Introduction
The pursuit of productivity growth is essential for societal benefits, including higher wages, lower consumer prices, increased business profits, and greater value for shareholders. However, a recent study by the McKinsey Global Institute sheds light on how productivity growth is primarily driven by a small number of audacious companies rather than incremental efficiency improvements across many businesses.
The Misconception of Productivity Growth
Contrary to the widespread belief that productivity growth results from gradual, collective efficiency improvements in numerous companies, the McKinsey Global Institute study suggests otherwise. A minuscule number of enterprising firms are responsible for most productivity advancements, not the small contributions of thousands or millions of companies.
Study Scope and Findings
The study analyzed 8,300 companies in Germany, the United Kingdom, and the United States, focusing on four sectors: retail, automotive and aerospace industries, transportation and logistics, and computing and electronics. The researchers created a “laboratory economy” to track companies that create value and contribute to national productivity growth versus those that hinder it.
The findings reveal that less than 100 highly productive companies account for two-thirds of the sample’s growth. These companies added at least one basic point to their respective national sample’s productivity growth between 2011 and 2019. Simultaneously, a smaller number of “laggards” generated at least one basic negative point. This concentration is much more extreme than the common understanding of productivity.
Strategic Decisions by Leading Companies
The most successful companies in the sample employed five types of strategic decisions, often in combination: scaling up business models and technologies with higher productivity (e.g., e-commerce or low-cost airline models); reorienting regional and product portfolios towards more productive activities or adjacent opportunities; changing customer value propositions in mass and niche markets; creating network effects and scale; and operational changes to increase labor efficiency and reduce costs.
- Apple’s strategic expansion into services
- EasyJet’s contribution to defining low-cost airline trends
- Zalando’s pioneering role in fashion e-commerce
Implications for Policy and Business Leadership
The study’s findings have significant policy implications. Current policies often aim to improve well-being by supporting small businesses and disseminating best practices. However, since most benefits come from a few enterprising companies, asymmetric strategies aligned with the observed patterns are necessary. This involves enabling faster reallocation of capital and labor and creating ecosystems that help leading companies scale their operations.
In emerging economies, encouraging entrepreneurial audacity is crucial as leading firms can skip stages and adopt advanced technologies and business models used in developed economies. If only a few companies have the potential to stand out within an economy, deliberate measures may be needed to foster their emergence and success.
Business leaders should stop viewing productivity as a byproduct of operations and start managing it as a strategic outcome. This entails measuring, investing in, and boldly choosing new growth areas while strategically withdrawing from others, complemented by resource reallocations.
Key Questions and Answers
- Q: What does the study reveal about productivity growth? A: The study concludes that a small number of bold companies are responsible for most productivity growth, not incremental efficiency improvements across many businesses.
- Q: How do leading companies drive productivity growth? A: Leading companies employ strategic decisions such as scaling up productive business models, reorienting portfolios, changing customer value propositions, creating network effects, and enhancing labor efficiency.
- Q: What are the policy implications of this study? A: Policymakers should consider asymmetric strategies that enable faster reallocation of capital and labor, fostering ecosystems to support leading companies’ growth.
- Q: How important is entrepreneurial audacity in emerging economies? A: Encouraging bold entrepreneurship is crucial in emerging economies, as leading firms can adopt advanced technologies and business models, accelerating growth.
- Q: What role should business leaders play in productivity management? A: Business leaders should manage productivity as a strategic outcome by measuring, investing in it, and making bold decisions about growth areas.
Authors:
Chris Bradley is the Director of the McKinsey Global Institute and a Senior Partner at McKinsey & Company in Sydney.
Jan Mischke is a Partner at the McKinsey Global Institute in Zurich.
Translation: Esteban Flamini
Copyright: Project Syndicate, 2025
www.project- syndicate.org
