McKinsey · Ideas & Institutions
TIER 4 Fri, 26 Jul 2024 06:48:30 +0000
Emerging ideas for leaders
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| | FOUR OF OUR BEST NEW IDEAS FOR THE C-SUITE
| | | Welcome to the latest edition of the CEO Shortlist , a biweekly newsletter of our best ideas for the C-suite. By way of introduction, we lead our industries and capabilities globally, having taken over from Liz and Homayoun. We appreciate the opportunity to communicate with you via the CEO Shortlist. We hope you find our perspectives novel and insightful as we continue to evolve this format. You can reach us at alex_panas@mckinsey.com and axel_karlsson@mckinsey.com. Thank you.
| | —Alex and Axel
| | As rates stabilize or begin to fall in the US, CEOs focus on growth. Every sector has its share of problems. In telecommunications, leaders are thinking hard about the fiber build-out. In retail, they’re as focused on industry structure as ever: the biggest companies are earning all the growth in ROIC and margins. In biopharma, leaders are coming to grips with the Inflation Reduction Act. In banking, they’re similarly concerned with regulatory initiatives, such as the Basel III endgame and new rules on capital accuracy and liquidity. But regardless of sector, what we’re hearing almost everywhere is that as the shock of higher rates has worn off, and the aftermath has not been nearly as catastrophic as some predicted, CEOs are turning their attention back to growth.
| | Gen AI will have an outsize impact in the services industries. We’re all familiar by now with the possibilities of generative AI. What’s less common knowledge is that the impact will vary a lot between industries. We’ve already heard rumblings from leaders in heavy industry that gen AI is not yet making a difference. But organizations that sell intangible products—companies in insurance, banking, telecommunications, media, entertainment, and so on—have a much higher potential for transformation. Our best guess? It’s possible that many companies in these industries could be as much as 80 percent smaller by 2040 as they increasingly rely on gen AI and automation.
| | Where have all the plumbers gone? There are fewer skilled workers—plumbers, electricians, welders, and so on—in the US than there have been in decades. This is a matter of urgency, where “our economic progress is at stake,” says McKinsey partner Bryan Hancock. The shortage—combined with skyrocketing demand, due in part to the energy transition—is causing record increases in annual wages in these sectors, to the tune of more than 20 percent since the first quarter of 2020. What’s more, they’re unlikely to ever go down, threatening margins and long-term growth for companies working in manufacturing and construction operations. What is to be done? Workforce development councils are tackling skilled-job placements, while companies are rethinking their talent and operating models with a renewed focus on productivity.
| | Transformation success hinges on bringing everyone along. Commitment—from senior leadership down to the front line—is critical to enacting lasting change. But it’s not just about commitment to the circumstances of an individual transformation; stakeholders need to believe in the importance of staying agile to meet the demands of rapidly changing circumstances. One key to making this work? Strengthen teams by giving them opportunities to build new skills and the tools to regularly apply them. According to our analysis, transformations are significantly more successful when organizations and managers give employees opportunities to practice new behaviors.
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