we help clients motivate talent by organizing people in the right roles and then arming them with the tools to be successful. We help clients design an organizational structure to execute their specific R&D strategy, addressing issues such as talent management and development, culture change, global collaboration, performance management, external collaboration models, and the role of R&D leadership.
Recent examples of our work
- We helped a North American pulp-and-paper company identify new businesses in which it could invest its large cash holdings. We helped identify several new opportunities aligned with the client's capabilities (for example, real estate, engineered wood products, and minerals) and then helped define an entry strategy for those areas. The board adopted the recommendations and allocated the required capital.
- We helped a global consumer-electronics company double its market share in China in only two years. By using detailed data on individual-store performance, as well as geographic forecasting data, we created 25 city clusters and prioritized the 7 that had the greatest potential for growth. We then helped the client shift its resources to focus on these prioritized clusters before driving growth in other clusters. The client quickly moved from number five in the market to number two.
- We supported a global consumer-electronics company in transitioning from being a fast follower into a leading innovator. We helped the CEO set a clear innovation strategy and design new processes, performance metrics, and portfolio governance. Using the Insights to Action approach, the client was able to create a new breakthrough portfolio pipeline; it now has more than ten new areas of innovation under development, each with the potential to generate $500 million or more in revenue.
- McKinsey's Growth Decomposition Tool helps companies apply the granularity-of-growth approach by breaking down their revenue growth among three sources: market momentum, M&A, and changes in market share. The tool produces easy-to-read analyses by value cell within the business—at the right level of granularity for each organization.
- Our proprietary Eight Essentials of Innovation diagnostic tool allows a client to benchmark its innovation performance relative to its peers. The tool helps the client create a clear plan for innovation based on the company's "innovation archetype" (for example, leading innovator or fast follower) and its strengths and weaknesses, which allows the client to determine where to invest and what to do to improve performance.
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