Building a superpower: What can we learn from the Magnificent Seven?

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Building a superpower: What can we learn from the Magnificent Seven?

By Brad Mendelson et al., | McKinsey & Company | June 25, 2024

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The stock market offers daily lessons in animal spirits and, occasionally, something more. Every so often, investors become obsessed with a small group of companies, and clever analysts give them a name that resonates with the investing public. In the ’60s, we had the Nifty 50; in the 2010s, we had the FAANGs; and today we have the Magnificent Seven and the Granolas. The Magnificent Seven are tech companies, by and large: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, a tech-forward car company.   The Granolas, a group of European companies, are more varied: GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP, and Sanofi.

In the authors’ experience, the companies that successfully build these kinds of distinctive capabilities tap six elements:

1. Vision and leadership.  To build a successful superpower, companies need to articulate the value they hope to create, not just next year but ten years from now, and link it to the economics of their business models. The basic question is simple: As the company evolves, can it expect an ever-larger impact from its superpower? Top companies continually expand the capability to maintain a competitive edge.
2. Employees.  Leading companies develop skill-building journeys for people throughout the organization and in that way sustain institutional knowledge—for example, through a corporate academy. These companies see this work as part of a multiyear strategic-workforce plan that outlines talent needs over a period of several years. By considering various factors such as roles, skills, hiring, and reskilling, an organization can ensure it has the right workforce to achieve its long-term vision for the institutional capability.
3. Culture and mindset.  When aspiring to build an institutional capability, organizations often assess their organizational health and take on board the changes needed to reset the culture for experimentation and building. These are typically discrete mindset and behavioral shifts to help employees embrace the new capability in their day-to-day work. Where most organizations fall short is embedding these target mindsets into the backbone of the people structure: the HR processes. By incorporating essential mindsets into hiring, leadership models, and feedback, companies can target moments that matter throughout the end-to-end employee life cycle.
4. Technology.  What companies often fail to appreciate is the challenge of hard-wiring technology into core workflow systems.  Building a superpower without technology is next to impossible; building one with technology that isn’t well integrated into the enterprise is only slightly easier.
5. Organization.  When building an enterprise superpower, organizations should ensure their organizational structures can adapt and scale the capability. Often, companies will revisit their organizational structures and look for opportunities to redesign the teams most directly linked to the institutional capability. A company that’s rewiring one of its functions to build a digital superpower, for example, may also adopt agile structures.
6. Routines.  As part of implementing the other VECTOR components, organizations should redesign essential processes to embed the capability into how the organization operates. What we see is that many companies create nice designs on paper but don’t see them through in practice. To make sure the capability endures, companies need repetition; they may need to run the new process as many as 20 cycles to “burn” it into the organization. This is especially important while building the capability; coaching teams on execution can ensure a long life for the new capability.

2 key takeaways from the article

1. The stock market offers daily lessons in animal spirits and, occasionally, something more. Every so often, investors become obsessed with a small group of companies, and clever analysts give them a name that resonates with the investing public. In the ’60s, we had the Nifty 50; in the 2010s, we had the FAANGs; and today we have the Magnificent Seven and the Granolas. The Magnificent Seven are tech companies, by and large: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, a tech-forward car company.   The Granolas, a group of European companies, are more varied: GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP, and Sanofi.
2. The companies that successfully build these kinds of distinctive capabilities tap six elements: vision, employees, culture, technology, organizational structure, and routines. As a bit of shorthand, we can call this the VECTOR approach.

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Topics:  Organizational Performance, Teams, Organizational Health, Competitive Advantage, Culture, Technology, Vision, Mission, Strategic Plan, Leadership, Routines, Implementation