What distinguishes growth leaders is not foresight, but greater conviction. Investing when uncertainty is highest, building capabilities rather than chasing headlines, treating growth as something to be engineered for. The position is fixed. Even some of the lowest growth quartile performers have moved up to be the top quartile. We know it's hard. It takes courage. It takes discipline. It takes dedication. But it's available to those who choose it. From McKinsey & Company, I'm Sean Brown and welcome to Inside the Strategy Room. That was our senior partner, David Schiff, who joins us with colleagues Kate Seagal and Simon Jones to share the latest insights from their research on how to drive business growth outperformance. The research focused on 61 companies across a range of sectors that were identified as top growth performers during the period from 2019 to 2024. These companies outperform their peers by an average of 5 percentage points in revenue growth and 7 percentage points in profitability annually, despite an increasingly challenging environment during that same time frame. The burning question we'll address today is what did those companies do differently to drive these outstanding results? Drawing on a fascinating collection of case studies from market leaders including Walmart, JP Morgan Chase, builders, first source and progressive insurance, David and his colleagues will share three common moves that these outperformers make and unpack the practical actions that business leaders should be focusing on to achieve sustainable, profitable growth and outperform their peers. And now it's my pleasure to introduce our three guests. Simon Jones is a senior advisor to our banking practice based in London. He was previously chief customer officer for ClearBank, the first new clearing bank in the UK for more than 250 years. Simon has extensive experience in growing franchises from an early stage to hyper growth during a long career at JP Morgan, where he was the regional leader for the payments business in Asia Pacific and then Amia. Simon, welcome to the podcast. I've shown great to be with you today. And David Schiff is a senior partner based on our Austin Texas office where he leads our growth transformation practice in North America. David, thanks for joining us today. Thanks, Shaw. Great to be here. And Kate Siegel is a partner in our Detroit office and a leader in our strategy and corporate finance practice. Kate, welcome. Thanks for having me. Kate, we've recently published a number of perspectives on growth and we're looking forward to discussing your latest research today. So to kick off, what is newer different about this topic now? And why is it so relevant for executives at this particular moment? Yeah. So I would say we keep coming back to growth for one simple reason. It truly matters to long-term value creation. And for those that do love corporate finance, there's really only two fundamental drivers if you're a CEO today to create value for your share of works. You're either trying to improve your return on invested capital or you are trying to grow. And as we've looked time after time again, it's much, much harder to grow over the long-term. And so this challenge, I would say, is perennial. But then the ways that people have been adapting to this has been evolving. So we just keep looking at what our performers are doing to bring the best of the global economy to our listeners. And so what we've consistently found just for those that are tuning in for the first time is that growth will take courage, dedication and discipline. You ask, you know, what's new? And we looked at the last five years in a post-COVID recovery. And I think what's new is we're seeing that our performers are turbocharging this growth blueprint in a really different way. They're trying to manage a more volatile world. We're trying to think about how technology can give them scale and create a real flywheel. And so we wanted to bring to life what does it mean to outperform the market? And so we're really excited to share what we're doing today. This sounds great, Kate. As I mentioned earlier, this latest research is based on growth outperformers. So what are some of the metrics you used to identify those outperformers and how hard is it really to become one? You know, the initial instinct for most is to look at companies' revenue growth rates. For example, if you just take the last five years from 2019 to 2024, this was a period of COVID disruption in recovery, the rise of the magnificent seven, just the first offshoots of Gen.A.I. We looked at nearly 4,000 global public companies with revenues are really nuts. And in that timeframe, what we saw is only 16 percent were able to grow their revenues by double digits annually. That said, absolute revenue growth in isolation is a pretty incomplete way to identify who is a growth outperformer and who should we look to to learn from. And so why is that? I think you would argue you have to look at each industry's market momentum and its profitability. And so what we typically do in this is leveraging the learnings of bringing a layer of growth and other corporate finance practices, we have to find companies that were able to grow beyond our market momentum. So companies that improve their revenue growth rates above their peers. And we also wanted to find companies that were doing growth not at the expense of margin or long-term return. They weren't buying it in a way. And so we asked to find agro-harmers that had profitability above their pure. And what's interesting is in this time period, there were nine sub-sector industries, sub-sectors that we looked at where the majority of companies in these industries failed to grow profitably. And that's pretty interesting finding and really hard if you were a CEO during that time. That said, we were able to identify 61 outperformers, really the top 15%, that were able to meet this criteria. They grew faster than their industry and they did it more profitably. And so if it's interesting, you know, it is hard. It's only 15% of companies, but it's really, really meaningful in terms of the economic gap they're able to create. So they beat their peers by an average of five percentage points in revenue growth. They had seven percentage points in profitability better than their peers. And frankly, their shareholder returns were above their peers by five points. So it's really hard to do, but if you were a shareholder, you were pretty excited about what these firms were able to do for you. And what about the split between organic and inorganic growth driven, say, by M&A? Yeah. And for this research, Neurventizer, we've tried to strip out, you know, those that have done M&A, but M&A is a really important level. And we are seeing in this volatility, harnessing capabilities that other companies can give you is really, really important if you want to move fast. And so we do not, you know, take it out of this sample, if you will, but we do hold them to this profitability bar. You can't do M&A and then dilute your returns. And so we would say there is really good M&A in these app performers and we can talk a bit more about the stories today. And I think Kate Tivono, what you're sharing, we're talking about this later as we go into some details. There are some really interesting examples of some of these growth out performers who did acquisition not to drive huge changes in revenue, but actually to bring in new capabilities, especially in areas of technology, data, analytics, and AI. And those capabilities have really contributed to that increased growth, rare increase in profitability that we observe. Walmart's a pretty interesting example, but I'm going to bring it to life later on. Thanks, David. And Simon, maybe you could share a practical example from your time at JP Morgan where M&A played this kind of role. I think one of the key areas that I certainly saw, as David just said around adding capabilities, some of the merges that I saw at JP Morgan, for example, the investment bank on the West Coast, Temberington, Christ, I'm going back quite a long time now, but it really transformed the relationships we had with big tech companies, for example. So the ability to bring the rest of the firm to those relationships was, you know, was transformational and added major new aspects of growth, you know, into into the customer portfolios as an example. So we've talked about how hard this is that you need to beat your industry trends and that it needs to be profitable and it can be our inorganic as well. So David, maybe you can take us through at a high level, the three behaviors that these outperformers engaged in to drive this exceptional growth. Yeah, absolutely. We try to understand how do our performers do it, you know, Kate talked about 61 outperformers. And what we discover is the pattern was pretty striking. What set our performers apart is not luck. It's not timing. It's truly how they commit to growth, how they develop growth engines and how they accelerate with technology. We observed these three behaviors across very different industries. They're sort of a or the first one is really they commit to growth as a priority. They do it with meaningful conviction, especially in times of uncertainty. They don't wait for perfect visibility. They don't wait for the clouds to part before they invest. You know, two, they make multiple growth bets. We often talk about one of the things that worked for a growth out performer, but the reality is they don't rely on one or two big swings and hope for the vast or hope for a grand slam. truly build a project.
portfolio of growth engines. They do this across what we call the core, where they are in the business today, adjacent, and many of the growth outperformers are actually looking at more breakout businesses and business areas that are further afield from where they are today, and they actively manage that growth portfolio holistically. You know, three, we really observe these outperformers accelerating with technology. You know, the research period we looked at was 2019 to 2024. It was true then, it's even more true today, especially with AI. They don't treat tech as a productivity as a side project. They truly wired into their operating model. They turn it into business as usual, and so AI and technology amplifies everything else they're doing. I think the good news is that we saw even large well established companies can shift their performance. You know, this, this, the stat that really stuck with us when we did the research was 16% of companies and moved from the lowest quartile of growth to the top quartile of growth. They're looking at sort of 2014 to 2019 to 2019 to 2020, 2024. And so the reality is that your position is not fixed. It takes real work, real commitment, but you can continue to improve, even if you're not a growth leader today. So this is inspiring that you can actually move, that it's doable. You can, that there were folks who move from the bottom to the top, but what's your perspective on what matters more for growth? Is it where or how you compete? In other words, is it about choosing your markets or choosing how you thrive in those markets? And I guess it's fine to say both. Yeah, well, you know, as a consultant, I would say it depends, sorry, bad jerk for the audience. Look, it is both truly. We saw there's two layers to it. First, where you choose to play really matters. You know, we have this idea of that our colleagues in the McKinsey Global Institute talked about code arenas, which is really about what are the small pockets that are going to generate the most amounted incremental revenue looking forward. There's replaces like India and China and micro markets within the US. And then what we did observe though, it's not just where you choose to play. It is actually how you build the portfolio and how you play. And we actually saw that mattered even more. This notion of how do you strengthen your core? How do you expand a close in agitation? How do you test new sources of growth? Allocate talent, allocate capital, and have real clear accountability, performance management against that portfolio and against those growth bets that you were making. And so we did observe that the tailwinds are helpful to these organizations, but actually how they execute, how they play the game, matter even more. Thank you, David. And choosing to invest in growth makes a lot of sense as a driver, but it also implies that there would be other investments that you might need to either reduce or reallocate from other areas that don't have the same growth prospect. So what are some of the biggest challenges when you set growth as your north star and you want to invest in it? But you also have other businesses that maybe are slow in steady. Perhaps they're not growing, but they're still supporting the business. So in your experience, how did the outperformers overcome that inertia and reallocate those resources? Yeah, I think there are a few things we saw, and then I'll invite my colleagues to add in because I think we got a chance to see this across industries, across institutions. You know, the first one is it takes real conviction from the CEO and from the senior leadership team to say, we're going to go after this. These are the bets we're going to make and we're going to communicate them very clearly internally and externally to you have to actually put aside real, I'll call it dollars and pools. It's resources and people. It's actual capital and investment to do it. It's in many cases the scarce commodity of your best performers and your best technologists to actually go do these things. And three, that's a something like a broken record, but you really have to create the performance management against it and have a very clear view of where do we need to be by month by quarter? What do we expect to see? Just because you don't necessarily hit the results, you were planning at the end of month one or month two, it doesn't mean you need to give up, but you do need to ask yourself the hard questions to say, what worked? If it didn't work, what do we learn? And how do we pivot as a result? We often see those growth outperformers are really doing those things. Many of the players that were in the lower growth quartiles, even the bottom quartile, made a commitment, said they were going to go do it, and then they just sort of revisited it three years later, and that's not the recipe for success. Thanks, David. And Kate, anything you'd like to add here, specifically any challenges that maybe you've seen at the CEO level in terms of building that initial conviction and then bringing the leadership team along, especially when there are real trade-offs involved as far as reallocation is concerned. Yeah, happy to. I would just build on David's point. I think the hardest moment is often the CEO and the top team really stacking hands around essentially the internal winners and losers of that strategy. What I've seen, excellent CEOs really do in that moment is thinking about but growth should be fun. It is way more fun to grow than to do a cost-cutting program and harnessing that positive energy growth as abundance and finding ways to take top talent and move them, inspire them, give them that next opportunity. I think can help get that spaghetti chart, like more straightened out, but it is hard. There will be leaders on your top team that don't understand what's happening and why and just really investing and bringing them along. And then sometimes changing out parts of the team. We did see some real reshuffle rates in top teams for these leaders. They recognize maybe they need new capabilities, new executives, and I think that can also help the top team understand the potential of a new e-commerce platform or some of these other things. If they haven't seen it before, it's very hard for them to go explore that at Jason's year break at area. Simon, I'd love to get your thoughts too. You live this. Yeah, I think the era I'd like to focus on is around geographic expansion and David touched on it a little bit. One of the key, key philosophies of J.P. Morgan was he don't go into a new market unless you're going to go into it for the next 100 years. So that sort of mindset really takes out the short-termism and really makes you focus on investment for the long term. Doesn't mean you have to do a large amount of investment upfront, but it means that you've set yourself and you've driven the data to give yourself a pathway to a long-term sustainable business model that's irresistrictibly linked to the rest of your business. A couple of examples that I experienced was for example going into a country like New Zealand or going into Vietnam, for example. In my time in Asia, they're fairly small markets to start with, but the demand that we were getting from customers were these were gaps in your regional capabilities and for us to take you seriously in the big countries like a Japan or Australia or a China or an India, you needed to have these countries in your regional footprint for me to be able to do that to support, to be able to do the banking with you for the region. And I think that's a very important point and it's about bringing the rest of the bank along that journey, but sometimes you have to be the one the line of business that takes the first step. Thanks and in terms of these three key drivers, a committed growth strategy, multiple growth pathways and a dedicated focus on technology and integrating it, how have you seen these evolve over time, especially as volatility from a macro perspective has also increased? Yeah, I would say some of it is genuinely new, like as we looked at the last five years versus 10 years ago on technology, that opportunity of how performers are really using it at a different scale and speed to allow them to do multiple bets is really unique and exciting. I think also the volatility that people started to feel in the last five years and that continues to this day has triggered a slight evolution of this footprint. And that's really in two ways. One is, as David said, it used to be you would have these success stories where a company placed one bet and it just worked out like they could they could plan it and it was beautiful. Outperformers today, even when we dug into their history of what did they do, they were placing many bets, right? Maybe one of them is the story we saw right before we could observe a couple of noble failures or ones that just didn't reach a safe scale, but they were positioning themselves across a variety of scenarios. And then second, I just don't think it can be luck anymore. In a volatility, if you want to be in a performer, you're going to have to engine your birth journey that will have very uncomfortable moments. Every story we looked at, there was a moment where this executive team had said, here is what we want to go do and there is a trough, you know, in the market cycle and all of their competitors were pulling back and they had to decide, you know, is our thesis still true? Is it still valid that we think this is a real tailwind in the long run and can we make it through that cycle? And then what's interesting is of course, when the cycle turns and these outperformers are really accelerating into that upswing, whereas you see their peers just kind of falling behind. Kate, I love our
or your articulated that, you know, we had the chance as a group to look at what we called the growth leader of mindset a couple of years ago, you know, famous venture capitalists has said the culture each strategy. And I think there's sort of three big things that we saw that continued forward as we did this latest round of research. CEOs are really building the muscle behind growth and we saw three big aspects of how they did that. Number one, the truly we're rewarding, not punishing, this idea of experimentation and even failing. Now, failing doesn't mean we want to bet the far and lose everything, but it does mean we need to take risks and we need to acknowledge that we're taking risks and reward accordingly. In many cases, we see, you know, large corporates unwilling to take that kind of mindset and approach. Number two, they truly are allodating their top performers into much more visible roles and acknowledging that they're taking on new challenges entering new arenas. And it might not work and it really connects back to this idea of rewarding experimentation and test and learn. And then three, and Kate hit on this a little bit in terms of talent, but they're looking for unconventional talent that might mean bringing somebody into an industry that doesn't relate, you know, Simon's sharing some examples of financial services were returned to hire from within, but maybe actually we should bring it a consumer retail leader who could help us really take on a new mindset. Plus, I'm comfortable conversations and bring fresh linking. Again, that's a, that's a bad SEO is taking. Not all bets work and pay off, but it's taking on sort of this multifaceted approach to make sure that you're creating a culture of growth and a mindset of growth for the organization. Thanks, David. Simon, it would be great if you could share your perspective here. Was this also your experience when driving high-growth businesses? Yeah, let me share some experiences at a clear bank, which I think is very relevant to this and brings to life the points that Kate makes around making simultaneous bets, but also some things not necessarily going right. At clear bank, you make your revenues on interest income of money sitting in accounts and you charge payment fees. Clear bank had been going for about three or four years and then COVID hit. And all of a sudden interest rates in the UK, which was the main part of their business, went from two or three percent to 0.25% overnight. Never have the UK interest rates gone so low. So all of a sudden their business model was completely turned on its head. Now, we knew that we needed to diversify revenues into fee generating and more adding more value around the payment and charging fees, but all of a sudden it put it on steroids because we needed to basically keep the business growing and surviving for the future in that mindset. And that really enabled us to accelerate those extra bets on those extra capabilities to support the clients. But the good news was that as everybody was going digitally first, all of a sudden the transaction payments volumes were going to go through the roof. So adding those extra capabilities enabled us to grow very significantly. And actually we went from doubling revenue every year to continue to doubling revenue every year even during COVID. Wow. So David, if we can come back to you, how do you actually make these investments in growth? Particularly as things get rough, assignment is just described. Look, I think the headline is simple. It's hard to live by. Everyone says growth matters. I don't think you've ever heard a CEO on an earnings call say the growth doesn't matter. But how outperformers actually translate that into concrete sustained commitments and how they act decisively is what actually matters to enable this. I think there's a number one to have growth. You have to do it. We've talked a bit about some of these aspects, but it takes attention, talent, capital. What we saw in this five year window-- and I think Simon's example and story as a great one-- is outperformers invested through downturns and through difficult moments. That means they continue to fund research and development. They launched new products. They built capabilities. They did all these things at multiple falls of what their peers were spending. Almost at exactly the moments when their competitors in the industry were pulling back. That investment compounded into competitive advantage over time. And that's a competitive advantage they never gave up. I think the other thing that we saw in the research was outperformers don't treat growth as a one-time plan. It's an ongoing process. It requires refreshing the portfolio, entering new category, reallocating resources, and sort of pushing through the hard yards day by day. It sounds hard. I think it's actually much harder than it sounds. One of the research pieces and one of the surveys we ran in 2024 found that only about a third of organizations are consistently reallocating budget, people, talent, from underperforming units to ones with real-growth potential. And we know that has continued. And so even among companies that want to grow, almost less than a third are actually moving resources to make it happen. The outperformers by contrast are actually making that hard call again and again and again. And I just come back to this idea of easy to say, very hard to do, but it is possible. And David, it's great to reallocate resources, but you also need to reallocate them to the right place. So what were some of the things that you saw that growth outperformers do to gain the insights necessary to have conviction in terms of where they were making those investments? Is it the portfolio approach that you were describing earlier where you know that not all the bets are going to work out, but you've got a reasonable assurance that a few of them could lead to outperformance. What's the secret here to making those reallocations the right ones? Yeah, I like to shake the Magic 8 ball, but I think the growth outperformers actually took on a much more deliberate approach. I think there's a few things that they did. They went into this with a real and analytically backed back base, understanding what are the trends taking place, what do their end customers need if they have distribution partners, what are they thinking, and to then craft a series of bets. In many cases, those bets are not fully stacking up on one another, meaning they actually are able to cover a wide swarth of ground as they think through what it takes to make sure that they're able actually to really monitor their signals as they start to execute. The second one is we've said this a few times today, but I would just keep coming back to it is they actually went forward with the idea and the knowledge, the not everything's going to work. And so given that, they were comfortable operating under a bit of uncertainty and making sure that they could literally monitor what's taking place. They stood up a real performance management, and they weren't afraid to say, hey, three months later, something has changed, a macroeconomic signal, something geopolitically. And so either this bet makes a lot more sense, and let's triple down on it, or actually, we have new information. Let's reassess what we're doing. And I think if that sort of humility to the approach that they were taking, it's confidence for humility that really allowed them to be successful as they thought through this. - Thank you, David. And Kate, anything you'd add here from your work? - Yeah, and I mean, I want to just share one of the examples that we found in the alcohol reset, which was BFS, right? So Builders for Source. They are a building products distributor very far from banking, shipping lumber in 2019. And I think if anyone was trying to build a house over the last five years, and you'll remember, there was a lot that happened in that market. So yeah, the COVID peak you had, then the crash and the supply chain shortages, the change in interest rates. And I think what they tried to do to this notion that David shared of, how do we find that they ever green truths about our market of what are the pockets that could grow, and how do we get access to those? I mean, what they did over the last five years was thinking about what are higher emerging product categories that we should be getting into. So what are more manufactured components? They saw some of the labor shortages. How do we get into installed services, perhaps, and other value at its mission? And they ultimately built this scale that's amazing of how did they get into a home builder's workflow rather than just dropping off lumber. And so that ultimately over this time, reduced their exposure to some of the commodity swings. But now what you see as we hit 2026 is they've got a really interesting foundation and scale to then enter even more categories and compete in their markets. And so again, probably was not comfortable for the CEO of BFS at the time. But now I think on the other side, there are many other players in that space that are looking to emulate some of those ranks. So I mean, you looked at you were going to add something. I'd love to hear your thoughts. I completely agree with David around the data and the measuring. But one of the things that I think was also very important and JP Morgan, we measure ourselves against the market leaders in each market, in each
country and we would obsess about really understanding their performance against the market. So even if you didn't grow very much on a quarter, for example, but you grew more than your competitor, you knew that you were doing something right. Or if your competitor was growing faster that quarter, why was that? And what do you need to do to adapt, you know, your sales strategy, your go-to-market strategy or product strategy in that particular market? So we were very obsessed, I would say, at a very granular level, so not just at a country level, but at a very granular level, I'd making sure we understood that. And I think that's the extra area of data measuring that I think was very critical. And so David, I imagine that you might have some other examples to share. And is there one that really stands out for you in terms of an outperformer who successfully navigated uncertainty and placed those proper and winning bets, if you will? Yeah, I might just add one other one, which I think many of our listeners would know well, but is Walmart. They, I think to sort of a case example and design in, they've been a strong performer for a while. Proof pandemic, they were on a decade-long journey to really build new growth engines on top of their core. You know, COVID hit, e-commerce searched, inflation followed, and so many of their core customers, lower- or middle-income households really felt squeezed. I think in many cases, the instinct of senior leaders would have been likely to pull back and protect the core business, even disregarding some of the bets that they had been making along the way in some of those years. I think what's fascinating is when you look outside in, it seems like they did the opposite. They kept investing organically. They actually made multiple inorganic acquisitions to bolster their capabilities, even when near-term returns were uncertain, even when the market was skeptical. And the result now is compelling. More than half of their operating income growth comes from these newer growth platforms, things like retail, media, marketplace, Walmart, plus. Those things, more or less, didn't exist or didn't exist materially a decade ago. And would they have publicly shared his Walmart plus members spend almost twice as much as non-members? I think it's a really nice encapsulation of what consistent commitment gets you in terms of growth that you can create. In some of these cases, these bets may play out over multiple years. So how do you maintain the conviction over time to continue making these bets? Simon, maybe you could share with us your experience in not only making that initial investment, but to keep it going in anticipation of the future growth that that's going to offer. I think it comes back to the research and the data that you've gone and talking to your clients as well, making sure you bring them along for that journey as well. My experience is that not only becomes your business model in the short to medium term, it actually becomes your North Star to guiding you for those long years where you're going to have times that are going to be difficult and troubled. But it's about continuing to invest in that longer term. You know the customers want this. You know it's right by the data that you've got, but not just the short term data, the medium term and the long term data for the future. And you have to keep reanalyzing the situation pivoting gently where you need to, but not starting and stopping, you know, being a consistent long term investor because you know clients want that, you know the data proves that this will be sustainable in the longer term. And I think that data also provides you with the execution, you know, measures and roadmap for the future. So you know it's a boring point. Data is so key, but I certainly experienced that in my time. Thank you Simon. And David earlier you referred to the McKinsey Global Institutes work on arenas. Those promising industries where outsized growth is expected to occur. Maybe you could share with us why in your mind and in your research arenas are so important. And how out, you know companies that would like to outperform should be thinking about them in terms of driving their own growth strategy. Yeah, absolutely. And let me just connect it back to to to reround everyone in the fundamentals of the research that we did. You know, the second thing or the second big behavior that we found is really around diversifying pathways. You know, again, we talked about this earlier, but they didn't just rely on one or two big bats since running for the fences. They built this portfolio of growth engines and they actually manage their portfolio. To drive that active management of the portfolio, where you choose to play does matter. We'll talk about how you play and, you know, we mentioned earlier how you play matters even more, but we can be honest where you choose to play does matter and has significant variability in overall performance. What we found for outperformers was that they focus on sub industries, micro markets and places that either have shown or they believe are going to demonstrate and show the steepest growth. Our colleagues at McKinsey Global Institute called these arenas and, you know, we found about sort of 18 future arenas that can generate up to $50 trillion of incremental revenue by 2040. But there are places like India where you see the likely forecast of consumption growing by almost four acts by 2050, creator China growing by two acts. Those were geographic examples, but they also exist even if you're just a UF only institution and so being really deliberate about positioning yourself to take advantage of the tailwind and where you believe growth to come from. That's sort of part one. Part two on this is really about how you build the portfolio against it and how you drive execution. I'll just reemphasize it to have strengthening the core, expanding into close adjacencies, testing new sources or growth and allowing yourself to really make sure that it's active management of your portfolio. It's performance managing each engine, each bet very closely. It's doubling and tripling down on what's working and it's really having the ability and the organizational muscle and nimbleness to be able to take a step back routinely and ask the hard questions on what's working and what's not working so you can make pivots. It's a very different muscle than when many organizations do. It's really taking on much more of a technology light approach in terms of monthly business reduced and quarterly business reviews to really manifest that into reality. We'll also include a link to the MGI Arena's research in the episode description today. But I'd like to pivot a little now as we think about this notion of multiple growth pathways given that not every pathway necessarily leads to success. How do you reduce the potential stigma of failure? How do you build a culture where going hard after something that might not pan out is still celebrated? And how do you build confidence in the organization and the people in the organization to pursue innovation even when it may be risky? Yeah, I think it's an fantastic question. It's really something that we observed. I also would add that while it might be hard to instill that kind of culture, it's a lot easier to do that than to watch your competitors outperform you and see your relative market share and market cap take a turn or your profitability. And I might just emphasize that and come back to this notion of we observe 16% of companies that started in the lowest growth curatile that moved up. And so your position isn't fixed. And so I think that should give everyone, but especially those who feel like they're not currently outperforming the confidence and the conviction that it is possible and that they can learn from what others have done. And then we'll come to this in a minute with technology, but actually leverage some of the latest in technology to accelerate their journey towards being a growth outperformers. I think crucially, we just to re-high that a couple points from earlier, you can't stop investing when uncertainty is high. I think in many cases, these organizations have created the organizational muscles so that they can live with that certainty. In many cases, we see the vast and some of our colleagues are spoken about this in previous webinars, but to really work through a set of scenarios. We know not all of their scenarios are going to be correct. Some will be very close in and feel very obtainable. Some might be a bit far out and outlandish, but through the notion of creating the scenarios, continuous monitoring, work aiming your moves, and then actually tweaking and evolving your operating model to really allow for flexibility. We think then company is able to prouce when the opportunity strikes. I think also Sean to your question as sort of this notion of mindsets, we think this idea of having clear stage gates so everyone is committing to what they're trying to deliver by certain points is really critical. It's not then leveraging a scenario to say, "Oh, let me have an excuse to wait." It's actually so.
I'm going to go after with us with full force, with full, the full weight of the organization behind me, and using that to sort of fuel what you do next. Thank you, David. And Simon, it looks like you have something you'd like to add here. Yeah, if I could add to that, I think coming from a big bank and then going to a FinTech, you're kind of going from both ends of the spectrum around testing and celebrating innovation. You know, big banks have invested a lot in creating a much more innovation culture, but it is still difficult, you know, you go out on a limb and something is not successful. Yes, big banks are getting better at celebrating the innovation culture, but you know, there are still fingers pointed, etc. You go into a FinTech environment and it's completely the opposite. It's all about testing and learning and innovating. And if you're successful, celebrating that, learning from the success, but equally, if you're not successful, learning from that, sharing that, it's not a bad thing and then pivoting quickly. All right, and that's really, you know, where pivoting is probably most famous is within FinTechs. But it's been a fascinating learning going from an organization that was embracing innovation to an organization where it was the main focus in the technology and innovation was the hub of the organization at ClareBank. So how did you personally feel about that change in environment when you came to ClareBank and how did you adapt to it? It's a great question and you do, you do have to adapt to it because you come from, you know, whether it be a bank or whether it be a FinTech, you come from a highly regulated environment. So you're used to doing things carefully within legal and compliance, etc. concerns. I think I probably found it easier to adapt because I had innovated, I had implemented into new markets, in emerging markets. So I had a fairly innovative bent, I suppose, within it, but it was a big change. It was a big change. The biggest change, I think, inside ClareBank was that the technology innovation organization was actually the leader in the bank. And you had to learn to embrace that, learn to channel that to make it as productive as possible. I think that's probably one of my, one of my major learnings, but it is difficult. Thank you Simon. And Kate, you spoke earlier about the research showing this shift from technology or AI as a side project to something that's really wired into the operating model for these outperformers. Maybe you could talk now a little bit about how you're seeing these outperformers take technology to its full potential as a driver of growth. Yeah. I mean, it's rightly so that it's getting so much attention now that AI is upon us all. The time period we were looking at was 2019 to 2024. So at least for the stories that we have, you know, this was just the beginning of Gen AI. But what is interesting is in that time, and then we'll talk about today, not time. They weren't just using technology as a tool. They were thinking about it as a foundation that ultimately would accelerate, you know, whatever pathway they were choosing. And so they at that time and even today are thinking about what are the interesting data sets, both proprietary and open that we can start ingesting to help our commercial teams. What is the tooling that we need to give senior leaders, frontline leaders to make sure that they're making the right decision day today. And then we talked about all of this performance management bringing those insights into strategy, into operations, and into just decision making that large. I think we saw that in the last five years. Now to today. So for AI, you know, the specific opportunities and fantastic AI use cases are often industry specific. But I think what we would argue, and I know our colleagues with ReWire would argue, is that if you today still have a portfolio of individual disconnected use cases for your technology and AI roadmap, you're probably not on your way to growth out performance. Like that is an old kind of decent piloting way to use technology. And AI, today, what we are seeing and we saw this first bloom in players like the JP Morgan story and Walmart is how do we redesign what are often cross-functional workflows and find a way to get data into them to improve speed and precision with predictive AI, but also, you know, in the case of customer outreach, generative AI, and then use that to find new business opportunities and then go after them. You know, what's cool about AI is it can change the cost of making a bit of entering a market of doing a test. And though we didn't see it in the last five years, I think as David and I and others are excited to publish our next article, I think it's going to be a lot about that as how you can use AI to enter new spaces. Well, we'll certainly look forward to that new article and research coming out and look forward to having you back on the podcast when it does and Kate, for companies that are doing this well, how are they building the AI capabilities in their people to rethink the way that the organization operates with the existence of these new capabilities and technologies? Yeah, I mean, I'll have Simon share, you know, the AI native, you know, version of this, but I think for many institutions, even those of Luta, you know, they were already a billion in revenues, they were not, you know, digital first. I think for those institutions, it can be really important to think about first, what is, you know, the strategy at Larkcheck, what are the most valuable areas we think that we need a technology and AI foundation, but then you kind of have to go through each piece of the puzzle. In many cases, you don't have the right talent. You just don't, you frankly may not have the data scientists, the UX, there's a number of rules that you might need to build and acquire. So I'm using M&A to acquire entities that might be more digitally native to acquire that talent, others are just hiring it. But then what I will say is they need to build a new operating model. I'd be curious, I mean, technology first, but often you need a business translation for technologists to bring it to life. And so thinking about how do we bring those that experience customers and experience the market to technology? I think that's the magic. So there is some reinvention of how that comes together. And then there is a ton of work for CIOs and, you know, what is our tech stack look like? What are the data feeds? Are they safe? Can they secure any trusted, you know, over time, I think people are getting concerned about what is reliable in the world and trying to make sure that we're not going to spend billions of dollars on data, you know, by accident. So there are some real realities, but you've got to have to take each piece to build your technology and AI strategy to support your growth. But anytime, and I'd love your thoughts, because you've seen both sides. You've seen both sides, and I would say my experience at Clare Bank was that the, you know, they built the bank entirely from scratch, entirely cloud native API first in a way that no other bank had ever done, you know, in the world. So it takes it to the extreme. Inside of JP Morgan, we were gradually transforming a lot of the capabilities into cloud, cloud first, microservices based architecture. So not necessarily changing the whole bank, but doing it in digestible chunks over time. What struck me is that the Clare Bank model of having a brand new digitally first infrastructure gives you a tremendous amount of flexibility as technology evolves and as AI capabilities come in, because your foundation is rock solid and is used to dealing in that type of capabilities. But I think the other key point that you bring up, Kate is around people and talent to leverage that technology. One of the stories I can share from our Clare Bank perspective was that actually some of the technologists that we hired came from the food delivery industry. Because that was a part of the industry that was growing extremely fast and had to scale very quickly. So actually a lot of the technologists and innovators in that area were very relevant to payments and the banking industry. So very interesting that, you know, you don't need to necessarily look within your industry. It's about bringing talent, bringing people that have used the new technology potentially in different fields, but can be massively benefit your particular field that you're working in. It's very interesting to think about this digital native versus, you know, bringing the technology capability in. And David, do you have any examples you can share on that from your research? Yeah, I love that story, Simon. You know, maybe I'll highlight an example that we featured in the Research in the article, which is progressive insurance. I know not everyone thinks of insurance as the fastest growing or sexiest industry, but it's actually a fascinating story, and it really shows what discipline, execution, and sort of commitment to technology.
analytics can deliver. You know, when we look at this time period that we analyze 2019 to 2024, we saw growth in the property and casualty and short sector was mostly driven by price increases or people call taking rate less about serving more customers. Rising claims costs were really compressing profitability. You know, when you look progressive stands above everyone else in that time periods, they grew their revenues at almost 14% annually three times their peers and this goes back to assignments point and measuring against the competition. They grew three times their peers and maintained profitability. Why others were actually becoming less profitable. We saw them do this in sort of a few fundamental ways. They had been investing in what's called telematics or analytics enabled insurance. Do you really think what how did they better price? They really continue to enhance their operating model. How do they integrate data and analytics and AI across the entire organization? It's not just a COE somewhere. It's actually how do they do that in pricing in underwriting in claims in marketing and at the time using machine learning models to actually get much better at things like fraud detection and granular pricing. And this combination is sort of the product led approach with telematics and the operating model and the investments in technology and AI really allowed them to be faster and more nimble than the rest of the industry to fuel both growth and profitability and get really sort of showcases the research in a very nice way in terms of what it takes to do this very well. The other thing I would add which wasn't in the research is you know there's good news for many of you listening to him right now which is you don't need multiple years of investment necessarily because of what the latest in technology and agentech AI can do for you. And so we actually see folks not just leveraging agentech AI and those capabilities to take out costs but actually to fundamentally reimagine the domains that matter most for growth. Things like sales, sales support, marketing, some of the back office operations that enable all of this and really invest into those and making very fast changes to allowing much more increased growth rate. And so we just encourage all of you to coming out of this to feel excitement of what's possible in such a short amount of time and that the pace of change has never been faster. Thank you David. It's great to hear these insights on the technology challenge and now I'd like to zoom out a little bit as you think about high growth markets. How and when do out performers spread their bets and how do you balance those new investments with also maintaining performance in core markets? It's a great question. I think what we fundamentally observed is there's not one singular heuristic that lets organizations say do this and don't do this or invest here and five here. And I apologize if that's not a fulfilling answer for illustrators. I think the reality is it comes back to what is the aspiration that we have as an organization? How have we split that out across the various markets, business units, products and channels that we operate in? And thus then what are the growth expectations that we have? There's a more attainable growth expectations and as we talk about in sort of the scenario planning concept, the more landish growth expectations are really aspirations that I want to set. And thus then we have to look at and say okay, what is our right to win in these channels in these markets? What's natural momentum going to take versus what wouldn't acceleration look like? And then how do we make sure that we're actually allocating our resources not in sort of a peanut butter or spread approach, but actually relative to what we fundamentally believe the return can look like? And then again it really comes back to this idea of really robust, not real time but close to real time performance management to say am I getting the returns that I expect? And if not, why? And being able to more than simply allocate, you know, when I was in Asia, I had a chance to work with players who were in 20 or 25 markets and they had to take a much different approach to performance management that if Lyon operates in the US takes where you sort of have one very large, a bit more similar in nature market where they can run it accordingly. And so it does take a difference in how you really set off that operating structure to execute a code in Lyon. Thank you David. So as we come to the end of the episode, I'd love to just summarize the three strategies that outperformers focus on to drive profitable growth. The first is to set that bold aspiration and invest consistently. The second is activating multiple growth pathways. And the third is executing with tech and AI at the core hardwired into the operating model if you will. But now before we close out, I'd love to hear any final thoughts or points of emphasis that you'd like to share. Maybe Kate, you could kick us off. Yeah. I mean, I do. I have two. So I think the first is have you set an aspiration at minimum to outperforming your market. Like I'm shocked at the number of teams that, you know, it's not actually clear that they're measuring themselves against their markets and holding themselves accountable. So one, make sure you have that with then to David's point. It's a beyond that as a boulder. You know, should you look outside your market if your market is not growing? And then the second is how many different independent growth engines do you have? If you do, do you only have one ideal and is it in your core business? We would say that that's probably also a really risky way to set yourself up for her. Is that performance in the car comment? And so just taking a hard look, if it's not going to help you add a whole one percent of revenue growth rate or two each bet, it's all not picking up to move the needle. So really just take a look at what bets have you placed if any. So let's run. Thank you, Kate. Simon. I'm going to go for the first one and focus again on geography, but then also an additional one as well. You already bought it to life with David. Just talked about around, you know, geographic growth. So, you know, my experience of China and India at the very early stages, you could see those economies were going to become huge, the population growth, the amount of manufacturing that was going on, the exporting, the foreign direct investment. All of these provided very key data to this was going to be where the next 10 or 20 years is. And I said the moment and I have experienced in starting to do more in these regions, is Africa is heading very similar, very similar sort of drivers as I saw in Asia 20, 20 years ago. So I think it's about having that really long term growth mindset, but following the data, following the customers into these markets and being bold about it in a long term, in a long term view. And the final point is as I'd like to put is my experience around technology execution of the technology innovating with it may actually surprise you with the cost structure that is very different to what you've seen in the past. So when you build your business model and when you build your business plan, you can potentially transform it by having a very different technology structure with the use of AI, with the use of cloud computing, etc. That completely turns the business model on its head and gives you a very differentiated position versus your competitors. And I think then executing that superbly, measuring and programming management that very intensely with technology again is key to the execution to a very high quality. Super, thank you Simon and David, you get the last word. A lot of pressure in the last word. Look, I think as we as we shared our performers continuously refresh the growth capabilities, they treated us something to engineer, not hope for. I think we see this most acutely with AI to really about work at AI, especially agentec AI, help us build our competitive advantages and grow. That also is a nice reminder to all of our listeners that are new recipes of research that we're working on, focuses squarely on how to drive growth with AI. You know, look, I think if we had to leave you with a closing thought, it literally comes from the article and from the research. What distinguishes growth leaders is not foresight, but greater conviction, investing when uncertainty is highest, building capabilities rather than chasing headlines, treating growth as something to be engineered for. The position is in fixed. Even some of the lowest growth quartile performers who moved up to be the top quartile, we know it's hard. It takes courage, it takes discipline, it takes dedication, but it's available to those who choose it. Kate, Simon, David, thanks so much for sharing your insights with us today. Thank you. Great discussion. Thanks, Tom Kate, David. Thanks, everyone. And thank you to all of our listeners for joining us. 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