319. Why strategy needs mobilization, especially in this moment

Speaker A: From McKinsey and Company, I'm Sean Brown and welcome to Inside the Strategy Room. As strategy rises to the top of executive agendas, many organizations are struggling to translate bold strategic choices into sustained performance. In this episode you'll hear from three of our strategy leaders who share how companies should be thinking about how to build effective strategies in the context of, of the significantly intensifying competitive landscape. They'll also unpack the key differentiator strategy winners are focusing on mobilization and ah, they'll explain why it's the critical factor separating the leading companies from the laggards. Our guests today are, uh, Andy west and Sebastian Lacroix, who are the global co leaders of our strategy and corporate finance practice, as well as Whitney Zimmerman, who is a distinguished expert in strategy. They are also co authors of a recent Harvard Business Review article on the topic, which we've linked to in the show notes. The research that informed this discussion is also featured in a forthcoming book by Andy West, Whitney Zimmerman and Tim Kohler called Strategy and Value Publishing November and which we've also linked to in the show notes. Okay, Andy, let's begin with why we're in a strategy moment here in 2026 and what drove you and your co authors to write the HBR article. What are you seeing that leaders are grappling with most right now?

Speaker B: Yeah, Sean, thank you. There are a lot of ways to think about strategy and the moment that we're in, there's a lot of uncertainty, there's a lot of things that have just changed in the world. And so people have more questions with, uh, those questions come, I think more opportunity. We definitely see strategy as an unfreezing moment, the opportunity for companies to expand performance. So I think that just the fact that so much is changing is partly driving strategy. But in order to really want to act on it, you have to have some level of conviction. And I think to me that is a bit of the catalyst that's happening right now. Many of our clients are understanding the difference of operating in this environment than in, you know, an environment two or three years ago. They're starting to digest geopolitics, they're starting to digest AI, they're starting to digest supply chain uncertainty and inflation. And so they're kind of ready to act. So all of these things I think are conspiring to, uh, a moment.

Speaker A: Thanks, Andy. And within this moment, there's a new competitive reality across industries. Competitive intensity has grown as traditional industry boundaries are continuing to shift. So Sebastian, maybe you can take us through now how this new Competitive reality is actually playing out in the marketplace.

Speaker C: So if you think a little bit about what we've seen in the last few years, combining the volatility and the uncertainty, but as well how competition, uh, has been changing over time, it's actually quite fascinating to see the speed at which market share is changing ends. And of course, when the shuffle rates are uh, high, competition is more intense and it can be harder to think long term. And just to highlight a bit from my own experience, the speed at which the market share can change and the competitive landscape and competitive intensity can change across the board, I'm just thinking, you know, about, about the banks. I'm, I do serve, and I do serve a lot of banks across the globe. Um, in the past competition was already very intense amongst the banks. And now you have digital players coming into the game and gaining market shares, but also the insurance players going into banking or the telcos and the tech giants. Without forgetting the OEMs in automotive offering financing schemes, in leasing, most of those new players are capturing more and more market shares, putting very strong pressure on the short term imperatives for banking executives to make it even more tangible. If you just talk about France, you have 65 million inhabitants. In the last five years, the new players in banking have gained 15, 1 5, 15 million clients, while the traditional banks, which represent 90% of the market share, they have lost 2 million clients. And we see this kind of trends in the majority of countries where customers and competitors are defining new boundaries. So if you think about this new competitive reality, combined with all the volatility and the geopolitics, it defines a new battlefield for the vast majority of companies. And making strategic choices in that context has become harder.

Speaker A: Uh, so Andy, how should leaders be responding to this shifting market dynamic?

Speaker B: I do think understanding competitive dynamics, what's happening, especially what's happening outside of traditional competitors, is a really important dialogue. Whether it's part of commercial discussions, whether it's part of strap planning, whether it's part of resources, reallocation, it almost doesn't matter. But very few companies actually think about market dynamics on a very regular, uh, basis and bring that into conversations. I think it's knowing where you are, there's a lot of leading indicators. So my recommendation would be you bring that in to discussions. And I would say, uh, 100% of the time it actually changes your decision making. Like you fundamentally just changes the way that you're thinking about a problem. You're reallocating resources, you're choosing to compete.

Speaker A: And so how should CEOs adapt their approach then to strategic decision making when these competitive dynamics are changing so quickly and uncertainty is so high.

Speaker C: I think what Andy was uh, was describing and uh, what we were talking about with the shuffer rate and the uncertainty does require the CEOs and the organization to really move the needle on the way you talk about your competition, the way you are pushing the business, you need to really think about the decision. The what if you can use war gaming, you can use scenario planning. But at the end is how do I do? We make sure we, we take a niistic view on the market in which you operate and you change uh, the way of thinking, framing the potential decisions ahead of you.

Speaker A: So in your experience then are business leaders bringing enough of that competitive advantage lens to their strategy discussions and decisions?

Speaker C: I would say that a lot of them are thinking about it. The question is how many of them do change the way they are making decision or framing strategic options, taking that into account because of course when you operate in an industry as an executive, you know this industry very well, you know what's going on. The question is how do you debias your way of thinking about strategy instead of uh, you know, acknowledging that you have new competitors? How do you truly change the pivots, the strategic way of thinking about your, your capital allocation or your human capital decisions? This is where I see the biggest gap and I would say that the vast majority think about it, I would say a small majority are taking that into account to truly change their strategic uh, management better. Envy.

Speaker B: I think this is probably one of the largest blind spots that actually organizations have. We surveyed about a thousand companies on competitive advantage. 57% of the companies, when we ask them are you confident or highly confident that you know your source of competitive advantage? About 60% said oh yeah, yeah, I know, I know what my strength is, right? I have a pretty good sense of competitive advantage. But when you, when you dial into that, when you, when you click down on it, uh, only 10% of those companies actually had any real data behind it that actually track the drivers of advantage at a market level. So if you think you have advantage but you don't know if it's strengthening, you don't know if it's eroding, you don't know if people are attacking it, you're really not operating on a very solid decision making foundation. Even more even if you know what it is, are you doing anything with that insight when it comes to strategy? So for most companies that we talk to, and by the way, uh, anecdotally I will say I will go talk to an executive team. If I go talk to 10 senior executives at the same company and I ask them about their source of competitive advantage, I will get at least three fundamentally different yet equally emphatic answers. And it doesn't mean that they're wrong. It just means that there's really not the alignment. The truth is usually in there, somewhere in between a combination of the three. But if you don't know it and you're not aligned on it, you're not managing it. And if you're not managing it, you're not retaining the competitive integrity that you likely, uh, have had over the last several years. So in times of change, I think competitive advantage is really important and I think it is a pretty big blind, blind spot for most organizations.

Speaker A: Thanks. And Andy, just to dig in a little more on that blind spot, what is your advice then for companies who have been enjoying a strong and long standing competitive advantage and how should they be thinking about keeping an eye on it and potentially pivoting?

Speaker B: It is really hard. It's hard to pivot. It's also hard to build. And so thing number one is make sure you're not losing it. The easiest and number one thing you can do is retain your advantage in most situations. So for that you've got to invest behind it. You've got to recognize what it is, you've got to actually act on it. So piece number one is hold on to what you have now. If that no longer has value, meaning it's eroded. And now what you used to, what used to make you special is now commonplace because of technology or industry structure or market entry or AI native organizations coming after you or whatever that might be, or if it's illiquid, meaning I've got to move from A to B in my industry. I see a great industry over there, but what I have is a real commercial capability. But I don't have a call point. You know, in, in this new market, for example, you've got to be very, very thoughtful and purposeful and you need to maintain a long term view of investing because often it's two or three chest moves in order to get there. Now, most companies, especially large companies that are quite profitable, this is not something that happens overnight. So we, what you have to recognize is our, you know, our competitive advantage is eroding. I need to build capabilities over here. You've got to make that explicit. It requires a massive amount of executive alignment and coherence to say we need to move and we don't really have the capabilities we need to move. Right. But what we do have, well, we might have one of the most temporary and most liquid forms of competitive advantage that exist. Or, you know, differentiating forms of competitive advantage that exist, which is cash. Right. It's not very malleable. But if you can buy your way there, if you're a large company with large cash flows, you can afford the migration. Many companies have done that. Whether it's migrating industries from industrials to health care, whether it's migrating into new segments of the market. You need to understand that whether it's through M and A, whether through its very purposeful capital reallocation, you need to get there and you need to do it now. Why is that so hard? It's really hard for every any Monday to show up and say, today's the day we're going to start unfunding a, uh, going concern with lots of employees and lots of political capital in my organization and fund a new one. That's why it's a strategy question. It's really a decision, not just capital

Speaker A: reallocation, IT and also AI is hugely disrupting markets right now and further adding to that challenge. So Sebastian, how are leading organizations thinking about AI then in this strategic context,

Speaker C: the companies which are uh, the best position for this disruption will treat AI. And um, this is the way I'm doing that with my client as a strategic inflection point. And the way we think about AI, we think about it across three vectors that are very important to track. The first one, very well known, the productivity gains to stay in the game. You think about automation, you think about workflow redesign. The second one is a little bit more complex innovation to expand and to defend your profit pools once you know where the value is. How do you think about innovating to protect your position and maybe to expand some of them? This is where you would see some concept around hyper personalization of all new AI enable products. But the last one is how do you think about the deliberate choices to shape new market structure as AI is disrupting them? And what's going to be your role into that? Think about full disintermediation or new value chains emerging in your respective industry. But the most successful ones are uh, the ones that understand the drivers of return in their markets. Back to what we were discussing, what they are right now and then what they can become. And how do you debate which of those drivers are the most likely to shift and what does it mean in terms of framing your own strategic decisions? And in my experience it means getting one, two layers deeper. In the uh, typical conversations about the market, we are not talking about market growth and historic returns. We need to talk about whether differentiation can be protected, whether customer fragmentation will change or whether new platform will emerge. So if uh, you combine again, uncertainty, competitive advantage, AI strategy is getting harder, but it matters more than ever.

Speaker A: And Andy, can you share any examples of how leaders are using AI to get a better understanding of their organization's current competitive advantage? I'd imagine that AI is having a pretty significant impact there.

Speaker B: AI is having a profound impact on lots of things. And uh, one of the things is our ability to see weak signals. And competitive advantage is usually a pretty weak signal. There's a reason why most companies aren't measuring it or talking about it because it's hard to see. But AI is great actually at weak signals. AI uh, is great at synthesis. And so we spent the last year trying to build AI tools that help us see competitive advantage for individual companies. And it's fascinating. We actually took 50 individual companies, we did a full tear down of their sources of advantage and their sources of value. So this would be looking at kind of a capital markets view of their overall valuation. And it was very, very interesting. And one of the things we, we found is to Sebastian's point, one in four, if you look at their source of advantage and then the source of disruption, many of which Sebastian just talked about, and you combine those two, roughly 25% of that data set of 50 industrial companies were at a meaningful threat. Their competitive advantage is being meaningfully eroded. So three quarters not yet, right, or maybe never, but a quarter, we're actually significantly under a threat. Now whether that was observable to those companies, you know, we don't know because we looked at it outside in, but it was meaningful. I think most importantly is even if the risk isn't exactly observable, the market understands that it's there. And when we disaggregated these 50 companies, nine out of 10 of those companies had that erosion in our view, priced into their share price. Right. And what do I mean by that? It meant for the most part that they're, the fundamentals of their performance are actually quite strong and differentiated, meaning they were out earning their competitors, which is great. It shows you actually have advantage. You're either growing faster or you're earning more profit than, than your peers. But when you look at medium to long term growth and the way that your terminal value grows, they were priced under the market, so they're growing at or below gdp. For example, meaning the market is saying this is good today, but 9 out of 10 the market was saying it's not good tomorrow. But the important point is that probably many are seeing a drag in medium to long term valuation based on this uncertainty. And the only way to combat that when you think about communicating with investors and telling the story, is to understand it, diagnose it, and have proof points to make your investors confident that this is not actually something that's going to erode value as you go forward.

Speaker A: And Sebastian, with so many competitive dynamics changing rapidly, how does one actually then measure the quality of their strategy?

Speaker C: So we do use what we call our 10 test of strategy to measure the quality of, uh, any given strategy. Let me pick a few ones. Will your strategy beat the market? Question number one. How do you make sure that the strategy you have, uh, will be distinctive enough to do better m than the average competitor in the market? How do you make sure that you tap your two sources of advantage back to uh, what Andy was seeing on the competitive advantage? But I think beyond the 10 test, what has been very striking for us is the quality of the strategy. When we look at the last 15 years, uh, where we have been, uh, on a regular basis asking executive how they feel about where their strategies land across the 10 tests. And it's of course always very hard to design a strategy well, but it has been getting harder and the quality of the strategies, uh, have been dropping on average. When you ask the question, and bear with me, the question we ask is how many of you, uh, do you think are, uh, passing four, four or more tests out of the 10?

Speaker D: Four.

Speaker C: Just four. Between 2010 and 2024, you see this number moving from 35% to 21%, which is a 40% drop over the last 10 years. And again, we are not judging. The task is enormous for executives. The context is just simply making it harder to get to a good strategy. Many would tell you, uh, or are telling us that the speed of change and the volume of information and the data to deal with is just overwhelming. And as an executive, on top of that, you are being asked to make some capital allocation decisions in a new frame of mind, ensuring you don't hold to what did work in the past. You don't hold to the historical competition that you are not the victim of your own biases. And then you can, on top of that, communicate very clearly your new set of priorities and the expected outcomes to your value stakeholders, employees, board members, investors. The drop of the quality of the strategy matters more than ever. On the outcomes of companies, we measure, uh, the strategy impact, uh, of a given company. We use a power curve, which is the distribution of the economic profit. And our research finds that big strategic moves make it more likely for a company to move up the curve to the top. You don't move this curve, uh, by accident. And over time, what we have found is that the winners have been becoming bigger winners and the losers have been failing harder. The very simple translation is getting strategy right has been harder than ever, but also more important than ever. And now the question is, what moves the needle on strategy outcomes? Because you can have a great idea, you can have a great system to steer your id, but this is where the mobilization comes in.

Speaker A: Okay, so it seems like the power curve is getting steeper then. And if the winners are winning even more. Can you say a little bit about how those toward the bottom of the power curve could move up?

Speaker C: I think somehow we've touched a number of those ideas in what we have discussed. And uh, we have also published a number of perspectives on how to move up to the curve. It comes very basically to making, uh, decisive decisions. Uh, um, and just to give you one, uh, example, when we looked into thousands of companies and where uh, they were on the curve and how some of them have been moving up the curve, the winners have been on average, investing twice more than their competitors in a given area to make a difference. So I think, uh, we were talking about being very clear on your competitive advantage, being very clear on the sources of distinctiveness, focusing on what truly matters. But once you have that clear in your mind, it's also about allocating twice more capital and taking that as an example, twice more capital, um, to the priorities you have set, that what your average competitor would do. And back to Andy's point, when we think about the budgeting, uh, process in many of those organizations, it's year on year, maybe you change by a few points, but you don't see real shift in the way you are making capital allocation. The magnitude of the decision you have to take and the magnitude of the capital allocation you have to focus on. A selected set of priorities is something which is not at all natural for many organization. And that requires strong and profound decision making. Where, uh, we've seen a number of companies failing. And of course, once you have that, you also need to mobilize your organization to get things done once you've made a decision.

Speaker A: Let's talk about that mobilization piece. Once a company is confident that they have their strategy right, they'll often then start Thinking about execution. So Whitney, how should they best get moving toward that execution goal?

Speaker D: You can't in our view, simply go from strategy execution. For strategy to work well, we believe you need to mobilize. You need to do discrete things that make it so the organization is able to actually execute the strategy. That includes empowering, engaging and governing, such, uh, as getting uh, strategic initiatives in executives hands. It includes making sure there's a sufficient level of planning beneath strategic choices you're making. Sometimes that's tons of planning, sometimes it's just a little to get you going. You need to make sure you're reallocating resources to strategy, uh, talent, capital, agentic budget, and away from things that are not important to strategy. And you need to make sure that those commitments make it into budgets and plans. This is a discrete kind of work that demands top team attention. And we wanted to study the extent to which all of these things really matter. And we studied over five years. We looked at companies that were able to rise up and stay at the top of that power curve, which as Sebastian mentioned, you can only really do if you're designing and delivering great strategies. It's hard to trip up the curve to top 20% economic profitability in the economy versus companies that fell down the curve to the bottom, which you can only really do if you make strategic missteps. So we wanted to find out what differentiates those companies and how they approach strategy. What we found is that those companies that rise up the curve, they are stronger at designing strategy, at mobilizing it and executing it. But they are most differentiated by their ability to mobilize. They're most differentiated by their ability to mobilize well, and that makes sense. Um, it's not necessarily a new idea, but it's a really timeless one that we think deserves more focus and attention in, in our language about how we talk about strategy. Back in the Cold War, there was a very important strategist called Andrew Marshall. Uh, he used to say your strategy can only influence your competitors if it survives your system first. Too many strategies don't survive our systems. Those that get results get value out of strategy, especially reaching the top of the power curve. They are better at ensuring that strategic choices survive their own systems.

Speaker A: And so Whitney, how should leaders think about then making sure that their strategy survives the system and moves through their organization?

Speaker D: The first thing is that our research finds it is difficult to mobilize vague strategy. Right? It's difficult to mobilize vague choices, vague themes, things that aren't actually choices at all. Just Sort of intentions. Uh, and so we believe that it's really important to set a standard for strategy. Hold strategy to a high bar so that everyone in the room knows where, whichever room you're in, be it, you know, a product design team or the top team that everyone knows, this is what a strategy looks like. And we're not going to stop the debate till we get there. Four things we think matter. One, A, ah, clear value creation thesis that explains the choices you're making. Right. What's our vision for of the future that's unique? What's our advantage we're building on or going to build that we believe is going to turn into competitive advantage? What's the choice? How do the choices hang together? And, and what is the case that we're making that we're actually going to capture value? This should be simple, right? But it should be something that if you hear that and not the strategy, not the choices, you should be able to make your own strategic choices that are coherent with the strategy. Right? Secondly, every choice you make in strategy needs to be a true choice and it needs to be something that you can turn into one or a small set of strategic initiatives, right? Things that can actually be owned by executives, not just we're going to digitize. Make sure that this choice can become an initiative and strategy is not done until it becomes one. Make sure that those choices and initiatives, they can hang together as a portfolio, ideally as a portfolio of choices that you can view across horizons of value and levels of risk or uncertainty that those choices are leaning into. And as you do that, a reason why that part matters as part of the standard is because it allows you to step back and say, okay, these choices make sense on the face of them, but we actually aren't happy with the extent to which we're leaning into uncertainty. So let's go back to the debate and maybe push this choice a little further. And then finally, we believe that it's important to confront trade offs early. If you're not naming what's going to stop when you're actually debating and committing to strategy, you're probably not going to stop things. This is why Steve Jobs used to say, and I believe also Tim Cook still says strategy is about saying yes to very few things and saying no to many, many more. We say no to thousands of things to say yes to and see through the few things that we can really make a difference. Different side, right? And so we believe front loading and pulling forward the conversation about what are we going to stop is important to making sure, strategy survives, but also making sure it's credible. Making sure that whatever, whether it's a team at the edge of the organization or it's the top team making strategic choices that they, they, they believe, they, they, they believe that the choices are true commitments because things are stopping. So that's a standard. You may have your own standard, but having that kind of standard matters.

Speaker A: Thanks, Whitney. So while that sounds challenging, it also sounds achievable. So if that's the case, why aren't more companies effectively mobilizing their strategy? What gets in the way?

Speaker D: I think one of the big reasons why is because of bias and social dynamics. Right? I think that it's really, really important, especially when, uh, in highly uncertain environments, that we're tackling, tackling bias. There are two that are, I think in particular important to that undercut mobilization from the knees. One is anchoring to last year's budget. The anchoring effect generally is really pernicious when it comes to budgeting, which is something that really undercuts the ability of strategic choices to survive. Many people I'm sure, are aware you are anchored to the first things that you see and it makes it hard for you to adjust to new information. One of the things that we know best in any organization, especially if we own a P and L or for an executive, is last year's budget. Because this is what we're focusing on every single day. And so last year's budget can really make it difficult to ensure that your strategic choices are actually funded in next year's budget. One really important way of resolving this is trying to get away from a very, very common habit of making last year's budget the draft, the first draft for next year's budget. We do a lot of work in organizations in trying to develop strategic financial plans where we do our strategy and we say, okay, what's the forecast for that? Very often the first year of that strategic financial plan is totally forgotten, uh, when it comes to budgeting. And we believe that actually instead that first, first, uh, year of that strategic financial plan should become the first draft of your budget to force you to be anchored differently. Secondly, evaluating bold moves one at a time, it is very easy to feel loss much more than gains. And as a result, executives that evaluate the potential of individual initiatives are more likely to be risk averse. At a corporate level, it's especially important to be seeing and thinking about the overall portfolio of initiatives that you're taking and choices, especially in context of other things that you're funding. Right? So by stack Ranking your overall, uh, bold moves alongside other initiatives you have, you make it much more likely that you're actually going to reallocate the resources to the things that matter. So those are two biases that I think are really important for ensuring that mobilization isn't cut off at the knees.

Speaker A: And so Whitney, what's the best way for a CEO to think about building mobilization in their organization as an institutional capability? And how long does it typically take to, to actually get this right?

Speaker D: You can't just as an organization, immediately build mobilization muscle. It takes time and commitment. And the most powerful form of mobilization is when it's institutional. When, when you make a strategic choice in the business, everyone knows what happens next. And you don't need to explicitly mobilize. You have a way of doing things, and that is different from just executing things and getting it done because it requires knowing what things you have to change about yourself in order to ensure a strategic choice actually works. So it's important to treat mobilization as an institutional investment that you're making over time to move up it. That ultimately starts with using the language. I talked to the CEO a few weeks ago and we talked about mobilization and he said, oh my gosh, I only just think about strategy versus execution and I get very impatient after, uh, uh, taking time to make decisions about why execution isn't happening. I need to be focusing on mobilization as opposed to, um, being impatient about execution not happening. So making it part of your language is the first step to actually being able to prioritize investments in and over time. But the second thing is to actually treat it as that sort of long term strategy that we want to become great at mobilization. And if you look across the world, if you look at some of the most successful businesses over time and you look for the markers of mobilization, you will see it in their culture, you will see it in their operating model. They know how to move when they make choices.

Speaker A: Thanks. And so just to wrap up, Whitney, which organizational capabilities matter most for delivering sustained performance? Is it the organization's ability to mobilize a strong strategy or does it really start with a high standard of strategy in the first place?

Speaker D: Yeah, so I will very quickly say I think it is very much mobilization and standards. The reason why is this. It's hard to get strategy right the first time. Right now in uncertainty, you have to test, learn and adapt. You have to make choices and move. Our research finds in terms of capabilities, companies that are great at, uh, testing, learning and adapting, they're significantly more likely to be great at mobilization. Because you have to mobilize to learn and those that are great at mobilization are significantly more likely to hold strata to a high standard. Right? It's a self reinforcing system. Hold yourself to a high standard, invest in capabilities and a lot of things get a lot easier in terms of trying to build vantage.

Speaker A: Awesome. Whitney, Andy Sebastian, thank you so much for taking the time. This has been a great conversation.

Speaker B: Thanks Sean, thank you.

Speaker D: Thanks Sean.

Speaker A: And thank you to all of our listeners for joining us today. As a quick reminder, the research that informed this discussion is featured in a recent Harvard Business Review article co authored by Andy Sebastian and Whitney, as well as a forthcoming book by Andy West, Whitney Zimmerman and Tim Cook, Kohler Publishing in October. That new book is titled Strategy and Value and we've included a link to both the HBR article and the book in the Show Notes. We really hope you enjoyed the conversation and we welcome your feedback and ideas for future episodes. Our email is itsrckenzie.com which stands for Inside the Strategy Room. You can also share your ratings and reviews on any podcast player with Many thanks to all who've already done so. We really appreciate the comments and feedback we receive every week and and encourage you to keep them coming. If you enjoyed this episode and you'd like to subscribe, you can easily follow our weekly series on any podcast player, where you can also access our entire library of more than 300 episodes. Finally, if you'd like to automatically receive our latest publications and insights, we encourage you to visit our Strategy and Corporate Finance practice page@McKinsey.com scf. You can also connect with us on LinkedIn at the McKinsey Strategy and click Corporate Finance Practice page, and we've included links for both of those in the Show Notes as well. Thank you again for listening. We look forward to having you join us again next week inside the Strategy Room.