ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

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

An IDEA

Understand AI’s growing impact

AI’s applications and implications continue to expand, reinforcing its position atop business leaders’ tech agendas, according to the McKinsey Technology Trends Outlook 2026 report. McKinsey’s Michael Chui, Roger Roberts, and Tanguy Catlin note that AI underpins and amplifies the 14 most meaningful trends across the tech landscape, including software development, scientific discovery, advanced connectivity, and quantum technologies. They also identify five broader themes spanning these trends:

“Not even the most talented technologists can predict every breakthrough. But business leaders who understand the patterns behind technological change will be equipped to shape the future rather than react to it,” the authors say. To learn more about the tech trends report, register for a McKinsey Live webinar on October 15.

A BIG NUMBER

$800 billion

This is the value that could be unlocked if software organizations can close the current productivity gap among engineers using agentic software development tools, according to McKinsey’s Charlotte Relyea, Gautam Lunawat, Janaki Palaniappan, Martin Harrysson, Matt Linderman, Prakhar Dixit, and their coauthors. While 80 percent of software engineers using AI tools see productivity gains of about 3 percent, the top 20 percent see average growth of 55 percent. “If organizations can coax their roughly 30 million engineers globally to catch up to the top quintile—a conservative target in a world where leading teams are already exceeding twofold productivity gains—the potential new value starts to rival the GDP of a midsize economy,” the authors note.

A QUOTE

“‘Tokenmaxxing’ is becoming a dirty word, with some companies taking down their AI user leaderboards. The ‘go, go, go’ energy driving AI over the past two years is yielding to a ‘wait a sec’ moment.”

McKinsey’s Pankaj Sachdeva, Wasim Lala, and their coauthors say companies are realizing that AI-related costs can rise faster than traditional tech spending. Leaders are now trying to scale AI while managing demand through “enterprise AI tokenomics,” a new approach designed to predict and manage AI tool use. The authors say companies can save 20 to 30 percent on AI costs by developing capabilities to optimize spending, improve accountability, and redirect savings toward higher-value opportunities.

A SPOTLIGHT INTERVIEW

To generate value from AI, CEOs should be focused on redesigning how their companies operate, not just chasing productivity gains. “A big part of winning the future will be having an adaptable operating model that allows you to learn fast and keep up with change,” Senior Partner and McKinsey Global Institute Director Tanguy Catlin says in an episode of The McKinsey Podcast. He observes that the biggest challenge in adopting AI is managing change and helping employees build the right skills to keep pace with the technology’s evolution. “Leaders will also need to demonstrate that they are growth oriented, have a certain level of humility, and have a set of incentives and systems that reward experimentation rather than punish failure,” Catlin says. “That will be critical for organizations to make that pivot.”

—Edited by Eric Quiñones, senior editor, New Jersey

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