Signal About 80% of a typical company's growth comes from its core industry

Summary

McKinsey research shows that roughly 80 percent of a typical company's growth originates in its core industry. Companies that outgrew their peers in that core earned total shareholder returns five percentage points higher each year. The report uses this to argue that organizations need to reallocate resources dynamically and divest in order to grow. Those that shift budget and talent quickly are said to reduce inefficiency, accelerate innovation, and improve employee and customer satisfaction. Effective portfolio management also involves regularly shedding underperforming businesses and activities that are no longer core. McKinsey adds that such pruning must be matched by a clear vision guiding priorities and decisions.