| Why do many companies competing in supposedly high-growth sectors fare so poorly? Bad execution is one obvious possibility, but McKinsey research into the recent growth histories of more than 200 large corporations around the world shows that while the ability to execute is essential, it isn't the key differentiator between companies that are growing quickly and slowly. The most critical thing is to compete not only in a fast-growing sector but also—at a more granular level—in a fast-growing part of that sector. Gaining new revenues through M&A is important as well. Market share, the third main growth driver, is less significant. Executives should assess a company's performance on all three, for all are actionable, and the more of them companies excel in, the greater the rewards. The exhibit below presents a diagnostic growth strategy tool that disaggregates the performance of a multinational consumer goods company on the three main growth drivers in 12 product categories and five geographic regions. Under this lens, it becomes immediately apparent that the company, which can't claim exceptional performance in any segment, has a portfolio problem. Although a promising Latin American growth story is emerging in most segments, the company's core operations, in Europe and North America, are performing poorly. A microscopic examination of this sort forces companies to make better-informed portfolio choices. |
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