Leading Off: A leader’s guide to translating strategy into long-term success

ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

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Brought to you by Alex Panas, global leader of industries, & Becca Coggins, global leader of functional practices and growth platforms

Welcome to the latest edition of Leading Off. We hope you find our insights useful. Let us know what you think at Alex_Panas@McKinsey.com and Becca_Coggins@McKinsey.com.

—Alex and Becca

Crafting corporate strategies that can generate sustained value has long been a demanding task. It’s especially challenging for today’s business leaders as they deal with a growing range of disruptions—from geopolitical uncertainty to AI’s rapid growth. And the stakes are only getting higher: The rewards for turning a compelling strategy into effective practices are greater than ever—as are the risks of getting strategy wrong. This week, we look at how top companies outperform their peers by converting breakthrough strategies into lasting results.

An IDEA

An image linking to the web page “How Strategy Champions win” on McKinsey.com.

Connect strategy and execution

When it comes to turning strategic vision into economic profit, the gap between top- and bottom-performing organizations is growing. Senior Partners Alejandro Krell , Alex D’Amico , Andy West , Dago Diedrich , and Michael Birshan and their coauthors studied the strategy practices and capabilities of more than 400 companies to learn how some become “Strategy Champions.” The authors found that these firms are, on average, stronger at every one of the 12 fundamental building blocks of strategy—and particularly at mobilizing their organizations to succeed. This means that Strategy Champions are better at empowering and engaging the right talent on each strategic decision, translating the strategy into granular initiatives, reallocating resources to the strategy, and ensuring that the strategy is baked into the organization’s plans and budgets. “The prominence of mobilization in our research reinforces a crucial reality: Before a strategy can shape the competitive landscape, it must successfully embed itself into the DNA of the organization,” the authors say.

A BIG NUMBER

That’s the share of executives and managers who say their companies effectively align their budgets with corporate strategies, according to a McKinsey Global Survey on resource allocation. McKinsey’s Andy West and Tim Koller also report that only 53 percent of the survey’s 617 respondents say their organizations fully fund the priorities they’ve identified on a regular basis. “Those who indicate that their organizations succeed at linking their budgets to their corporate strategies—and at taking appropriate levels of risk—are much more likely than others to report that their organizations outperform on both revenue growth and return on capital,” they say .

A QUOTE

“The best leaders and companies are ambidextrous: prudent about managing the downside while aggressively pursuing the upside. These leaders are thinking about the next decade, not the next month.”

That’s McKinsey Global Managing Partner Bob Sternfels and Senior Partners Ishaan Seth and Michael Birshan on why business leaders need to build strategic courage during turbulent times. McKinsey research has found that an overly defensive approach to volatility tends to lead to median company performance, while aggressive offensive stances deliver a mix of occasional wins and big failures. The authors instead recommend “taking all the right defensive actions while also leaning into the volatility, using it as a catalyst to galvanize action around new opportunities.”

A SPOTLIGHT INTERVIEW

An image linking to the web page “Why strategists should embrace imperfection” on McKinsey.com.

In a constantly changing world, the pursuit of perfection can be a limitation rather than a strength. That’s why leaders should learn to embrace imperfection, according to McKinsey alumni Charles Conn and Rob McLean, authors of The Imperfectionists: Strategic Mindsets for Uncertain Times. In an episode of McKinsey’s Inside the Strategy Room podcast, Conn says that companies and nonprofits can make small moves to build their knowledge while navigating uncertain environments. Then they can “slowly add capabilities, assets, and other forms of advantage so they can essentially bootstrap themselves into strategic position, rather than making the wrong type of bold leaps or being frozen in stasis.” McLean adds that organizations should create a culture that empowers people to raise bold ideas and questions about strategy. “We’re all familiar with the situation of someone being told, ‘That’s a stupid question.’ That’s the kind of thing that puts an end to curiosity,” he says.

TAKE THE TEN TESTS

An image linking to the web page “Have you tested your strategy lately?” on McKinsey.com.

For leaders who are struggling with uncertainty as they try to develop strategies for the future, some timeless approaches can help. McKinsey’s ten tests of strategy highlight the enduring questions that can help leaders assess the strengths of their strategies. “Detailed pressure testing, in our experience, helps pinpoint more precisely where the strategy needs work, while generating a deeper and more fruitful strategic dialogue,” say Senior Partners Chris Bradley and Sven Smit and Senior Partner Emeritus Martin Hirt. The authors suggest starting with a comprehensive question—“Will your strategy beat the market?”—and then digging deeper into the details. Other tests include asking whether an organization’s strategy taps a true source of advantage, takes a granular view of competition, and embraces uncertainty.

Lead by turning strategy into action.

— Edited by Eric Quiñones, senior editor, New Jersey

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﻿Connect strategy and execution

﻿“The best leaders and companies are ambidextrous: prudent about managing the downside while aggressively pursuing the upside. These leaders are thinking about the next decade, not the next month.”

Connect strategy and execution

“The best leaders and companies are ambidextrous: prudent about managing the downside while aggressively pursuing the upside. These leaders are thinking about the next decade, not the next month.”