Congratulations! Your organization is performing at or near the top of its game, or it has been in the recent past. Perhaps even better, you have a strategy to improve in the near future. Now for the bad news: the good news won’t last.It can’t—at least without the right kind of organization. Across industries, barely half of the top performers sustain their leadership position over the course of a decade, according to research by our colleagues in McKinsey’s Strategy Practice. The challenges in maintaining dominance are not new; even sectors that digitization has not consigned to oblivion have seen flagships such as Delta Airlines, General Motors, and Owens Corning move from the top into Chapter 11 and then back into leadership positions again.But of course, technology is changing everything. As digitization, advanced analytics, and artificial intelligence (AI) sweep across industries and geographies, they aren’t just reshaping the competitive landscape; they’re redefining the organizational imperative: adapt or die.
The average large firm reorganizes every two to three years, and the average reorganization takes more than 18 months to implement. Wait and see is not an option; it’s a death sentence.As a result, companies are beginning to experiment with increasingly radical approaches. We’re struck by a commonality among those who get it right: they create adaptive, fast-moving organizations that can respond quickly and flexibly to new opportunities and challenges as they arise. In doing so, they’re moving intelligent decision making to the front lines. That’s in sharp contrast to the standard, “safer” modus operandi of capturing data, sending it up a hierarchal chain, centrally analyzing it, and sending guidance back. Several of these forward-thinking organizations now starkly describe their decision making as being pushed to the “edges”—to and beyond employees, past the organization’s four walls, and out to consumers and partners. The process functions more like a network and less like a chain of command.
In this article, we’ll share these emerging elements of the organization of the future. While there is no set formula for success, we’ve seen versions of these elements at so many companies that we think they provide at least the organizational outline to win (Exhibit 1). Along the way, we’ll try to dispel some common misconceptions (too risky! too inefficient! too time consuming to set up!) of what such an organization really means. We know you don’t want your company to undergo yet another reorg—and another one a few years after that. Consider this a road map out.
The urgency imperative
A good road map can come with callouts and suggestions, and here’s our first: floor it. When you compete in a marketplace that moves so quickly, the default outcome is to fall behind. If your organization is to have any hope of keeping up, it will need to be reconceived as fast, quick to turn, and even quicker to emerge from rapid pit stops and tune-ups. One could almost analogize to a race car—almost, because race cars typically run on a fixed track toward a clear finish line. Your organization’s race, by comparison, is toward an unknowable destination. And that race doesn’t end.
* * *
Our colleagues in McKinsey’s Strategy Practice have just written a book, Strategy Beyond the Hockey Stick (Wiley, 2018), about how to tame this “social side” of strategy. By understanding the real odds (long) of breaking out from the pack, by making a consistent series of big moves, and by treating these steps as a journey that doesn’t end, they show that companies can make strategic breakthroughs. (For more, see “Strategy to beat the odds.”)