Leading Off: Ready, set, go: A leader's guide to action in 2023

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ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

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Brought to you by Liz Hilton Segel, chief client officer and managing partner, global industry practices, & Homayoun Hatami, managing partner, global client capabilities

Leaders are used to deciding what should happen when. Yet sometimes the goal may be clear but the path murky on the way there. Or it may be difficult to detect which of many possible actions is most suited to a specific situation. In an uncertain world, the test of a leader’s skill may lie in reading and responding to signals accurately: our research shows that this capability may be what kept some organizations more resilient than others during the pandemic-induced downturn of 2020. If you’re not sure which signals are red flags or green lights, read on for some indicators.

AN IDEA

Wintery aerial view of a red ice-breaker ship pushing through cracked sea ice.

Watch for three signs that need action

Leaders have a multitude of priorities, but CEOs the world over agree on what matters most. In our latest CEO Excellence Survey, led by McKinsey senior partners Carolyn Dewar, Scott Keller, Vikram Malhotra, and Kurt Strovink, the heads of leading companies name disruptive technology, the economy, and geopolitics as the top signals that they expect to monitor and act on in 2023. A mix of defensive and offensive moves takes center stage in this new playbook. For example, in response to digital disruption, many global companies are spending heavily on advanced analytics to gain competitive advantage. They’re also fortifying cybersecurity infrastructure as online threats escalate. And the growing number of geopolitical risks has many leaders enhancing their organizations’ compliance and early-warning capabilities: “Globalization is changing, but it’s not disappearing,” says one CEO. “We need to plan for multiple scenarios and have a game plan for each contingency.”

A BIG NUMBER

That number stands for the ‘superpower’ that your organization needs to set it apart from the rest, according to research by McKinsey senior partners Homayoun Hatami, Brad Mendelson, Michael Park, Liz Hilton Segel, and Rodney Zemmel. “Around the world, CEOs are concluding that success in congested, increasingly commoditized markets can be achieved by building a superpower,” they say. This is an institutional capability whereby an organization consistently does something better than its competitors. Six elements go into building such a capability, which could be a functional one—such as sales or supply chain management—or an enterprise-wide strength such as agile decision making, the ability to innovate, or customer centricity .

A QUOTE

‘Risk needs to be part of everyone’s job.’

That’s McKinsey’s Jim Boehm, Jan Shelly Brown , Lama Sabbagh, and Karim Thomas on the importance of aligning everyone in the organization on risk control initiatives. Business units and the risk function tend to be at loggerheads, but as organizations grapple with geopolitical and economic uncertainty, they should consider adopting a unified mindset regarding risk controls. “We’ve found that the best companies establish active collaboration between risk, security, IT, and the business units,” the authors note. “They have a comprehensive understanding of the changes needed at the operating-model, technology, and culture levels, and a coordinated approach to the actions to take and in what order.”

A SPOTLIGHT INTERVIEW

Grass growing through cracks in a concrete footpath

Short-term disruptions may distract companies, but “the long-term direction doesn’t change: the commitment is to net zero,” says McKinsey senior partner Humayun Tai in this podcast on achieving a balance between building resilience and committing to clean energy. Companies may need to adopt a mix of strategies to move closer to this goal, such as tapping into both public- and private-sector funding, investing in sustainable materials, and forming green partnerships. According to McKinsey partner Anna Moore, an essential action for leaders is to be “laser focused on where there truly is market share gain, or green premium to be had, from new, sustainable value pools.” For example, she says, “tooling and machinery companies [are] shifting from serving oil and gas to serving renewables. It’s tweaking the existing asset base to match where the direction of travel is around sustainability.”

STUCK IN TRAFFIC

Death by committee. Paralysis by analysis. These are phrases commonly used to describe situations where actions come to a standstill because of too much debate, persistent disagreement, power plays, or fear of making a wrong turn when economic and business signals are ambiguous. Leaders may need a structured way to break such gridlocks. McKinsey senior partner Aaron De Smet and colleagues suggest a framework called DARE—standing for deciders, advisers, recommenders, and execution stakeholders—that outlines a well-defined path from decision to action. “It can be helpful to involve more people in making a decision—but only when roles are clearly articulated,” they say. “Give more people a voice, but fewer people a vote.”

Lead with action.

— Edited by Rama Ramaswami, senior editor, New York

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