In a world of constant change, including the rise of AI, the pressure to innovate has never been greater—or more daunting. It can feel like the rules of the game are rewritten daily, leaving leaders scrambling to keep up. But here’s the hard truth: Staying ahead isn’t just about reacting to change—it’s about building systems that actively seek it out.
True renewal demands more than a dusty “suggestion box” or sporadic brainstorming sessions. It requires organizations to look within, outside, and across their ecosystems to uncover fresh ideas and untapped opportunities. Yet, many unknowingly stifle innovation by making it difficult to share insights, challenge the status quo, or collaborate across silos. The cost of this stalled inertia? Missed opportunities, disengaged teams, and a slow slide into irrelevance.
In this final post of our Organizational Health Index series, we dive into the two critical outcomes that drive renewal and explore how top-performing organizations shatter barriers to health. The question isn’t whether your organization can adapt—it’s whether you’re ready to lead the charge.
Innovation and learning
How effectively does your organization spark innovation, cultivate a culture of continuous learning, and channel new ideas into transformative growth and evolution?
Innovation and learning aren’t just buzzwords—they’re survival skills. Organizations that thrive aren’t waiting for change; they’re actively seeking it out, testing bold ideas, and learning from every success and failure. They may not know the destination, yet they recognize the journey ahead calls for reinvention, courage, and a willingness to adapt.
The most innovative often have one thing in common: senior leaders who champion a culture of experimentation and continuous improvement. These leaders empower employees to push boundaries, collaborate across teams, and turn fresh ideas into real impact. They make decisions rooted in data and stay up to date on the market’s best practices—whether innovations come from within or outside the organization.
A multinational company once found itself constrained by the limiting mindset that the best ideas had to come from within. This stifled innovation and created a barrier to growth, as external ideas and technologies that could have accelerated the business were often undervalued simply because they weren’t homegrown. Recognizing the need to keep up with an ever-evolving landscape, the company shifted from a traditional “invent-it-ourselves” model to a bold, deliberately collaborative approach—actively soliciting external ideas from startups, universities, and competitors, and sharing knowledge openly across teams.
This wasn’t just a tactical adjustment—it became a cultural transformation. Leaders championed curiosity and openness, embedding these values into the company’s core. Employees at all levels were empowered to contribute, blending internal expertise with external insights to drive innovation. The company also maintained a sharp focus on data-driven decision making, ensuring that the decision to pursue an idea was strongly supported by data. The organization saw a 60 percent increase in research and development productivity in five years.
Organizations today must go beyond using data to measure performance—they must leverage it to gain sharper, faster insights into market dynamics and customer needs. Those that integrate external insights with internal expertise will turn that knowledge into a powerful competitive advantage.
External orientation
How well does the organization work with external stakeholders to create and deliver value?
External orientation reflects an organization’s ability to look beyond its own walls and engage meaningfully with the world around it. Companies that excel here embed a deep understanding of customers, foster strong business partnerships, embrace social responsibility, and navigate regulations with agility. They also stay ahead by using competitive insights to inform strategy and decision making.
This isn’t just nice to have—it’s a critical driver of growth, resilience, and adaptability. Organizations that actively cultivate this external lens are better positioned to anticipate market shifts, strengthen stakeholder relationships, and seize opportunities in an increasingly complex landscape. Companies that integrate competitive insights into their decisions are nearly three times more likely to achieve sustained health and performance.*
A financial institution transformed itself by putting customers at the center of everything it does. For example, through customer journey mapping, it developed seamless solutions and integrated platforms for everyday banking. Embedding AI into its operations not only improved customer satisfaction but also achieved a 50 percent reduction in the cost-to-income ratio for digital customers compared to traditional ones. The company dedicates 20 percent of its balanced scorecard to customer-focused metrics, ensuring client success and experience stay central to its performance goals.
The transformation extended beyond customers. The bank collaborated with business partners to enhance its offerings and worked closely with local communities to promote financial literacy and inclusion. It also used technology and competitive insights to stay ahead. For example, it launched an AI-powered app that delivers hyper-personalized financial planning tips, empowering customers to make smarter financial decisions. By combining customer orientation, partnerships, and social responsibility, the bank unlocked growth, built loyalty, and set a new standard for impact in its industry.
Renewal turns constant change from a threat into an opportunity for growth and leadership. Without this ability to continuously evolve, even the most successful organizations risk stagnation.
Breaking through barriers to health
Organizational health is the ultimate competitive advantage and a top predictor of long-term performance. Yet, most organizations fail to prioritize it until it’s too late.
Sustained success demands mastery of all three axes of health: alignment, execution, and renewal. But the road to getting healthy is rarely straightforward. Roadblocks will emerge, and overcoming them demands deliberate action and unwavering focus.
Ironically, when times get tough, many organizations double down on performance, neglecting health in the process. But our research finds that chasing performance without prioritizing health fails to achieve sustainable results. The cost is steep: Health deteriorates further, performance plummets, and recovery becomes exponentially harder. The same trap appears in good times too—when results look strong, leaders often assume that health can be taken for granted and turn their attention elsewhere. This is precisely when complacency sets in, creating blind spots that can erode resilience and make future downturns even more painful.
The question isn’t whether organizational health matters—it’s whether you’re ready to make it the cornerstone of success. The roadblocks are real, but so is the opportunity to break through them and unlock your organization’s full potential. The time to act is now.
The authors wish to thank Jean Ma, Laura Pineault, and Nicolette Rainone for their contributions to this blog post.
*McKinsey OrgHealth Refresh Survey, 3,940 English-speaking employees across the United States (2,068 participants), the United Kingdom (525 participants), Canada (519 participants), Australia (433 participants), and Singapore (395 participants), conducted from May to July 2023.
***
This blog post is part of a four-part series on the Organizational Health Index, exploring the core axes of organizational health—alignment, execution, and renewal—and sharing lessons learned from organizations that achieved health and performance gains.