Recovery from the COVID-19 pandemic offers an opportunity for companies to accelerate progress to grow, broaden, and sustain prosperity for more Americans. In this inaugural episode of McKinsey’s new Future of America podcast, McKinsey’s Kweilin Ellingrud and Greg Kelly discuss how leading companies can use growth to drive sustainability and promote genuine inclusion. An edited version of the conversation follows. For more conversations on the Future of America, subscribe to the podcast.
Why post-COVID economic recovery can’t be about ‘growth at all costs’
Kweilin Ellingrud: Welcome to the first episode of McKinsey’s new Future of America podcast, where we’ll explore how we can build a future that drives sustainable and inclusive growth. This isn’t about trade-offs. We reject the “or” and embrace the “and.” Join us in conversations with leaders who are accelerating progress to grow, to broaden, and to sustain prosperity for more Americans.
I’m Kweilin Ellingrud, your host for today. I’m a McKinsey Global Institute director and a senior partner based in Minneapolis. I lead the development of insights on the future of work, gender equality, racial equity, and productivity. I will be cohosting this show with my colleague Andre Dua. He is a senior partner at McKinsey and managing partner of our Miami office. Andre works on issues related to education, reskilling and upskilling, economic opportunity and the distribution of that opportunity, and the US economic outlook. You’ll be hearing from him in future episodes.
Today I’m joined by Greg Kelly, my senior-partner colleague in the Atlanta office and the global leader of our growth, marketing, and sales practice. Greg helps companies grow in a way that transcends the bottom line and improves communities and the environment. Greg, welcome, and thank you for being with us.
Greg Kelly: It’s a pleasure to be with you on this first recording.
Kweilin Ellingrud: Greg, can you tell our listeners a bit about your background?
Greg Kelly: Sure, Kweilin. I’ve been at the firm for 27 years, 27 of the 30 years of my professional life, during which I have focused on working to help consumer companies grow better and faster. Our research shows that you’re more likely to grow better and faster if you pursue growth in multiple dimensions. Growth in your core, growth in adjacencies, growth in geographies, and to do so with multiple levers. That’s what I’ve been focused on: helping some of the best companies and brands in America grow better and faster.
Kweilin Ellingrud: Greg, you’ve spent your career helping companies not just grow but also grow in sustainable ways that benefit all stakeholders. Here at McKinsey, we’re unapologetic about being advocates for that growth. Not just the growth but also the sustainability and the inclusion elements of it. These aren’t trade-offs. They are mutually reinforcing elements of growth. And you can’t have sustainability and inclusion without growth as the foundation.
Greg Kelly: I firmly believe that. I think it’s never been more true than it is today, with the increased transparency. Customers and consumers know more about how a company treats its employees than ever before. They know more about how companies work in their communities than ever before. And they want to be associated with companies that are really making a positive difference. So I find that companies with a relatable purpose that’s authentic with their heritage are the ones that are winning with customers and consumers.
Kweilin Ellingrud: Let’s talk about economic recovery, and economic recovery from the pandemic. What has it looked like so far? What does it look like as we look ahead?
Greg Kelly: It’s been fascinating for me, as a student of customer behavior, to see how the pandemic has changed behaviors. It’s really interesting when you see the impact because it’s really hard to change behaviors. I’ll give you a small example. Retailers occasionally have to remodel. Restaurants will have to remodel and update their facilities. But they hate doing it. They have loyal customers, and upending those routines gives their customers a reason to change. And sometimes it’s hard to get them back. So they really hate to do it. And normally, there aren’t that many big changes that consumers make. So changing behaviors takes years and years to do.
The pandemic changed that overnight. What we saw with the pandemic is that 75 percent of consumers took on new digital routines. E-commerce penetration, which was 16 percent in 2019, rose to 35 percent in 2020. From a B2B perspective, eight in ten buyers said their omnichannel behaviors were just as good, if not better, than the way they had interacted before. As a result, we’re seeing companies be much more aggressive with connecting with their consumers and customers in more personalized, digitally enabled ways than before.
Kweilin Ellingrud: What a dramatic change on all dimensions, as you described.
Greg Kelly: Another big change that we’ve heard a lot about is the supply chain change—the supply chain disruption—which, of course, has been a big catalyst for the highest inflation we’ve had in 40 years. And that’s really required companies to be on top of their game—both on the demand side and the supply side.
On the demand side, that’s thinking about how to put the customer at the center and add value, and then make sure that they get compensated for that value with the pricing and promotion that’s commensurate with the cost increases that they’re incurring. And then on the supply side, that’s giving a new level of thought to where their products are produced, how much inventory they’re building, and how they’re doing their forecasting, which has to be much more sophisticated than in the past.
Unpacking what sustainable and inclusive growth looks like
Kweilin Ellingrud: Let’s take each of the elements of sustainable and inclusive growth separately. Let’s start with growth because without the growth, the rest is not quite as interesting. Where have you seen CEOs and companies driving really transformative growth?
Greg Kelly: It starts with the growth mindset. As you said, if you don’t have growth, it’s hard to do as much as you can and need to do on the sustainability and inclusivity side, as it helps fund some of the improvements you need in sustainability. And it creates opportunities for people from an inclusion standpoint. What I found in working with companies is that it really does start with a growth mindset. I can usually tell in my first conversation with the top leaders of a company whether or not they’re going to be a growth outperformer. When I’m talking to those top growers, the question isn’t really, “Can we?” It’s more a question of, “Where and how should we grow? Where are the greatest opportunities?” And they’re usually more focused on a wider variety of growth levers.
As I mentioned in the introduction, thinking through how much we can grow in the core is important. And by the way, the outperformers always grow in the core too. We usually find that you’re much more likely to outperform if you’re growing in your core categories, in your core market, because you’re always finding renewal opportunities. But then you’re moving to adjacencies and growing in adjacencies and finding opportunities for those strengths to apply in new ways. And then you’re also growing in additional geographies and doing that with a wider variety of capabilities with innovation and a focus on your core categories, your core customers, and then you’re finding even better ways to meet your customer needs. Frequently, that requires better innovation. Also, it can be connecting more digitally, connecting with better marketing. We talk about full-funnel marketing, which is the brand-building marketing as well as the performance marketing. So connecting with better capabilities and then also pursuing growth inorganically through mergers and acquisitions. We find that the growth outperformers use those multiple levers to drive growth. But again, it all starts with that growth mindset. The leaders with that growth mindset grow twice as high as those without it.
It starts with the growth mindset. If you don’t have growth, it’s hard to do as much as you can and need to do on the sustainability and inclusivity side, as it helps fund some of the improvements you need.
Kweilin Ellingrud: What about in terms of inclusion? We’ve seen the business case for diverse companies and diverse leadership pretty consistently. But what are some of the leading practices of CEOs, of company leaders to promote genuine inclusion, both for employees and their customers?
Greg Kelly: It starts with awareness. They have to know where they stand and where they stand at each different level. You’re well aware, I know, of the different assessments that we have for women in the workplace. Customers understanding that at the entry level, at the manager level, at the more senior levels in the boardroom, is really a critically important starting point.
The second part is [the company’s] commitment to change—really setting aggressive aspirations for what they can and should do. A third is then rewarding that change. We’re seeing leading companies really build that into their performance assessments for their key leaders.
And finally, there’s real coaching and development on the “How?” I know I’ve learned a lot over the past few years. I have a transgender son, for example. I thought I knew a good bit about inclusion, but I found out there was much more that I needed to learn to be a truly inclusive father. I think the same thing is true for our leaders at our companies. We all have a lot we can learn.
Kweilin Ellingrud: So that’s growth, inclusion. Finally, let’s talk about sustainability. What have you seen in terms of how companies have successfully pursued business goals while also prioritizing outcomes for the environment?
Greg Kelly: Kweilin, I’ve found the same four things that I just mentioned on inclusion apply to sustainability as well. Having real awareness, committing to change, rewarding the change, providing coaching and development to make the change happen. Maybe one of the key differences, I’d say, when it comes to sustainability, is just how far you have to reach.
For many of our companies, sustainability and being more sustainable means reaching outside their own companies and helping their suppliers improve their sustainability. So it’s even more externally oriented. One retailer with whom we worked is a good example where, in their own operations, they worked on [being more sustainable] and got to a good spot pretty quickly. But the real emissions are coming from all of their suppliers. They were pretty creative in creating a solution for all of their suppliers to understand their own emissions, understand what levers they might pursue to reduce those emissions, and then also expecting progress for those suppliers over time.
Confronting a challenging landscape
Kweilin Ellingrud: Greg, I’d love to explore what the future of America looks like for the average consumer out there. You’ve got decades of experience with consumer and retail companies, and we’ve seen that it’s a uniquely challenging time for a lot of Americans. Our latest American Opportunity Survey published just a couple of months ago found that only 35 percent of respondents thought it likely that our country as a whole will enjoy continuous growth and economic opportunity over the next five years. So the outlook is quite pessimistic. What actions do you think that consumer-facing companies can take in this more challenging landscape to drive sustainable and inclusive growth?
Greg Kelly: That’s a great question, Kweilin, and I think it goes back to what we’ve been talking about: first of all, having that mindset for growth, and that mindset that growth is a positive driver for sustainability and for inclusion. So [companies can start] with that mindset and aspiration to have the “and” and drive sustainable inclusive growth.
The second [action] is being pretty aggressive in the pursuit of that. And by aggressive, I mean pursuing multiple avenues. We find that the companies that look to grow in their core, in adjacencies, in additional geographies are the ones that are more likely to succeed. And we also find that those that are thoughtful about doing that through multiple capabilities are more likely to succeed.
Whether that’s improving their innovation capability, their digital connections, or what we call full-funnel marketing, which is both brand-building and performance-oriented marketing, and those that are thoughtful about how acquisitions can help accelerate their progress—those are the [companies] that outperform. So that second key is pursuing multiple levers. And third, holding themselves accountable for the “and,” for driving inclusion and sustainability and growth.
Kweilin Ellingrud: How have you seen that happen, the accountability piece of it?
Greg Kelly: It goes back to having it be included in executives’ reviews. A core part of their development. Prioritizing it. We’ve seen some leading companies prioritize it as one of the top three [areas] that leaders are accountable for. When you do that, they tend to pay attention and make progress.
Kweilin Ellingrud: Absolutely. Put your money where your mouth is, right? Wonderful. And, Greg, you live in Atlanta, right? You’ve written a lot about how Atlanta has thrived economically over the past few years. But the rest of the state has struggled to keep up with the growth rates and economic inclusion in Atlanta. How do you think we can better address these disparities both in Georgia and across the country?
Greg Kelly: I do love Georgia, and I love Atlanta. Georgia has made real progress. I should start with that. It’s gone from being the fifteenth- to the ninth-largest state economy from 1979 to 2019. It has the world’s second-busiest airport, two major container ports, great roads, great rail networks. So a fantastic state and fantastic progress.
You’re right, though. We did write about what got us here won’t get us there—that more is needed. And it starts with infrastructure. We do need more infrastructure. Hopefully, the latest national support in infrastructure will help, but we really need to invest more in infrastructure in Georgia. A related topic that some also include in that infrastructure, but we’d call out separately, is the broadband expansion. Expanding broadband throughout Georgia is a critical driver for success across Georgia. A third is in reskilling. You mentioned in your introduction that you’re part of our McKinsey Global Institute, which looks at this, of course. But I haven’t seen as much written about how our workforce population growth is really going to be lower looking forward. Maybe the lowest it’s been, really, since our country was founded. That’s a national trend. It’s also a Georgia trend. The workforce in Georgia participates at a lower rate than the rest of the country.
So reskilling, providing childcare, providing better education are all key to great labor-force participation in Georgia, and it’ll be key for Georgia’s success. And finally, supporting younger, faster-growing companies is a real opportunity for Georgia to drive higher growth. Some of those same things apply in Atlanta as well, but are especially critical for Georgia more broadly.
Kweilin Ellingrud: Greg, I think a lot of the themes that you emphasized are absolutely applicable more broadly across the country. Broadband access, right? Making sure that workers in rural areas have the access and connectivity to be able to connect to a whole new set of jobs that even two years ago, pre-COVID-19, probably wouldn’t have been available. To connect and reskill and upskill because I think the challenge in our current economy is we have quite a few jobs. Millions of jobs. We also have a number of people now looking for them. But there’s a mismatch in the jobs and the skills that we need on the one hand, and the skills of the workers that are remaining and looking for those jobs on the other. So how do we upskill and better match in our labor markets?
Greg, thank you for sharing your insights with us today. I loved the “and” elements of growth and sustainability and inclusion, and the fact that you emphasize that we’re all on a learning journey, and we can each get so much better. Whether you’re the CEO of a consumer products company or you work in a very different role, the continuous-improvement journey across those dimensions is so important.
Tangible steps to accelerate sustainable and inclusive growth
Kweilin Ellingrud: We’re going to be wrapping up each of our Future of America episodes with a rapid-fire Q&A session. Greg, you’re the first one up for this.
Greg Kelly: Lucky me.
Kweilin Ellingrud: Greg, is there a book or an article that you’ve read recently that excites you about sustainable and inclusive growth in the future?
Greg Kelly: Maybe I’ll take the inclusion side of that, Kweilin. I just watched The Tender Bar. I don’t know if you saw that movie come out in December. And as is usually the case, I watched it with my wife. And she said, “Ah, it was pretty good, but the book was better.” How many times do we hear that the book was even better? So that was a good catalyst for me to get the book. I’m sure many of our listeners read [the book] when it came out in 2005, so it’s old news to them. But if you haven’t, it’s a wonderful story. J. R. Moehringer is the author. He writes of his own coming of age. He grew up without his father present, so his real inspiration came from a wide cast of characters in the bar that his uncle ran. To me, it’s a good example of taking inspiration from a wide variety of people and a real testament to the power of inclusion.
Kweilin Ellingrud: Greg, what makes you optimistic that we can get there? That we can really achieve sustainable and inclusive growth going forward?
Greg Kelly: It goes back to the transparency that I mentioned at the beginning, Kweilin. The fact that consumers and customers do have that transparency into how companies operate today. And they’re going to hold companies accountable. They’re going to hold our government leaders accountable. So the fact that we have that transparency actually gives me optimism that we’re going to make progress.
Kweilin Ellingrud: More people know, and they’re also voting with their feet. So what is the one thing listeners can do today to promote sustainable and inclusive growth?
Greg Kelly: With that transparency, support those companies and leaders that are sustainable, inclusive leaders.
Kweilin Ellingrud: Wonderful, Greg. Thank you for joining us today. We appreciate your insights.