BrazilSix strategies for outperforming peers on growth
Less than one in four companies outpaces their industry peers on revenue and profit growth, according to analysis of commercial data from McKinsey & Company. Based on their analysis, the consultants have revealed the six mindsets and strategies that set these growth outperformers apart.
Build a culture of innovation
Companies that achieve superior performance do not simply expand their existing products and services. Instead, they foster a culture and mindset of innovation, bolstered by investments in research and development, digital capabilities, analytics, and artificial intelligence, enabling them to outshine competition
Companies that are top performers in innovation have experienced, on average, a four-percentage-point increase in their annual total shareholder return (TSR) growth on a 5-year period, as well as a 16% higher median return on invested capital when compared to other growth leaders.
While excellence in innovation can enhance any company’s likelihood of surpassing its peers in terms of revenue growth and profitability by 32%, top innovative performers increase their chances by 52%, according to McKinsey & Company.
Commit to ESG-backed growth
When financial resources are limited, the pursuit of ESG objectives might not appear as a top priority. A solid ESG performance cannot compensate for weak fundamentals. Nonetheless, leaders who adopt a ‘win-win-win’ mindset by actively seeking positive outcomes for their customers, the environment, and their company's long-term sustainability will be better positioned to achieve peak growth.
This approach of aiming for strong growth, robust profits, and also enhanced sustainability and ESG scores can result in an annual excess TSR that is 2 percentage points higher than companies that solely excel in financial metrics.
These triple outperformers create value by integrating ESG considerations into their growth strategy. Such companies overhaul their portfolios to reduce net emissions, establish environmentally friendly enterprises, and leverage sustainability as a distinguishing factor to command a higher price premium.
Invest in core for sustainable growth
The path to growth commences within the core. High-performing companies prioritize ‘innovating new’ within their core business just as much, if not more, than ‘scaling old’ ventures. Organizations must focus on both.
Successful CEOs understand that making short-term budget cuts that compromise future core business growth is a misguided financial strategy. Instead, successful businesses boost their core growth by investing in their workforce, refining processes, and embracing innovative technologies.
Estimates suggest that identifying and reallocating 10% to 20% of inefficient marketing expenditures toward enterprise-wide artificial intelligence, data, and analytics capabilities can potentially lead to a 5% to 10% boost in a company’s core business.
Right expansion for the win
In many cases, complacency stands as a formidable obstacle to growth. This is precisely why high-performing companies are strategically exploring adjacent and breakout business opportunities.
C-suite executives who take advantage of the resources available to them in order to explore ventures in adjacent markets are most likely to achieve the most robust shareholder returns.
Strategic downsizing for growth
In certain cases, the path to achieving better growth begins with a strategic reduction in size. Irrespective of the underlying reasoning, the approach of downsizing with the intention to facilitate growth demands a careful allocation of resources and a supportive framework to ensure a smooth transition.
About 30% of recent growth outperformers in McKinsey’s global benchmark followed a strategy of shrinking in order to later grow.
The art of mobilization
CEOs who outperform in engaging their employees, from the C-suite to the base employees, are more successful in realizing value. The study shows that when over 20% of the workforce takes ownership of transformation milestones or initiatives, the average 24-month excess total shareholder return surges beyond 60% compared to industry benchmarks.
These high-performing companies cultivate a culture of bold thinking that is conducive to growth. They mobilize their workforce and nurture a sense of ownership by investing in enhancing their skills and deepening their functional expertise.
