319. Why strategy needs mobilization, especially in this moment

0:00Whitney Zimmerman: For McKinsey & 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 a significantly intensifying competitive landscape. They'll also unpack the key differentiator strategy winners are focusing on, mobilization, and they'll explain why it's the critical factor separating the leading companies from the laggards.

0:40Whitney Zimmerman: Our guests today are 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 in November, in which we've also linked to in the show notes.

1:14Whitney Zimmerman: 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? 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 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.

1:52But 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 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 a moment.

2:19Whitney Zimmerman: 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. 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, you know, how competition has been changing over time. It's actually quite fascinating to see the speed at which market share is changing hands. And of course, when the shuffle rates are high, competition is more intense and it can be harder to think long term.

3:04And 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 about the banks I do serve, and I do serve a lot of banks across the globe. 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.

3:47To 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 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, you know, harder.

4:29Whitney Zimmerman: So, Andy, how should leaders be responding to this shifting market dynamic? 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 basis and bring that into conversations. I think it's knowing where you are. There's a lot of leading indicators. But my recommendation would be you bring that in to discussions.

5:02And I would say 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.

5:13Whitney Zimmerman: 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? I think what Andy was describing and what we were talking about with the shuffle 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 wargaming, you can use scenario planning, but at the end is how do we make sure we take a holistic view on the market in which you operate and you change the way of framing the potential decisions ahead of you?

5:56Whitney Zimmerman: So in your experience then, And are business leaders bringing enough of that competitive advantage lens to their strategy discussions and decisions? 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 decisions or framing strategic options, taking that into account? Because, of course, when you operate in industry as an executive, you know this industry very well. You know what's going on. The question is, how do you debiased your way of thinking about strategy? And instead of acknowledging that you have new competitors, how do you truly change the pivots, the strategic way of thinking about your capital allocation or human capital decisions?

6:38This 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 management. Betendi?

7:20on it, 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, 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.

8:01And 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 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 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 spot for most organizations. Thanks.

8:29Whitney Zimmerman: 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 longstanding competitive advantage? And how should they be thinking about keeping an eye on it and potentially pivoting? 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.

9:05Now, if that no longer has value, meaning it's eroded and now what used to make you special is now commonplace because of technology or industry structure or market entry or AI native organizations coming after 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. 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.

9:43Now, most companies, especially large companies that are quite profitable, this is not something that happens overnight. So what you have to recognize is, 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 exists, which is cash, right?

10:16It'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 healthcare, whether it's migrating into new segments of the market, you need to understand that whether it's through M &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 any Monday to show up and say, today's the day we're going to start unfunding a going concern with lots of employees and lots of political capital in my organization and fund a new one.

10:49That's why it's a strategy question. It's really a decision, not just capital reallocation.

10:55Whitney Zimmerman: 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? The companies which are the best position for this disruption will treat AI, and 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.

11:38Once 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 our new AI-enabled 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 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.

12:20And how do you debate which of those drivers are the most likely to shift? And what does it mean in in terms of framing your own strategic decisions. And in my experience, it means getting one, two layers deeper in the 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 a new platform will emerge. So if you combine, again, uncertainty, competitive advantage, AI, Strategy is getting harder, but it matters more than ever.

12:57Whitney Zimmerman: 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. AI is having a profound impact on lots of things. And 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 or talking about it, because it's hard to see. But AI is great, actually, at weak signals. AI 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.

13:34And it's fascinating. We actually took 50 individual companies. We did a full teardown 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 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 percent of that data set of 50 industrial companies were at a meaningful threat. Their competitive advantage is being meaningfully eroded.

14:11So three quarters, not yet, right, or maybe never, but a quarter were actually significantly under threat. Now, whether that was observable to those companies, 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 the fundamentals of their performance were actually quite strong and differentiated, meaning they were out earning their competitors, which is great.

14:55It shows you actually have advantage. You're either growing faster or you're earning more profit 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 out or below GDP, for example, meaning the market is saying this is good today, but nine out of 10, the market was saying, it's not good tomorrow. But the important point is, 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.

15:38Whitney Zimmerman: And Sebastian, with so many competitive dynamics changing rapidly, how does one actually then measure the quality of their strategy? So we do use what we call our 10 tests of strategy to measure the quality of 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 will be distinctive enough to do better than the average competitor in the market? How do you make sure that you tap you true sources of advantage, back to what Andy was seeing on the competitive advantage. But I think beyond the 10 tests, what has been very striking for us is the quality of the strategy when we look at the last 15 years, where we have been on a regular basis asking executives how they feel about where their strategies land across the 10 tests.

16:31And it's, of course, always very hard to design a strategy well, but it has been getting harder. And the quality of the strategies have been dropping on average. When you ask the question, and bear with me, the question we ask is, you know, how many of you do you think are passing four or more tests out of the 10? Four, 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 or are telling us that the speed of change and the volume of information and the data to deal with is just overwhelming.

17:21And 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 various stakeholders, employees, board members, investors. The drop of the quality of the strategy matters more than ever on the outcomes of companies. We measure the strategy impact of a given company. We use a power curve, which is the distribution of the economic profit.

18:05And 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 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.

18:45Whitney Zimmerman: 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? I think somehow we've touched a number of those ideas in what we have discussed. And we have also published a number of perspectives on how to move up to the curve. It comes very basically to making decisive decisions. And just to give you one example, when we looked into thousands of companies and where 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.

19:33So I think 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 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 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.

20:11The 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 organizations. And that requires strong and profound decision making where 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.

20:39Whitney Zimmerman: 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? 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 as getting strategic initiatives in executives' hands. It includes making sure there's a sufficient level of planning beneath strategic choices you're making.

21:17Whitney Zimmerman: 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, 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.

21:52Whitney Zimmerman: It's hard to trip up the curve to top 20 % economic profit 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. It's not necessarily a new idea, but it's a really timeless one that we think deserves more focus and attention in our language about how we talk about strategy.

22:34Whitney Zimmerman: Back in the Cold War, there was a very important strategist called Andrew Marshall. 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. And so, Whitney, how should leaders think about then making sure that their strategy survives the system and moves through their organization? The first thing is that our research finds it is difficult to mobilize vague strategy, right?

23:09Whitney Zimmerman: It's difficult to mobilize vague choices, vague themes, things that aren't actually choices at all, just sort of intentions. 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, whichever room you're in, be it 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 until we get there. Four things we think matter. One, a clear value creation thesis that explains the choices you're making. Right. What's our vision of the future that's unique?

23:42Whitney Zimmerman: 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 what is the case that we're making that we're actually in a 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?

24:12Whitney Zimmerman: 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, OK, 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.

24:45Whitney Zimmerman: 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 on. 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.

25:20Whitney Zimmerman: Making sure that whether it's a team at the edge of the organization or it's the top team making strategic choices, that 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. 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? 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 in highly uncertain environments that we're tackling, tackling bias.

25:55Whitney Zimmerman: 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 &L or for an executive is last year's budget because this is what we're focusing on every single day.

26:26Whitney Zimmerman: 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, OK, what's the forecast for that? Very often, the first year of that strategic financial plan is totally forgotten when it comes to budgeting. And we believe that actually instead, that first year of that strategic financial plan should become the first draft of your budget to force you to be anchored differently.

27:04Whitney Zimmerman: 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. other things that you're funding, right? So by stack ranking your overall 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.

27:36Whitney Zimmerman: So those are two biases that I think are really important for ensuring that mobilization isn't cut off at the knees. 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 actually get this right? 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 you make a strategic choice in the business, everyone knows what happens next. And you don't need to explicitly mobilize.

28:12Whitney Zimmerman: 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've talked with a 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 taking time to make decisions about why execution isn't happening.

28:45Whitney Zimmerman: I need to be focusing on mobilization as opposed to 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 and 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.

29:15Thanks.

29:16Whitney Zimmerman: 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? 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 testing learning 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 strategy to a high standard right it it's a self-reinforcing system.

30:03Whitney Zimmerman: Hold yourself to a high standard, invest in capabilities, and a lot of things get a lot easier in terms of trying to build an advantage. Awesome. Whitney, Andy, Sebastian, thank you so much for taking the time. This has been a great conversation. Thanks, Sean. Thank you. Thanks, Sean. 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 Kohler, publishing in October.

30:36Whitney Zimmerman: 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 itsr at mckinsey.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 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.

31:15Whitney Zimmerman: 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 at McKinsey.com slash SCF. You can also connect with us on LinkedIn at the McKinsey strategy and 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.

31:45Thank you.