AI unlock: From investing to innovation to reaping its rewards

Companies that outperform their peers on revenue and profit growth don’t merely scale existing products and services. They nurture new sources of growth by building an innovation mindset and culture, and driving it with investments in state-of-the-art digital technologies, including generative AI.

Our latest research finds that companies with a strong innovation culture and operating model achieve, on average, four percentage points greater annual TSR growth and 16 percent higher median return on invested capital than other growth outperformers (exhibit). Top innovative companies also increase their chances of outpacing their industry peers on revenue and profit growth by 52 percent.

Top innovators have been more successful at creating business value from their investments in tech and R&D.

CEOs who successfully pursue growth through innovation go beyond investing financial resources in AI and other digital technologies. They talk about innovation at twice the rate of their peers.1 They place innovation at the center of strategic and financial discussions. And they mobilize their organizations to unlock value from these investments quickly by building the right talent and capabilities and fostering a culture of fearlessness.

While the regulatory landscape for generative AI will undoubtedly evolve, CEOs who take a wait-and-see approach may find themselves falling significantly behind their competitors. Nearly a third of top innovators we surveyed in February and March 2023 said they are already deploying generative AI at scale to accelerate innovation and R&D. Their lead over innovation laggards is also widening, with top innovators rolling out generative AI six times faster than trailing companies—or nearly double the rate of 2022. While some CEOs may choose to start small and scale later, the exploration of generative AI should be considered a must, not a maybe.

“Gen AI is on the mind of almost every CEO, as they try to separate the hype from the reality of what value it will create,” said McKinsey senior partner Erik Roth. “Our latest research, however, shows that top innovators are leading others in their ability to scale gen AI and most importantly, capture its benefits.”

Companies that unlock value quickly, responsibly, and sustainably from generative AI investments embrace an AI-led operating model. They are up to five times more likely than the weakest innovators to have tech-savvy business leaders, three times more likely to have agile teams that can write code, and eight times more likely to have organization-wide agile practices. They are five times more likely to have DevSecOps teams that know how to secure data, handle it compliantly, and prevent proprietary data from leaking into broader source material for large language models (LLMs) such as ChatGPT. They also have the people and processes in place to ask the right questions of generative AI and quickly weed out “wrong” answers.

Generative AI makes it more imperative than ever for CEOs to commit to innovation and master its eight essentials courageously, because when it comes to driving revenue and profit growth, outperformance favors the bold.

1 McKinsey analysis of earnings calls.