Leading Off: Achieving superhero status: A leader’s guide to institutional capabilities

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ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

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Brought to you by Alex Panas, global leader of industries, & Axel Karlsson, 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 [email protected] and [email protected].

—Alex and Axel

Time was when superpowers were the stuff of comic books, action films, and the furthest corners of our own imaginations. But even mere mortals, including business leaders, can become heroes by helping their companies build a “superpower.” By developing an institutional capability that can make their companies uniquely successful, leaders can set up their organizations to thrive in the long run—as long as they agree on what that superpower should be and how it can create a sustainable competitive advantage. This week, we take a closer look at the enterprise-wide capabilities that can separate the best companies from the rest.

AN IDEA

An image linking to the web page “Building a superpower: What can we learn from the Magnificent Seven?” on McKinsey.com.

Build a capability that endures

In such an interconnected and fast-changing economy, what makes a company truly unique? This may seem like an impossible question to answer; much like human beings, companies contain multitudes. But senior partners Brad Mendelson, Harald Fanderl, Homayoun Hatami, and Liz Hilton Segel have identified six elements that help companies develop exceptional institutional capabilities. An institutional capability, or “superpower,” is an integrated set of people, processes, and technology that can give organizations a distinct edge based on one or more of the following: vision and leadership, employees, culture, technology, organizational structure, and routines. While there’s no one approach to determine which superpower is most advantageous for a specific company, organizations can only realize their superpower if they’re clear on the value they hope the capability will create, especially over the longer term; if it’s rooted in corporate strategy; and if it’s linked to work that is core to the company and its industry.

A BIG NUMBER

25%

That’s the share of companies that grow sustainably over time, according to McKinsey’s Jill Zucker, Kate Siegel, and Rebecca Doherty. After analyzing the ways in which more than 4,000 global companies pursue growth, they identified three timeless strategies followed by growth outperformers and three others that are newer—many of which underscore the value of a superpower in today’s business environment. Among them is innovating the core business, which accounts for 80 percent of growth; involving key talent in growth initiatives; and creating an innovation culture that embraces risk-taking.

A QUOTE

“You do not have to be a tech company to achieve excellence in digital and AI. Large, established companies can outcompete and capture value, but only when they are willing to commit to the hard work of rewiring their enterprise.”

That’s McKinsey’s Eric Lamarre, Kate Smaje, and Rodney Zemmel on the promise, and the inherent challenges, of tech. Technology is a superpower in its own right. But these days, digital and AI transformations are table stakes for all companies, and many organizations struggle to take advantage of tech at scale. In their book, Rewired: The McKinsey Guide to Outcompeting in the Age of Digital and AI, the authors describe six interconnected capabilities that a business needs to stay competitive through its tech—all of which call for strong leadership at the top. “The cross-functional nature of a digital and AI transformation requires an unparalleled level of collaboration across the C-suite,” they say. “Rewiring the business is an ongoing journey of improvement, not a destination.”

A SPOTLIGHT INTERVIEW

An image linking to the web page “Building a business culture with a single vision at its core” on McKinsey.com.

At Grab, a mobile technology firm in Southeast Asia, a focus on culture and employees has been part of the organizational fabric from the start—and continues to underpin the company’s success. “The most important lesson is that our business is ultimately as strong as the people we hire and nurture,” says Hooi Ling Tan, the company’s cofounder. And while Grab has expanded its footprint and business lines over the years—from ridesharing to food delivery, payments, and travel—culture and employees remain essential to its work. “We acquire talent that embodies our four core values, which we call ‘the four H’: heart, honor, humility, and hunger. These values allow us to realize our vision, which is to drive Southeast Asia forward by elevating the quality of life for everyone.”

WE NEED A (NEW) HERO

An image linking to the web page “Latinos in Hollywood: Amplifying voices, expanding horizons” on McKinsey.com.

Superpowers, and the heroes who possess them, have long been a big draw for moviegoers. But returns on the movie industry’s superhero investments seem to be diminishing as viewers grow wary of seeing the same characters and motifs in film after film. One potential antidote: improving the industry’s representation of Latinos, both on- and off-screen. According to McKinsey research, US Latinos account for larger percentages of ticket sales and streaming subscribers than their share of the population but remain underrepresented in the leadership of media companies, in acting roles, and as content creators whose work is greenlit. A concerted effort to create more opportunities for Latino talent and stories could bring in more viewers and generate more revenue for the entertainment industry—and dispel long-held stereotypes about a large, and growing, community.

Lead by investing in institutional capabilities.

— Edited by Daniella Seiler, executive editor, Washington, DC

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