# data[].attributes.body
Moving from knowledge stocks to knowledge flows.

# data[].attributes.attachment_link.title
The Big Shift - Part 1: What is the Big Shift?

# data[].attributes.body
This means managers will need to develop the skills to be familiar with more than just their team and companies will need to focus on internal tools designed to make skillsets among resource pools searchable.

# data[].attributes.body
Hagel argues that companies need to migrate to having managers pull resources as from a company pool rather than "pushing" those resources into an assigned roll from which they will not migrate.

# data[].attributes.attachment_link.title
The Big Shift - Part 1: What is the Big Shift?

# data[].attributes.body
[2:36] New purpose of companies is to provide grater opportunities for collaborative learning and innovation.

# data[].attributes.attachment_link.title
The Big Shift - Part 2: How do we thrive in the Big Shift?

# data[].attributes.body
Moving from what Conklin refers to as the Age of Science's individual achievement to the Age of Design's collaborative learning.

# data[].attributes.body
The process of sharing and creating meaning through story telling implies more conversations and meetings. The process of creating ownership and shared understanding implies having more conversations and meetings."

# data[].attributes.body
"The reasearch on innovation identifies [...] a common promlem for managers as companies grow. [...] 'there's a natural tendency to think in terms of bigger bets as you get bigger'"

# data[].attributes.body
But asking [sharp-edged questions intended to narrow our focus], very often legitimate in business-as-usual settings, may constrain management teams in atypical, complex situations, such as responding to
a quickly changing market or revitalizing a privatized utility’s culture.

# data[].attributes.attachment_link.readable_text
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands. Nowadays, late nights of number crunching, feasts of modeling, and the familiar rituals of presentations have replaced the rain dances of old. But often, the odds of generating reliable insights are not much better.

Perhaps that's because our approach to the hardest problems-and the anxiety those problems create-is fundamentally misdirected. When most of us face a challenge, we typically fall back on our standard operating procedures. Call this "managing the probable." In much of our education, and in many of our formative experiences, we've learned that some simple problems have one right answer. For more complicated problems, accepted algorithms can help us work out the best answer from among available options. We respond to uncertainty with analysis or leave that analysis to the experienced hands of others. We look for leaders who know the way forward and offer some assurance of predictability.

This way of approaching situations involves a whole suite of routines grounded in a mind-set of clarity if not outright certainty. To that end, they are characterized by sharp-edged questions intended to narrow our focus: What is the expected return on this investment? What is the three-year plan for this venture? At what cost are they willing to settle? But asking these kinds of questions, very often legitimate in business-as-usual settings, may constrain management teams in atypical, complex situations, such as responding to a quickly changing market or revitalizing a privatized utility's culture. Our tendency to place one perspective above all others-the proverbial "fact-based view" or "maximizing key stakeholders' alignment"-can be dangerous. All too often, we operate with an excessively simple model in enormously messy circumstances. We fail to perceive how different pieces of reality interact and how to foster better outcomes.

Moving from "managing the probable" to "leading the possible" requires us to address challenges in a fundamentally different way. Rather than simply disaggregating complexities into pieces we find more tractable, we should also broaden our range of interventions by breaking out of familiar patterns and using a whole new approach that allows us to expand our options, experiment in low-risk ways, and realize potentially outsized payoffs. But be warned: leading the possible involves coping with our own anxieties about an unknowable and uncontrollable world. A few simple habits of mind presented here can prod us toward thinking and acting differently. These should not be considered a checklist of to-dos; indeed, the very point is to move beyond a check-the-box mentality.
McKinsey Quarterly
Unexpected possibilities

We relish stories of unexpected possibilities-little bets that created huge and unforeseen benefits. Twitter, for instance, was born when its creators noticed how alive and engaged they felt when communicating with each other in real time over SMS. The concept was brilliant, and the platform has reshaped the way the world communicates. But the initiative arose from brainstorming rather than an elaborate business plan. Tweeting caught on, in large part, because it grants its users freedom. In fact, Twitter cofounder Evan Williams has explained that, in general, his rule is to do less. We can't foresee how uncertain conditions will unfold or how complex systems will evolve, but we can conduct thoughtful experiments to explore the possibilities.

That's what happened at the birth of Emirates Airline. We've grown accustomed to thinking of Dubai as a major transit hub, but its development was hardly inevitable. During the mid-1980s, Gulf Air, the area's regional flag carrier at the time, began to cut back its services to the city. Faced with the possibility of hundreds of stranded passengers in the short term, and the threat of long-term decline, the government tried something new. With a small infusion of cash (by airline standards), it leased two planes with crews from another airline and converted a couple of jets from the royal fleet for commercial use. In time, the fledgling Emirates Airline flew high. Traffic through Dubai International Airport seeded a local tourism industry and, on the cargo side, a logistics platform. This in turn attracted ever more traffic in what became a fantastically virtuous cycle. Not even the most optimistic of the airline's founders could have reasonably imagined that Emirates Airline would be an industry giant-or that Dubai would become the world's busiest international-passenger airport.

The leaders of these new ventures used unconventional approaches to try new, unexpected moves-with enormous payoffs. But it's not just large innovations that make a difference. When people think in new ways, very small shifts can have unexpected and significant consequences.

Habits of mind

Uncertainty can't be solved with pat procedures; it takes new habits of mind to lead the possible. In our experience, three such habits stretch the capabilities of leaders and help them not only to lead the possible but also to delight in it.

Ask different questions

The questions we ask emerge from our typical patterns of thought. We focus on narrowing down a problem so that we can find a solution. But we often fail to notice that in doing so we constrain the solution and make it ordinary. Asking different questions helps slow down the process. We begin to take in the full range of data available to us and in consequence have a significantly wider set of possible options. Examples of such questions include the following:

What do I expect not to find? How could I attune to the unexpected?

What might I be discounting or explaining away a little too quickly?

What would happen if I shifted one of my core assumptions on an issue, just as an experiment?

The two of us have seen this approach applied successfully to real-life situations. For example, a government agency struggling with ever-shrinking resources and ever-increasing demands had asked two questions for years: "How will we get enough money to meet the demands?" and "Which services can we cut to stay within our budget?" The senior team, tired of running in circles searching for untapped financing streams or arguing over which core services to cut, intentionally explored a new idea: "How can we share our workload with others so that our current financing becomes sufficient without cutting back on services?" This new question significantly widened the available possibilities, and the organization set out to conduct a long series of small-scale experiments with businesses, other government departments, and community members to keep the same level of service for far less money. Asking a different question opened up dynamic possibilities.

Take multiple perspectives

No one can predict when or where the next vital idea will emerge, but we can support an expansive view of our present conditions. We can start by pushing back on our natural inclination to believe that the data we see are all the data we need and by distrusting our natural craving for alignment. Considering multiple perspectives opens up our field of vision. Diversity might create more disagreement and short-term conflict, but in an uncertain environment, a more expansive set of solutions is desirable.

We can try these approaches:

Take the perspective of someone who frustrates or irritates us. What might that person have to teach us?

Seek out the opinions of people beyond our comfort zone. The perspectives of, among others, younger people, more junior staff, and dissatisfied customers can be insightful and surprising.

Listen to what other people have to say. We should not try to convince them to change their conclusions; we should listen to learn. If we can understand their perspectives well enough, we might even find that our own conclusions change.

New perspectives often arise from unexpected sources. At a large consumer-goods organization that prided itself on its customer-centric approach, the leadership team rightly asserted that it understood the perspectives of its diverse customer base and key suppliers. The team was asked whether any group-anywhere at all-"just wasn't getting it." Rueful laughter followed; of course there was such a group: a set of consumers written off some time ago and now never considered. Taking a new approach, the leaders probed that group's perspectives, not to win over these consumers or to sell them something but to learn from them. The leaders discovered the possibility of a whole new product line that slipped easily into the company's supply chain but hadn't been on the horizon previously. Taking multiple perspectives radically opened up a new set of possibilities.

See systems

This approach is about seeing patterns of behavior, and then developing and trying small "safe-to-fail" experiments to nudge the system in a more helpful direction. Leaders are best served when they get a wider, more systemic view of the present. Yet we've been trained to follow our natural inclination to examine the component parts. We assume a straightforward and linear connection between cause and effect. Finally, we look for root causes at the center of problems. In doing these things, we often fail to perceive the broader forces at work. The more we can hold on to the special features of systems, the more we can create experiments in unexpected places to open up new possibilities.

To best understand systems, it's helpful to resist the urge to disaggregate problems and to solve them right away. Here are some alternatives:

We can hold opposing ideas without reconciling them. If it looks as though we're confronting an either/or choice, we can reconsider our narrow framing and wonder what we're missing.

We shouldn't waste time arguing about the best solution; instead, we can pick several good but different solutions and experiment with them all in a small way.

We can give up the hunt for the root cause and instead look to the edges of an issue for our experiments. The system's center is most resistant to change, but tinkering at the periphery can deliver outsized returns.

Elements in a system can be connected in ways that are not immediately apparent. For example, call-center employee turnover is notoriously high across industries-an expensive drain on this particular system. Many managers have tried to develop better hiring practices to eliminate some of the turnover before it begins; others beef up their HR departments to deal with the inevitable churn.

Would you like to learn more about our Organization Practice?

One executive, looking at the edges of the issue in his district, noticed that many skilled people outside the workforce care for their children or sick parents. He experimented with ways to bring these people into his call center in a flexible way: working from home, setting their own shift lengths and hours (a revolutionary idea in call centers), and managing their own performance targets. Over time, he nudged the model so that it became enormously successful. After 12 months of the new system, when the call-center staff had been ramped up to more than 200 employees, upward of 90 percent of them felt engaged with their work-a remarkable achievement in the traditionally transient and disengaged world of call centers-and turnover fell to under 10 percent a year. Looking at the whole system and experimenting with (and learning from) different approaches helped the executive to solve a number of related problems: turnover, customer satisfaction, local unemployment, and even rates of depression among people who provide care for family members.

Leadership implications

Of course, such shifts of mind have implications, and opening ourselves up to the delights of the possible comes at a cost. One casualty may be our cherished image of the traditional leader. The default model of a clear-minded person, certain of his or her outlook and ideas, is not consistent with the qualities that allow possibilities to flourish. In a complex world, we're often better served by leaders with humility, a keen sense of their own limitations, an insatiable curiosity, and an orientation to learning and development.

Understanding this can have significant implications. For example, a group of private-equity leaders began to chart different leadership styles required at their various portfolio companies. Eventually, they realized that CEO searches were too often based on a one-size-fits-all model. Even as they fought their anxiety about breaking the standard mold, they came to understand that fluid circumstances require flexibility. Their awareness of the very different requirements of leadership in unpredictable settings helped them select-and develop-the leaders they really needed.

Transformative change is certain to happen, often in unforeseen ways and not necessarily led from the front. Unintended repercussions often stymie our best-laid plans. The world is neither simple nor static. It is patterned but not predictable. In the face of new challenges, we all default to how we think we should act and to what seems to have worked before. Managing the probable is reassuring but leaves us more open to being blindsided. Some problems do not lend themselves to rote methods, simple models, or sophisticated algorithms. When we treat them as different, complex, and uncertain, we can unlock solutions of immense creativity and power. And by exercising three simple habits of mind, we can begin to delight in the possible.

Article - McKinsey Quarterly

# data[].attributes.attachment_link.description
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands.

# data[].attributes.body
"the army [...] require[d] soldiers to essentially memorize checklists. In army terms, [...] 'doctrinally approved solutions'. [...] Because fighting the Soviet Army allowed for such a small margin of error"

# data[].attributes.body
"McNamara had fallen prey to what I'll call the "illusion of rationality." [...] It happens when ideas or assumptions seem logical in a plan [...] yet they haven't been validated on the ground or in the real world."

"Systems and approved solutions had become too much of a substitute for moment-to-moment, creative problem-solving"

# data[].attributes.body
breaking out of familiar patterns and using a whole
new approach that allows us to expand our options, experiment
in low-risk ways

# data[].attributes.attachment_link.readable_text
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands. Nowadays, late nights of number crunching, feasts of modeling, and the familiar rituals of presentations have replaced the rain dances of old. But often, the odds of generating reliable insights are not much better.

Perhaps that's because our approach to the hardest problems-and the anxiety those problems create-is fundamentally misdirected. When most of us face a challenge, we typically fall back on our standard operating procedures. Call this "managing the probable." In much of our education, and in many of our formative experiences, we've learned that some simple problems have one right answer. For more complicated problems, accepted algorithms can help us work out the best answer from among available options. We respond to uncertainty with analysis or leave that analysis to the experienced hands of others. We look for leaders who know the way forward and offer some assurance of predictability.

This way of approaching situations involves a whole suite of routines grounded in a mind-set of clarity if not outright certainty. To that end, they are characterized by sharp-edged questions intended to narrow our focus: What is the expected return on this investment? What is the three-year plan for this venture? At what cost are they willing to settle? But asking these kinds of questions, very often legitimate in business-as-usual settings, may constrain management teams in atypical, complex situations, such as responding to a quickly changing market or revitalizing a privatized utility's culture. Our tendency to place one perspective above all others-the proverbial "fact-based view" or "maximizing key stakeholders' alignment"-can be dangerous. All too often, we operate with an excessively simple model in enormously messy circumstances. We fail to perceive how different pieces of reality interact and how to foster better outcomes.

Moving from "managing the probable" to "leading the possible" requires us to address challenges in a fundamentally different way. Rather than simply disaggregating complexities into pieces we find more tractable, we should also broaden our range of interventions by breaking out of familiar patterns and using a whole new approach that allows us to expand our options, experiment in low-risk ways, and realize potentially outsized payoffs. But be warned: leading the possible involves coping with our own anxieties about an unknowable and uncontrollable world. A few simple habits of mind presented here can prod us toward thinking and acting differently. These should not be considered a checklist of to-dos; indeed, the very point is to move beyond a check-the-box mentality.
McKinsey Quarterly
Unexpected possibilities

We relish stories of unexpected possibilities-little bets that created huge and unforeseen benefits. Twitter, for instance, was born when its creators noticed how alive and engaged they felt when communicating with each other in real time over SMS. The concept was brilliant, and the platform has reshaped the way the world communicates. But the initiative arose from brainstorming rather than an elaborate business plan. Tweeting caught on, in large part, because it grants its users freedom. In fact, Twitter cofounder Evan Williams has explained that, in general, his rule is to do less. We can't foresee how uncertain conditions will unfold or how complex systems will evolve, but we can conduct thoughtful experiments to explore the possibilities.

That's what happened at the birth of Emirates Airline. We've grown accustomed to thinking of Dubai as a major transit hub, but its development was hardly inevitable. During the mid-1980s, Gulf Air, the area's regional flag carrier at the time, began to cut back its services to the city. Faced with the possibility of hundreds of stranded passengers in the short term, and the threat of long-term decline, the government tried something new. With a small infusion of cash (by airline standards), it leased two planes with crews from another airline and converted a couple of jets from the royal fleet for commercial use. In time, the fledgling Emirates Airline flew high. Traffic through Dubai International Airport seeded a local tourism industry and, on the cargo side, a logistics platform. This in turn attracted ever more traffic in what became a fantastically virtuous cycle. Not even the most optimistic of the airline's founders could have reasonably imagined that Emirates Airline would be an industry giant-or that Dubai would become the world's busiest international-passenger airport.

The leaders of these new ventures used unconventional approaches to try new, unexpected moves-with enormous payoffs. But it's not just large innovations that make a difference. When people think in new ways, very small shifts can have unexpected and significant consequences.

Habits of mind

Uncertainty can't be solved with pat procedures; it takes new habits of mind to lead the possible. In our experience, three such habits stretch the capabilities of leaders and help them not only to lead the possible but also to delight in it.

Ask different questions

The questions we ask emerge from our typical patterns of thought. We focus on narrowing down a problem so that we can find a solution. But we often fail to notice that in doing so we constrain the solution and make it ordinary. Asking different questions helps slow down the process. We begin to take in the full range of data available to us and in consequence have a significantly wider set of possible options. Examples of such questions include the following:

What do I expect not to find? How could I attune to the unexpected?

What might I be discounting or explaining away a little too quickly?

What would happen if I shifted one of my core assumptions on an issue, just as an experiment?

The two of us have seen this approach applied successfully to real-life situations. For example, a government agency struggling with ever-shrinking resources and ever-increasing demands had asked two questions for years: "How will we get enough money to meet the demands?" and "Which services can we cut to stay within our budget?" The senior team, tired of running in circles searching for untapped financing streams or arguing over which core services to cut, intentionally explored a new idea: "How can we share our workload with others so that our current financing becomes sufficient without cutting back on services?" This new question significantly widened the available possibilities, and the organization set out to conduct a long series of small-scale experiments with businesses, other government departments, and community members to keep the same level of service for far less money. Asking a different question opened up dynamic possibilities.

Take multiple perspectives

No one can predict when or where the next vital idea will emerge, but we can support an expansive view of our present conditions. We can start by pushing back on our natural inclination to believe that the data we see are all the data we need and by distrusting our natural craving for alignment. Considering multiple perspectives opens up our field of vision. Diversity might create more disagreement and short-term conflict, but in an uncertain environment, a more expansive set of solutions is desirable.

We can try these approaches:

Take the perspective of someone who frustrates or irritates us. What might that person have to teach us?

Seek out the opinions of people beyond our comfort zone. The perspectives of, among others, younger people, more junior staff, and dissatisfied customers can be insightful and surprising.

Listen to what other people have to say. We should not try to convince them to change their conclusions; we should listen to learn. If we can understand their perspectives well enough, we might even find that our own conclusions change.

New perspectives often arise from unexpected sources. At a large consumer-goods organization that prided itself on its customer-centric approach, the leadership team rightly asserted that it understood the perspectives of its diverse customer base and key suppliers. The team was asked whether any group-anywhere at all-"just wasn't getting it." Rueful laughter followed; of course there was such a group: a set of consumers written off some time ago and now never considered. Taking a new approach, the leaders probed that group's perspectives, not to win over these consumers or to sell them something but to learn from them. The leaders discovered the possibility of a whole new product line that slipped easily into the company's supply chain but hadn't been on the horizon previously. Taking multiple perspectives radically opened up a new set of possibilities.

See systems

This approach is about seeing patterns of behavior, and then developing and trying small "safe-to-fail" experiments to nudge the system in a more helpful direction. Leaders are best served when they get a wider, more systemic view of the present. Yet we've been trained to follow our natural inclination to examine the component parts. We assume a straightforward and linear connection between cause and effect. Finally, we look for root causes at the center of problems. In doing these things, we often fail to perceive the broader forces at work. The more we can hold on to the special features of systems, the more we can create experiments in unexpected places to open up new possibilities.

To best understand systems, it's helpful to resist the urge to disaggregate problems and to solve them right away. Here are some alternatives:

We can hold opposing ideas without reconciling them. If it looks as though we're confronting an either/or choice, we can reconsider our narrow framing and wonder what we're missing.

We shouldn't waste time arguing about the best solution; instead, we can pick several good but different solutions and experiment with them all in a small way.

We can give up the hunt for the root cause and instead look to the edges of an issue for our experiments. The system's center is most resistant to change, but tinkering at the periphery can deliver outsized returns.

Elements in a system can be connected in ways that are not immediately apparent. For example, call-center employee turnover is notoriously high across industries-an expensive drain on this particular system. Many managers have tried to develop better hiring practices to eliminate some of the turnover before it begins; others beef up their HR departments to deal with the inevitable churn.

Would you like to learn more about our Organization Practice?

One executive, looking at the edges of the issue in his district, noticed that many skilled people outside the workforce care for their children or sick parents. He experimented with ways to bring these people into his call center in a flexible way: working from home, setting their own shift lengths and hours (a revolutionary idea in call centers), and managing their own performance targets. Over time, he nudged the model so that it became enormously successful. After 12 months of the new system, when the call-center staff had been ramped up to more than 200 employees, upward of 90 percent of them felt engaged with their work-a remarkable achievement in the traditionally transient and disengaged world of call centers-and turnover fell to under 10 percent a year. Looking at the whole system and experimenting with (and learning from) different approaches helped the executive to solve a number of related problems: turnover, customer satisfaction, local unemployment, and even rates of depression among people who provide care for family members.

Leadership implications

Of course, such shifts of mind have implications, and opening ourselves up to the delights of the possible comes at a cost. One casualty may be our cherished image of the traditional leader. The default model of a clear-minded person, certain of his or her outlook and ideas, is not consistent with the qualities that allow possibilities to flourish. In a complex world, we're often better served by leaders with humility, a keen sense of their own limitations, an insatiable curiosity, and an orientation to learning and development.

Understanding this can have significant implications. For example, a group of private-equity leaders began to chart different leadership styles required at their various portfolio companies. Eventually, they realized that CEO searches were too often based on a one-size-fits-all model. Even as they fought their anxiety about breaking the standard mold, they came to understand that fluid circumstances require flexibility. Their awareness of the very different requirements of leadership in unpredictable settings helped them select-and develop-the leaders they really needed.

Transformative change is certain to happen, often in unforeseen ways and not necessarily led from the front. Unintended repercussions often stymie our best-laid plans. The world is neither simple nor static. It is patterned but not predictable. In the face of new challenges, we all default to how we think we should act and to what seems to have worked before. Managing the probable is reassuring but leaves us more open to being blindsided. Some problems do not lend themselves to rote methods, simple models, or sophisticated algorithms. When we treat them as different, complex, and uncertain, we can unlock solutions of immense creativity and power. And by exercising three simple habits of mind, we can begin to delight in the possible.

Article - McKinsey Quarterly

# data[].attributes.attachment_link.description
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands.

# data[].attributes.body
Moving from “managing the probable” to “leading the possible”
requires us to address challenges in a fundamentally different
way

# data[].attributes.attachment_link.readable_text
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands. Nowadays, late nights of number crunching, feasts of modeling, and the familiar rituals of presentations have replaced the rain dances of old. But often, the odds of generating reliable insights are not much better.

Perhaps that's because our approach to the hardest problems-and the anxiety those problems create-is fundamentally misdirected. When most of us face a challenge, we typically fall back on our standard operating procedures. Call this "managing the probable." In much of our education, and in many of our formative experiences, we've learned that some simple problems have one right answer. For more complicated problems, accepted algorithms can help us work out the best answer from among available options. We respond to uncertainty with analysis or leave that analysis to the experienced hands of others. We look for leaders who know the way forward and offer some assurance of predictability.

This way of approaching situations involves a whole suite of routines grounded in a mind-set of clarity if not outright certainty. To that end, they are characterized by sharp-edged questions intended to narrow our focus: What is the expected return on this investment? What is the three-year plan for this venture? At what cost are they willing to settle? But asking these kinds of questions, very often legitimate in business-as-usual settings, may constrain management teams in atypical, complex situations, such as responding to a quickly changing market or revitalizing a privatized utility's culture. Our tendency to place one perspective above all others-the proverbial "fact-based view" or "maximizing key stakeholders' alignment"-can be dangerous. All too often, we operate with an excessively simple model in enormously messy circumstances. We fail to perceive how different pieces of reality interact and how to foster better outcomes.

Moving from "managing the probable" to "leading the possible" requires us to address challenges in a fundamentally different way. Rather than simply disaggregating complexities into pieces we find more tractable, we should also broaden our range of interventions by breaking out of familiar patterns and using a whole new approach that allows us to expand our options, experiment in low-risk ways, and realize potentially outsized payoffs. But be warned: leading the possible involves coping with our own anxieties about an unknowable and uncontrollable world. A few simple habits of mind presented here can prod us toward thinking and acting differently. These should not be considered a checklist of to-dos; indeed, the very point is to move beyond a check-the-box mentality.
McKinsey Quarterly
Unexpected possibilities

We relish stories of unexpected possibilities-little bets that created huge and unforeseen benefits. Twitter, for instance, was born when its creators noticed how alive and engaged they felt when communicating with each other in real time over SMS. The concept was brilliant, and the platform has reshaped the way the world communicates. But the initiative arose from brainstorming rather than an elaborate business plan. Tweeting caught on, in large part, because it grants its users freedom. In fact, Twitter cofounder Evan Williams has explained that, in general, his rule is to do less. We can't foresee how uncertain conditions will unfold or how complex systems will evolve, but we can conduct thoughtful experiments to explore the possibilities.

That's what happened at the birth of Emirates Airline. We've grown accustomed to thinking of Dubai as a major transit hub, but its development was hardly inevitable. During the mid-1980s, Gulf Air, the area's regional flag carrier at the time, began to cut back its services to the city. Faced with the possibility of hundreds of stranded passengers in the short term, and the threat of long-term decline, the government tried something new. With a small infusion of cash (by airline standards), it leased two planes with crews from another airline and converted a couple of jets from the royal fleet for commercial use. In time, the fledgling Emirates Airline flew high. Traffic through Dubai International Airport seeded a local tourism industry and, on the cargo side, a logistics platform. This in turn attracted ever more traffic in what became a fantastically virtuous cycle. Not even the most optimistic of the airline's founders could have reasonably imagined that Emirates Airline would be an industry giant-or that Dubai would become the world's busiest international-passenger airport.

The leaders of these new ventures used unconventional approaches to try new, unexpected moves-with enormous payoffs. But it's not just large innovations that make a difference. When people think in new ways, very small shifts can have unexpected and significant consequences.

Habits of mind

Uncertainty can't be solved with pat procedures; it takes new habits of mind to lead the possible. In our experience, three such habits stretch the capabilities of leaders and help them not only to lead the possible but also to delight in it.

Ask different questions

The questions we ask emerge from our typical patterns of thought. We focus on narrowing down a problem so that we can find a solution. But we often fail to notice that in doing so we constrain the solution and make it ordinary. Asking different questions helps slow down the process. We begin to take in the full range of data available to us and in consequence have a significantly wider set of possible options. Examples of such questions include the following:

What do I expect not to find? How could I attune to the unexpected?

What might I be discounting or explaining away a little too quickly?

What would happen if I shifted one of my core assumptions on an issue, just as an experiment?

The two of us have seen this approach applied successfully to real-life situations. For example, a government agency struggling with ever-shrinking resources and ever-increasing demands had asked two questions for years: "How will we get enough money to meet the demands?" and "Which services can we cut to stay within our budget?" The senior team, tired of running in circles searching for untapped financing streams or arguing over which core services to cut, intentionally explored a new idea: "How can we share our workload with others so that our current financing becomes sufficient without cutting back on services?" This new question significantly widened the available possibilities, and the organization set out to conduct a long series of small-scale experiments with businesses, other government departments, and community members to keep the same level of service for far less money. Asking a different question opened up dynamic possibilities.

Take multiple perspectives

No one can predict when or where the next vital idea will emerge, but we can support an expansive view of our present conditions. We can start by pushing back on our natural inclination to believe that the data we see are all the data we need and by distrusting our natural craving for alignment. Considering multiple perspectives opens up our field of vision. Diversity might create more disagreement and short-term conflict, but in an uncertain environment, a more expansive set of solutions is desirable.

We can try these approaches:

Take the perspective of someone who frustrates or irritates us. What might that person have to teach us?

Seek out the opinions of people beyond our comfort zone. The perspectives of, among others, younger people, more junior staff, and dissatisfied customers can be insightful and surprising.

Listen to what other people have to say. We should not try to convince them to change their conclusions; we should listen to learn. If we can understand their perspectives well enough, we might even find that our own conclusions change.

New perspectives often arise from unexpected sources. At a large consumer-goods organization that prided itself on its customer-centric approach, the leadership team rightly asserted that it understood the perspectives of its diverse customer base and key suppliers. The team was asked whether any group-anywhere at all-"just wasn't getting it." Rueful laughter followed; of course there was such a group: a set of consumers written off some time ago and now never considered. Taking a new approach, the leaders probed that group's perspectives, not to win over these consumers or to sell them something but to learn from them. The leaders discovered the possibility of a whole new product line that slipped easily into the company's supply chain but hadn't been on the horizon previously. Taking multiple perspectives radically opened up a new set of possibilities.

See systems

This approach is about seeing patterns of behavior, and then developing and trying small "safe-to-fail" experiments to nudge the system in a more helpful direction. Leaders are best served when they get a wider, more systemic view of the present. Yet we've been trained to follow our natural inclination to examine the component parts. We assume a straightforward and linear connection between cause and effect. Finally, we look for root causes at the center of problems. In doing these things, we often fail to perceive the broader forces at work. The more we can hold on to the special features of systems, the more we can create experiments in unexpected places to open up new possibilities.

To best understand systems, it's helpful to resist the urge to disaggregate problems and to solve them right away. Here are some alternatives:

We can hold opposing ideas without reconciling them. If it looks as though we're confronting an either/or choice, we can reconsider our narrow framing and wonder what we're missing.

We shouldn't waste time arguing about the best solution; instead, we can pick several good but different solutions and experiment with them all in a small way.

We can give up the hunt for the root cause and instead look to the edges of an issue for our experiments. The system's center is most resistant to change, but tinkering at the periphery can deliver outsized returns.

Elements in a system can be connected in ways that are not immediately apparent. For example, call-center employee turnover is notoriously high across industries-an expensive drain on this particular system. Many managers have tried to develop better hiring practices to eliminate some of the turnover before it begins; others beef up their HR departments to deal with the inevitable churn.

Would you like to learn more about our Organization Practice?

One executive, looking at the edges of the issue in his district, noticed that many skilled people outside the workforce care for their children or sick parents. He experimented with ways to bring these people into his call center in a flexible way: working from home, setting their own shift lengths and hours (a revolutionary idea in call centers), and managing their own performance targets. Over time, he nudged the model so that it became enormously successful. After 12 months of the new system, when the call-center staff had been ramped up to more than 200 employees, upward of 90 percent of them felt engaged with their work-a remarkable achievement in the traditionally transient and disengaged world of call centers-and turnover fell to under 10 percent a year. Looking at the whole system and experimenting with (and learning from) different approaches helped the executive to solve a number of related problems: turnover, customer satisfaction, local unemployment, and even rates of depression among people who provide care for family members.

Leadership implications

Of course, such shifts of mind have implications, and opening ourselves up to the delights of the possible comes at a cost. One casualty may be our cherished image of the traditional leader. The default model of a clear-minded person, certain of his or her outlook and ideas, is not consistent with the qualities that allow possibilities to flourish. In a complex world, we're often better served by leaders with humility, a keen sense of their own limitations, an insatiable curiosity, and an orientation to learning and development.

Understanding this can have significant implications. For example, a group of private-equity leaders began to chart different leadership styles required at their various portfolio companies. Eventually, they realized that CEO searches were too often based on a one-size-fits-all model. Even as they fought their anxiety about breaking the standard mold, they came to understand that fluid circumstances require flexibility. Their awareness of the very different requirements of leadership in unpredictable settings helped them select-and develop-the leaders they really needed.

Transformative change is certain to happen, often in unforeseen ways and not necessarily led from the front. Unintended repercussions often stymie our best-laid plans. The world is neither simple nor static. It is patterned but not predictable. In the face of new challenges, we all default to how we think we should act and to what seems to have worked before. Managing the probable is reassuring but leaves us more open to being blindsided. Some problems do not lend themselves to rote methods, simple models, or sophisticated algorithms. When we treat them as different, complex, and uncertain, we can unlock solutions of immense creativity and power. And by exercising three simple habits of mind, we can begin to delight in the possible.

Article - McKinsey Quarterly

# data[].attributes.attachment_link.description
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands.

# data[].attributes.body
Transformative change is certain to happen, often in unforeseen ways and not necessarily led from the front.

# data[].attributes.attachment_link.readable_text
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands. Nowadays, late nights of number crunching, feasts of modeling, and the familiar rituals of presentations have replaced the rain dances of old. But often, the odds of generating reliable insights are not much better.

Perhaps that's because our approach to the hardest problems-and the anxiety those problems create-is fundamentally misdirected. When most of us face a challenge, we typically fall back on our standard operating procedures. Call this "managing the probable." In much of our education, and in many of our formative experiences, we've learned that some simple problems have one right answer. For more complicated problems, accepted algorithms can help us work out the best answer from among available options. We respond to uncertainty with analysis or leave that analysis to the experienced hands of others. We look for leaders who know the way forward and offer some assurance of predictability.

This way of approaching situations involves a whole suite of routines grounded in a mind-set of clarity if not outright certainty. To that end, they are characterized by sharp-edged questions intended to narrow our focus: What is the expected return on this investment? What is the three-year plan for this venture? At what cost are they willing to settle? But asking these kinds of questions, very often legitimate in business-as-usual settings, may constrain management teams in atypical, complex situations, such as responding to a quickly changing market or revitalizing a privatized utility's culture. Our tendency to place one perspective above all others-the proverbial "fact-based view" or "maximizing key stakeholders' alignment"-can be dangerous. All too often, we operate with an excessively simple model in enormously messy circumstances. We fail to perceive how different pieces of reality interact and how to foster better outcomes.

Moving from "managing the probable" to "leading the possible" requires us to address challenges in a fundamentally different way. Rather than simply disaggregating complexities into pieces we find more tractable, we should also broaden our range of interventions by breaking out of familiar patterns and using a whole new approach that allows us to expand our options, experiment in low-risk ways, and realize potentially outsized payoffs. But be warned: leading the possible involves coping with our own anxieties about an unknowable and uncontrollable world. A few simple habits of mind presented here can prod us toward thinking and acting differently. These should not be considered a checklist of to-dos; indeed, the very point is to move beyond a check-the-box mentality.
McKinsey Quarterly
Unexpected possibilities

We relish stories of unexpected possibilities-little bets that created huge and unforeseen benefits. Twitter, for instance, was born when its creators noticed how alive and engaged they felt when communicating with each other in real time over SMS. The concept was brilliant, and the platform has reshaped the way the world communicates. But the initiative arose from brainstorming rather than an elaborate business plan. Tweeting caught on, in large part, because it grants its users freedom. In fact, Twitter cofounder Evan Williams has explained that, in general, his rule is to do less. We can't foresee how uncertain conditions will unfold or how complex systems will evolve, but we can conduct thoughtful experiments to explore the possibilities.

That's what happened at the birth of Emirates Airline. We've grown accustomed to thinking of Dubai as a major transit hub, but its development was hardly inevitable. During the mid-1980s, Gulf Air, the area's regional flag carrier at the time, began to cut back its services to the city. Faced with the possibility of hundreds of stranded passengers in the short term, and the threat of long-term decline, the government tried something new. With a small infusion of cash (by airline standards), it leased two planes with crews from another airline and converted a couple of jets from the royal fleet for commercial use. In time, the fledgling Emirates Airline flew high. Traffic through Dubai International Airport seeded a local tourism industry and, on the cargo side, a logistics platform. This in turn attracted ever more traffic in what became a fantastically virtuous cycle. Not even the most optimistic of the airline's founders could have reasonably imagined that Emirates Airline would be an industry giant-or that Dubai would become the world's busiest international-passenger airport.

The leaders of these new ventures used unconventional approaches to try new, unexpected moves-with enormous payoffs. But it's not just large innovations that make a difference. When people think in new ways, very small shifts can have unexpected and significant consequences.

Habits of mind

Uncertainty can't be solved with pat procedures; it takes new habits of mind to lead the possible. In our experience, three such habits stretch the capabilities of leaders and help them not only to lead the possible but also to delight in it.

Ask different questions

The questions we ask emerge from our typical patterns of thought. We focus on narrowing down a problem so that we can find a solution. But we often fail to notice that in doing so we constrain the solution and make it ordinary. Asking different questions helps slow down the process. We begin to take in the full range of data available to us and in consequence have a significantly wider set of possible options. Examples of such questions include the following:

What do I expect not to find? How could I attune to the unexpected?

What might I be discounting or explaining away a little too quickly?

What would happen if I shifted one of my core assumptions on an issue, just as an experiment?

The two of us have seen this approach applied successfully to real-life situations. For example, a government agency struggling with ever-shrinking resources and ever-increasing demands had asked two questions for years: "How will we get enough money to meet the demands?" and "Which services can we cut to stay within our budget?" The senior team, tired of running in circles searching for untapped financing streams or arguing over which core services to cut, intentionally explored a new idea: "How can we share our workload with others so that our current financing becomes sufficient without cutting back on services?" This new question significantly widened the available possibilities, and the organization set out to conduct a long series of small-scale experiments with businesses, other government departments, and community members to keep the same level of service for far less money. Asking a different question opened up dynamic possibilities.

Take multiple perspectives

No one can predict when or where the next vital idea will emerge, but we can support an expansive view of our present conditions. We can start by pushing back on our natural inclination to believe that the data we see are all the data we need and by distrusting our natural craving for alignment. Considering multiple perspectives opens up our field of vision. Diversity might create more disagreement and short-term conflict, but in an uncertain environment, a more expansive set of solutions is desirable.

We can try these approaches:

Take the perspective of someone who frustrates or irritates us. What might that person have to teach us?

Seek out the opinions of people beyond our comfort zone. The perspectives of, among others, younger people, more junior staff, and dissatisfied customers can be insightful and surprising.

Listen to what other people have to say. We should not try to convince them to change their conclusions; we should listen to learn. If we can understand their perspectives well enough, we might even find that our own conclusions change.

New perspectives often arise from unexpected sources. At a large consumer-goods organization that prided itself on its customer-centric approach, the leadership team rightly asserted that it understood the perspectives of its diverse customer base and key suppliers. The team was asked whether any group-anywhere at all-"just wasn't getting it." Rueful laughter followed; of course there was such a group: a set of consumers written off some time ago and now never considered. Taking a new approach, the leaders probed that group's perspectives, not to win over these consumers or to sell them something but to learn from them. The leaders discovered the possibility of a whole new product line that slipped easily into the company's supply chain but hadn't been on the horizon previously. Taking multiple perspectives radically opened up a new set of possibilities.

See systems

This approach is about seeing patterns of behavior, and then developing and trying small "safe-to-fail" experiments to nudge the system in a more helpful direction. Leaders are best served when they get a wider, more systemic view of the present. Yet we've been trained to follow our natural inclination to examine the component parts. We assume a straightforward and linear connection between cause and effect. Finally, we look for root causes at the center of problems. In doing these things, we often fail to perceive the broader forces at work. The more we can hold on to the special features of systems, the more we can create experiments in unexpected places to open up new possibilities.

To best understand systems, it's helpful to resist the urge to disaggregate problems and to solve them right away. Here are some alternatives:

We can hold opposing ideas without reconciling them. If it looks as though we're confronting an either/or choice, we can reconsider our narrow framing and wonder what we're missing.

We shouldn't waste time arguing about the best solution; instead, we can pick several good but different solutions and experiment with them all in a small way.

We can give up the hunt for the root cause and instead look to the edges of an issue for our experiments. The system's center is most resistant to change, but tinkering at the periphery can deliver outsized returns.

Elements in a system can be connected in ways that are not immediately apparent. For example, call-center employee turnover is notoriously high across industries-an expensive drain on this particular system. Many managers have tried to develop better hiring practices to eliminate some of the turnover before it begins; others beef up their HR departments to deal with the inevitable churn.

Would you like to learn more about our Organization Practice?

One executive, looking at the edges of the issue in his district, noticed that many skilled people outside the workforce care for their children or sick parents. He experimented with ways to bring these people into his call center in a flexible way: working from home, setting their own shift lengths and hours (a revolutionary idea in call centers), and managing their own performance targets. Over time, he nudged the model so that it became enormously successful. After 12 months of the new system, when the call-center staff had been ramped up to more than 200 employees, upward of 90 percent of them felt engaged with their work-a remarkable achievement in the traditionally transient and disengaged world of call centers-and turnover fell to under 10 percent a year. Looking at the whole system and experimenting with (and learning from) different approaches helped the executive to solve a number of related problems: turnover, customer satisfaction, local unemployment, and even rates of depression among people who provide care for family members.

Leadership implications

Of course, such shifts of mind have implications, and opening ourselves up to the delights of the possible comes at a cost. One casualty may be our cherished image of the traditional leader. The default model of a clear-minded person, certain of his or her outlook and ideas, is not consistent with the qualities that allow possibilities to flourish. In a complex world, we're often better served by leaders with humility, a keen sense of their own limitations, an insatiable curiosity, and an orientation to learning and development.

Understanding this can have significant implications. For example, a group of private-equity leaders began to chart different leadership styles required at their various portfolio companies. Eventually, they realized that CEO searches were too often based on a one-size-fits-all model. Even as they fought their anxiety about breaking the standard mold, they came to understand that fluid circumstances require flexibility. Their awareness of the very different requirements of leadership in unpredictable settings helped them select-and develop-the leaders they really needed.

Transformative change is certain to happen, often in unforeseen ways and not necessarily led from the front. Unintended repercussions often stymie our best-laid plans. The world is neither simple nor static. It is patterned but not predictable. In the face of new challenges, we all default to how we think we should act and to what seems to have worked before. Managing the probable is reassuring but leaves us more open to being blindsided. Some problems do not lend themselves to rote methods, simple models, or sophisticated algorithms. When we treat them as different, complex, and uncertain, we can unlock solutions of immense creativity and power. And by exercising three simple habits of mind, we can begin to delight in the possible.

Article - McKinsey Quarterly

# data[].attributes.attachment_link.description
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands.

# data[].attributes.body
In a complex world, we’re often better served by leaders with humility, a keen sense of their own limitations, an insatiable curiosity, and an orientation to learning and development.

# data[].attributes.attachment_link.readable_text
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands. Nowadays, late nights of number crunching, feasts of modeling, and the familiar rituals of presentations have replaced the rain dances of old. But often, the odds of generating reliable insights are not much better.

Perhaps that's because our approach to the hardest problems-and the anxiety those problems create-is fundamentally misdirected. When most of us face a challenge, we typically fall back on our standard operating procedures. Call this "managing the probable." In much of our education, and in many of our formative experiences, we've learned that some simple problems have one right answer. For more complicated problems, accepted algorithms can help us work out the best answer from among available options. We respond to uncertainty with analysis or leave that analysis to the experienced hands of others. We look for leaders who know the way forward and offer some assurance of predictability.

This way of approaching situations involves a whole suite of routines grounded in a mind-set of clarity if not outright certainty. To that end, they are characterized by sharp-edged questions intended to narrow our focus: What is the expected return on this investment? What is the three-year plan for this venture? At what cost are they willing to settle? But asking these kinds of questions, very often legitimate in business-as-usual settings, may constrain management teams in atypical, complex situations, such as responding to a quickly changing market or revitalizing a privatized utility's culture. Our tendency to place one perspective above all others-the proverbial "fact-based view" or "maximizing key stakeholders' alignment"-can be dangerous. All too often, we operate with an excessively simple model in enormously messy circumstances. We fail to perceive how different pieces of reality interact and how to foster better outcomes.

Moving from "managing the probable" to "leading the possible" requires us to address challenges in a fundamentally different way. Rather than simply disaggregating complexities into pieces we find more tractable, we should also broaden our range of interventions by breaking out of familiar patterns and using a whole new approach that allows us to expand our options, experiment in low-risk ways, and realize potentially outsized payoffs. But be warned: leading the possible involves coping with our own anxieties about an unknowable and uncontrollable world. A few simple habits of mind presented here can prod us toward thinking and acting differently. These should not be considered a checklist of to-dos; indeed, the very point is to move beyond a check-the-box mentality.
McKinsey Quarterly
Unexpected possibilities

We relish stories of unexpected possibilities-little bets that created huge and unforeseen benefits. Twitter, for instance, was born when its creators noticed how alive and engaged they felt when communicating with each other in real time over SMS. The concept was brilliant, and the platform has reshaped the way the world communicates. But the initiative arose from brainstorming rather than an elaborate business plan. Tweeting caught on, in large part, because it grants its users freedom. In fact, Twitter cofounder Evan Williams has explained that, in general, his rule is to do less. We can't foresee how uncertain conditions will unfold or how complex systems will evolve, but we can conduct thoughtful experiments to explore the possibilities.

That's what happened at the birth of Emirates Airline. We've grown accustomed to thinking of Dubai as a major transit hub, but its development was hardly inevitable. During the mid-1980s, Gulf Air, the area's regional flag carrier at the time, began to cut back its services to the city. Faced with the possibility of hundreds of stranded passengers in the short term, and the threat of long-term decline, the government tried something new. With a small infusion of cash (by airline standards), it leased two planes with crews from another airline and converted a couple of jets from the royal fleet for commercial use. In time, the fledgling Emirates Airline flew high. Traffic through Dubai International Airport seeded a local tourism industry and, on the cargo side, a logistics platform. This in turn attracted ever more traffic in what became a fantastically virtuous cycle. Not even the most optimistic of the airline's founders could have reasonably imagined that Emirates Airline would be an industry giant-or that Dubai would become the world's busiest international-passenger airport.

The leaders of these new ventures used unconventional approaches to try new, unexpected moves-with enormous payoffs. But it's not just large innovations that make a difference. When people think in new ways, very small shifts can have unexpected and significant consequences.

Habits of mind

Uncertainty can't be solved with pat procedures; it takes new habits of mind to lead the possible. In our experience, three such habits stretch the capabilities of leaders and help them not only to lead the possible but also to delight in it.

Ask different questions

The questions we ask emerge from our typical patterns of thought. We focus on narrowing down a problem so that we can find a solution. But we often fail to notice that in doing so we constrain the solution and make it ordinary. Asking different questions helps slow down the process. We begin to take in the full range of data available to us and in consequence have a significantly wider set of possible options. Examples of such questions include the following:

What do I expect not to find? How could I attune to the unexpected?

What might I be discounting or explaining away a little too quickly?

What would happen if I shifted one of my core assumptions on an issue, just as an experiment?

The two of us have seen this approach applied successfully to real-life situations. For example, a government agency struggling with ever-shrinking resources and ever-increasing demands had asked two questions for years: "How will we get enough money to meet the demands?" and "Which services can we cut to stay within our budget?" The senior team, tired of running in circles searching for untapped financing streams or arguing over which core services to cut, intentionally explored a new idea: "How can we share our workload with others so that our current financing becomes sufficient without cutting back on services?" This new question significantly widened the available possibilities, and the organization set out to conduct a long series of small-scale experiments with businesses, other government departments, and community members to keep the same level of service for far less money. Asking a different question opened up dynamic possibilities.

Take multiple perspectives

No one can predict when or where the next vital idea will emerge, but we can support an expansive view of our present conditions. We can start by pushing back on our natural inclination to believe that the data we see are all the data we need and by distrusting our natural craving for alignment. Considering multiple perspectives opens up our field of vision. Diversity might create more disagreement and short-term conflict, but in an uncertain environment, a more expansive set of solutions is desirable.

We can try these approaches:

Take the perspective of someone who frustrates or irritates us. What might that person have to teach us?

Seek out the opinions of people beyond our comfort zone. The perspectives of, among others, younger people, more junior staff, and dissatisfied customers can be insightful and surprising.

Listen to what other people have to say. We should not try to convince them to change their conclusions; we should listen to learn. If we can understand their perspectives well enough, we might even find that our own conclusions change.

New perspectives often arise from unexpected sources. At a large consumer-goods organization that prided itself on its customer-centric approach, the leadership team rightly asserted that it understood the perspectives of its diverse customer base and key suppliers. The team was asked whether any group-anywhere at all-"just wasn't getting it." Rueful laughter followed; of course there was such a group: a set of consumers written off some time ago and now never considered. Taking a new approach, the leaders probed that group's perspectives, not to win over these consumers or to sell them something but to learn from them. The leaders discovered the possibility of a whole new product line that slipped easily into the company's supply chain but hadn't been on the horizon previously. Taking multiple perspectives radically opened up a new set of possibilities.

See systems

This approach is about seeing patterns of behavior, and then developing and trying small "safe-to-fail" experiments to nudge the system in a more helpful direction. Leaders are best served when they get a wider, more systemic view of the present. Yet we've been trained to follow our natural inclination to examine the component parts. We assume a straightforward and linear connection between cause and effect. Finally, we look for root causes at the center of problems. In doing these things, we often fail to perceive the broader forces at work. The more we can hold on to the special features of systems, the more we can create experiments in unexpected places to open up new possibilities.

To best understand systems, it's helpful to resist the urge to disaggregate problems and to solve them right away. Here are some alternatives:

We can hold opposing ideas without reconciling them. If it looks as though we're confronting an either/or choice, we can reconsider our narrow framing and wonder what we're missing.

We shouldn't waste time arguing about the best solution; instead, we can pick several good but different solutions and experiment with them all in a small way.

We can give up the hunt for the root cause and instead look to the edges of an issue for our experiments. The system's center is most resistant to change, but tinkering at the periphery can deliver outsized returns.

Elements in a system can be connected in ways that are not immediately apparent. For example, call-center employee turnover is notoriously high across industries-an expensive drain on this particular system. Many managers have tried to develop better hiring practices to eliminate some of the turnover before it begins; others beef up their HR departments to deal with the inevitable churn.

Would you like to learn more about our Organization Practice?

One executive, looking at the edges of the issue in his district, noticed that many skilled people outside the workforce care for their children or sick parents. He experimented with ways to bring these people into his call center in a flexible way: working from home, setting their own shift lengths and hours (a revolutionary idea in call centers), and managing their own performance targets. Over time, he nudged the model so that it became enormously successful. After 12 months of the new system, when the call-center staff had been ramped up to more than 200 employees, upward of 90 percent of them felt engaged with their work-a remarkable achievement in the traditionally transient and disengaged world of call centers-and turnover fell to under 10 percent a year. Looking at the whole system and experimenting with (and learning from) different approaches helped the executive to solve a number of related problems: turnover, customer satisfaction, local unemployment, and even rates of depression among people who provide care for family members.

Leadership implications

Of course, such shifts of mind have implications, and opening ourselves up to the delights of the possible comes at a cost. One casualty may be our cherished image of the traditional leader. The default model of a clear-minded person, certain of his or her outlook and ideas, is not consistent with the qualities that allow possibilities to flourish. In a complex world, we're often better served by leaders with humility, a keen sense of their own limitations, an insatiable curiosity, and an orientation to learning and development.

Understanding this can have significant implications. For example, a group of private-equity leaders began to chart different leadership styles required at their various portfolio companies. Eventually, they realized that CEO searches were too often based on a one-size-fits-all model. Even as they fought their anxiety about breaking the standard mold, they came to understand that fluid circumstances require flexibility. Their awareness of the very different requirements of leadership in unpredictable settings helped them select-and develop-the leaders they really needed.

Transformative change is certain to happen, often in unforeseen ways and not necessarily led from the front. Unintended repercussions often stymie our best-laid plans. The world is neither simple nor static. It is patterned but not predictable. In the face of new challenges, we all default to how we think we should act and to what seems to have worked before. Managing the probable is reassuring but leaves us more open to being blindsided. Some problems do not lend themselves to rote methods, simple models, or sophisticated algorithms. When we treat them as different, complex, and uncertain, we can unlock solutions of immense creativity and power. And by exercising three simple habits of mind, we can begin to delight in the possible.

Article - McKinsey Quarterly

# data[].attributes.attachment_link.description
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands.

# data[].attributes.body
To best understand systems, it’s helpful to resist the urge to disaggregate problems and to solve them right away.

We shouldn’t waste time arguing about the best solution; instead, we can pick several good but different solutions and experiment with them all in a small way.

The system’s center is most resistant to change, but tinkering at the periphery can deliver outsized returns.

# data[].attributes.attachment_link.readable_text
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands. Nowadays, late nights of number crunching, feasts of modeling, and the familiar rituals of presentations have replaced the rain dances of old. But often, the odds of generating reliable insights are not much better.

Perhaps that's because our approach to the hardest problems-and the anxiety those problems create-is fundamentally misdirected. When most of us face a challenge, we typically fall back on our standard operating procedures. Call this "managing the probable." In much of our education, and in many of our formative experiences, we've learned that some simple problems have one right answer. For more complicated problems, accepted algorithms can help us work out the best answer from among available options. We respond to uncertainty with analysis or leave that analysis to the experienced hands of others. We look for leaders who know the way forward and offer some assurance of predictability.

This way of approaching situations involves a whole suite of routines grounded in a mind-set of clarity if not outright certainty. To that end, they are characterized by sharp-edged questions intended to narrow our focus: What is the expected return on this investment? What is the three-year plan for this venture? At what cost are they willing to settle? But asking these kinds of questions, very often legitimate in business-as-usual settings, may constrain management teams in atypical, complex situations, such as responding to a quickly changing market or revitalizing a privatized utility's culture. Our tendency to place one perspective above all others-the proverbial "fact-based view" or "maximizing key stakeholders' alignment"-can be dangerous. All too often, we operate with an excessively simple model in enormously messy circumstances. We fail to perceive how different pieces of reality interact and how to foster better outcomes.

Moving from "managing the probable" to "leading the possible" requires us to address challenges in a fundamentally different way. Rather than simply disaggregating complexities into pieces we find more tractable, we should also broaden our range of interventions by breaking out of familiar patterns and using a whole new approach that allows us to expand our options, experiment in low-risk ways, and realize potentially outsized payoffs. But be warned: leading the possible involves coping with our own anxieties about an unknowable and uncontrollable world. A few simple habits of mind presented here can prod us toward thinking and acting differently. These should not be considered a checklist of to-dos; indeed, the very point is to move beyond a check-the-box mentality.
McKinsey Quarterly
Unexpected possibilities

We relish stories of unexpected possibilities-little bets that created huge and unforeseen benefits. Twitter, for instance, was born when its creators noticed how alive and engaged they felt when communicating with each other in real time over SMS. The concept was brilliant, and the platform has reshaped the way the world communicates. But the initiative arose from brainstorming rather than an elaborate business plan. Tweeting caught on, in large part, because it grants its users freedom. In fact, Twitter cofounder Evan Williams has explained that, in general, his rule is to do less. We can't foresee how uncertain conditions will unfold or how complex systems will evolve, but we can conduct thoughtful experiments to explore the possibilities.

That's what happened at the birth of Emirates Airline. We've grown accustomed to thinking of Dubai as a major transit hub, but its development was hardly inevitable. During the mid-1980s, Gulf Air, the area's regional flag carrier at the time, began to cut back its services to the city. Faced with the possibility of hundreds of stranded passengers in the short term, and the threat of long-term decline, the government tried something new. With a small infusion of cash (by airline standards), it leased two planes with crews from another airline and converted a couple of jets from the royal fleet for commercial use. In time, the fledgling Emirates Airline flew high. Traffic through Dubai International Airport seeded a local tourism industry and, on the cargo side, a logistics platform. This in turn attracted ever more traffic in what became a fantastically virtuous cycle. Not even the most optimistic of the airline's founders could have reasonably imagined that Emirates Airline would be an industry giant-or that Dubai would become the world's busiest international-passenger airport.

The leaders of these new ventures used unconventional approaches to try new, unexpected moves-with enormous payoffs. But it's not just large innovations that make a difference. When people think in new ways, very small shifts can have unexpected and significant consequences.

Habits of mind

Uncertainty can't be solved with pat procedures; it takes new habits of mind to lead the possible. In our experience, three such habits stretch the capabilities of leaders and help them not only to lead the possible but also to delight in it.

Ask different questions

The questions we ask emerge from our typical patterns of thought. We focus on narrowing down a problem so that we can find a solution. But we often fail to notice that in doing so we constrain the solution and make it ordinary. Asking different questions helps slow down the process. We begin to take in the full range of data available to us and in consequence have a significantly wider set of possible options. Examples of such questions include the following:

What do I expect not to find? How could I attune to the unexpected?

What might I be discounting or explaining away a little too quickly?

What would happen if I shifted one of my core assumptions on an issue, just as an experiment?

The two of us have seen this approach applied successfully to real-life situations. For example, a government agency struggling with ever-shrinking resources and ever-increasing demands had asked two questions for years: "How will we get enough money to meet the demands?" and "Which services can we cut to stay within our budget?" The senior team, tired of running in circles searching for untapped financing streams or arguing over which core services to cut, intentionally explored a new idea: "How can we share our workload with others so that our current financing becomes sufficient without cutting back on services?" This new question significantly widened the available possibilities, and the organization set out to conduct a long series of small-scale experiments with businesses, other government departments, and community members to keep the same level of service for far less money. Asking a different question opened up dynamic possibilities.

Take multiple perspectives

No one can predict when or where the next vital idea will emerge, but we can support an expansive view of our present conditions. We can start by pushing back on our natural inclination to believe that the data we see are all the data we need and by distrusting our natural craving for alignment. Considering multiple perspectives opens up our field of vision. Diversity might create more disagreement and short-term conflict, but in an uncertain environment, a more expansive set of solutions is desirable.

We can try these approaches:

Take the perspective of someone who frustrates or irritates us. What might that person have to teach us?

Seek out the opinions of people beyond our comfort zone. The perspectives of, among others, younger people, more junior staff, and dissatisfied customers can be insightful and surprising.

Listen to what other people have to say. We should not try to convince them to change their conclusions; we should listen to learn. If we can understand their perspectives well enough, we might even find that our own conclusions change.

New perspectives often arise from unexpected sources. At a large consumer-goods organization that prided itself on its customer-centric approach, the leadership team rightly asserted that it understood the perspectives of its diverse customer base and key suppliers. The team was asked whether any group-anywhere at all-"just wasn't getting it." Rueful laughter followed; of course there was such a group: a set of consumers written off some time ago and now never considered. Taking a new approach, the leaders probed that group's perspectives, not to win over these consumers or to sell them something but to learn from them. The leaders discovered the possibility of a whole new product line that slipped easily into the company's supply chain but hadn't been on the horizon previously. Taking multiple perspectives radically opened up a new set of possibilities.

See systems

This approach is about seeing patterns of behavior, and then developing and trying small "safe-to-fail" experiments to nudge the system in a more helpful direction. Leaders are best served when they get a wider, more systemic view of the present. Yet we've been trained to follow our natural inclination to examine the component parts. We assume a straightforward and linear connection between cause and effect. Finally, we look for root causes at the center of problems. In doing these things, we often fail to perceive the broader forces at work. The more we can hold on to the special features of systems, the more we can create experiments in unexpected places to open up new possibilities.

To best understand systems, it's helpful to resist the urge to disaggregate problems and to solve them right away. Here are some alternatives:

We can hold opposing ideas without reconciling them. If it looks as though we're confronting an either/or choice, we can reconsider our narrow framing and wonder what we're missing.

We shouldn't waste time arguing about the best solution; instead, we can pick several good but different solutions and experiment with them all in a small way.

We can give up the hunt for the root cause and instead look to the edges of an issue for our experiments. The system's center is most resistant to change, but tinkering at the periphery can deliver outsized returns.

Elements in a system can be connected in ways that are not immediately apparent. For example, call-center employee turnover is notoriously high across industries-an expensive drain on this particular system. Many managers have tried to develop better hiring practices to eliminate some of the turnover before it begins; others beef up their HR departments to deal with the inevitable churn.

Would you like to learn more about our Organization Practice?

One executive, looking at the edges of the issue in his district, noticed that many skilled people outside the workforce care for their children or sick parents. He experimented with ways to bring these people into his call center in a flexible way: working from home, setting their own shift lengths and hours (a revolutionary idea in call centers), and managing their own performance targets. Over time, he nudged the model so that it became enormously successful. After 12 months of the new system, when the call-center staff had been ramped up to more than 200 employees, upward of 90 percent of them felt engaged with their work-a remarkable achievement in the traditionally transient and disengaged world of call centers-and turnover fell to under 10 percent a year. Looking at the whole system and experimenting with (and learning from) different approaches helped the executive to solve a number of related problems: turnover, customer satisfaction, local unemployment, and even rates of depression among people who provide care for family members.

Leadership implications

Of course, such shifts of mind have implications, and opening ourselves up to the delights of the possible comes at a cost. One casualty may be our cherished image of the traditional leader. The default model of a clear-minded person, certain of his or her outlook and ideas, is not consistent with the qualities that allow possibilities to flourish. In a complex world, we're often better served by leaders with humility, a keen sense of their own limitations, an insatiable curiosity, and an orientation to learning and development.

Understanding this can have significant implications. For example, a group of private-equity leaders began to chart different leadership styles required at their various portfolio companies. Eventually, they realized that CEO searches were too often based on a one-size-fits-all model. Even as they fought their anxiety about breaking the standard mold, they came to understand that fluid circumstances require flexibility. Their awareness of the very different requirements of leadership in unpredictable settings helped them select-and develop-the leaders they really needed.

Transformative change is certain to happen, often in unforeseen ways and not necessarily led from the front. Unintended repercussions often stymie our best-laid plans. The world is neither simple nor static. It is patterned but not predictable. In the face of new challenges, we all default to how we think we should act and to what seems to have worked before. Managing the probable is reassuring but leaves us more open to being blindsided. Some problems do not lend themselves to rote methods, simple models, or sophisticated algorithms. When we treat them as different, complex, and uncertain, we can unlock solutions of immense creativity and power. And by exercising three simple habits of mind, we can begin to delight in the possible.

Article - McKinsey Quarterly

# data[].attributes.attachment_link.description
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands.

# data[].attributes.body
"Considering multiple
perspectives opens up our field of vision. Diversity might create
more disagreement and short-term conflict, but in an uncertain
environment, a more expansive set of solutions is desirable."

# data[].attributes.attachment_link.readable_text
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands. Nowadays, late nights of number crunching, feasts of modeling, and the familiar rituals of presentations have replaced the rain dances of old. But often, the odds of generating reliable insights are not much better.

Perhaps that's because our approach to the hardest problems-and the anxiety those problems create-is fundamentally misdirected. When most of us face a challenge, we typically fall back on our standard operating procedures. Call this "managing the probable." In much of our education, and in many of our formative experiences, we've learned that some simple problems have one right answer. For more complicated problems, accepted algorithms can help us work out the best answer from among available options. We respond to uncertainty with analysis or leave that analysis to the experienced hands of others. We look for leaders who know the way forward and offer some assurance of predictability.

This way of approaching situations involves a whole suite of routines grounded in a mind-set of clarity if not outright certainty. To that end, they are characterized by sharp-edged questions intended to narrow our focus: What is the expected return on this investment? What is the three-year plan for this venture? At what cost are they willing to settle? But asking these kinds of questions, very often legitimate in business-as-usual settings, may constrain management teams in atypical, complex situations, such as responding to a quickly changing market or revitalizing a privatized utility's culture. Our tendency to place one perspective above all others-the proverbial "fact-based view" or "maximizing key stakeholders' alignment"-can be dangerous. All too often, we operate with an excessively simple model in enormously messy circumstances. We fail to perceive how different pieces of reality interact and how to foster better outcomes.

Moving from "managing the probable" to "leading the possible" requires us to address challenges in a fundamentally different way. Rather than simply disaggregating complexities into pieces we find more tractable, we should also broaden our range of interventions by breaking out of familiar patterns and using a whole new approach that allows us to expand our options, experiment in low-risk ways, and realize potentially outsized payoffs. But be warned: leading the possible involves coping with our own anxieties about an unknowable and uncontrollable world. A few simple habits of mind presented here can prod us toward thinking and acting differently. These should not be considered a checklist of to-dos; indeed, the very point is to move beyond a check-the-box mentality.
McKinsey Quarterly
Unexpected possibilities

We relish stories of unexpected possibilities-little bets that created huge and unforeseen benefits. Twitter, for instance, was born when its creators noticed how alive and engaged they felt when communicating with each other in real time over SMS. The concept was brilliant, and the platform has reshaped the way the world communicates. But the initiative arose from brainstorming rather than an elaborate business plan. Tweeting caught on, in large part, because it grants its users freedom. In fact, Twitter cofounder Evan Williams has explained that, in general, his rule is to do less. We can't foresee how uncertain conditions will unfold or how complex systems will evolve, but we can conduct thoughtful experiments to explore the possibilities.

That's what happened at the birth of Emirates Airline. We've grown accustomed to thinking of Dubai as a major transit hub, but its development was hardly inevitable. During the mid-1980s, Gulf Air, the area's regional flag carrier at the time, began to cut back its services to the city. Faced with the possibility of hundreds of stranded passengers in the short term, and the threat of long-term decline, the government tried something new. With a small infusion of cash (by airline standards), it leased two planes with crews from another airline and converted a couple of jets from the royal fleet for commercial use. In time, the fledgling Emirates Airline flew high. Traffic through Dubai International Airport seeded a local tourism industry and, on the cargo side, a logistics platform. This in turn attracted ever more traffic in what became a fantastically virtuous cycle. Not even the most optimistic of the airline's founders could have reasonably imagined that Emirates Airline would be an industry giant-or that Dubai would become the world's busiest international-passenger airport.

The leaders of these new ventures used unconventional approaches to try new, unexpected moves-with enormous payoffs. But it's not just large innovations that make a difference. When people think in new ways, very small shifts can have unexpected and significant consequences.

Habits of mind

Uncertainty can't be solved with pat procedures; it takes new habits of mind to lead the possible. In our experience, three such habits stretch the capabilities of leaders and help them not only to lead the possible but also to delight in it.

Ask different questions

The questions we ask emerge from our typical patterns of thought. We focus on narrowing down a problem so that we can find a solution. But we often fail to notice that in doing so we constrain the solution and make it ordinary. Asking different questions helps slow down the process. We begin to take in the full range of data available to us and in consequence have a significantly wider set of possible options. Examples of such questions include the following:

What do I expect not to find? How could I attune to the unexpected?

What might I be discounting or explaining away a little too quickly?

What would happen if I shifted one of my core assumptions on an issue, just as an experiment?

The two of us have seen this approach applied successfully to real-life situations. For example, a government agency struggling with ever-shrinking resources and ever-increasing demands had asked two questions for years: "How will we get enough money to meet the demands?" and "Which services can we cut to stay within our budget?" The senior team, tired of running in circles searching for untapped financing streams or arguing over which core services to cut, intentionally explored a new idea: "How can we share our workload with others so that our current financing becomes sufficient without cutting back on services?" This new question significantly widened the available possibilities, and the organization set out to conduct a long series of small-scale experiments with businesses, other government departments, and community members to keep the same level of service for far less money. Asking a different question opened up dynamic possibilities.

Take multiple perspectives

No one can predict when or where the next vital idea will emerge, but we can support an expansive view of our present conditions. We can start by pushing back on our natural inclination to believe that the data we see are all the data we need and by distrusting our natural craving for alignment. Considering multiple perspectives opens up our field of vision. Diversity might create more disagreement and short-term conflict, but in an uncertain environment, a more expansive set of solutions is desirable.

We can try these approaches:

Take the perspective of someone who frustrates or irritates us. What might that person have to teach us?

Seek out the opinions of people beyond our comfort zone. The perspectives of, among others, younger people, more junior staff, and dissatisfied customers can be insightful and surprising.

Listen to what other people have to say. We should not try to convince them to change their conclusions; we should listen to learn. If we can understand their perspectives well enough, we might even find that our own conclusions change.

New perspectives often arise from unexpected sources. At a large consumer-goods organization that prided itself on its customer-centric approach, the leadership team rightly asserted that it understood the perspectives of its diverse customer base and key suppliers. The team was asked whether any group-anywhere at all-"just wasn't getting it." Rueful laughter followed; of course there was such a group: a set of consumers written off some time ago and now never considered. Taking a new approach, the leaders probed that group's perspectives, not to win over these consumers or to sell them something but to learn from them. The leaders discovered the possibility of a whole new product line that slipped easily into the company's supply chain but hadn't been on the horizon previously. Taking multiple perspectives radically opened up a new set of possibilities.

See systems

This approach is about seeing patterns of behavior, and then developing and trying small "safe-to-fail" experiments to nudge the system in a more helpful direction. Leaders are best served when they get a wider, more systemic view of the present. Yet we've been trained to follow our natural inclination to examine the component parts. We assume a straightforward and linear connection between cause and effect. Finally, we look for root causes at the center of problems. In doing these things, we often fail to perceive the broader forces at work. The more we can hold on to the special features of systems, the more we can create experiments in unexpected places to open up new possibilities.

To best understand systems, it's helpful to resist the urge to disaggregate problems and to solve them right away. Here are some alternatives:

We can hold opposing ideas without reconciling them. If it looks as though we're confronting an either/or choice, we can reconsider our narrow framing and wonder what we're missing.

We shouldn't waste time arguing about the best solution; instead, we can pick several good but different solutions and experiment with them all in a small way.

We can give up the hunt for the root cause and instead look to the edges of an issue for our experiments. The system's center is most resistant to change, but tinkering at the periphery can deliver outsized returns.

Elements in a system can be connected in ways that are not immediately apparent. For example, call-center employee turnover is notoriously high across industries-an expensive drain on this particular system. Many managers have tried to develop better hiring practices to eliminate some of the turnover before it begins; others beef up their HR departments to deal with the inevitable churn.

Would you like to learn more about our Organization Practice?

One executive, looking at the edges of the issue in his district, noticed that many skilled people outside the workforce care for their children or sick parents. He experimented with ways to bring these people into his call center in a flexible way: working from home, setting their own shift lengths and hours (a revolutionary idea in call centers), and managing their own performance targets. Over time, he nudged the model so that it became enormously successful. After 12 months of the new system, when the call-center staff had been ramped up to more than 200 employees, upward of 90 percent of them felt engaged with their work-a remarkable achievement in the traditionally transient and disengaged world of call centers-and turnover fell to under 10 percent a year. Looking at the whole system and experimenting with (and learning from) different approaches helped the executive to solve a number of related problems: turnover, customer satisfaction, local unemployment, and even rates of depression among people who provide care for family members.

Leadership implications

Of course, such shifts of mind have implications, and opening ourselves up to the delights of the possible comes at a cost. One casualty may be our cherished image of the traditional leader. The default model of a clear-minded person, certain of his or her outlook and ideas, is not consistent with the qualities that allow possibilities to flourish. In a complex world, we're often better served by leaders with humility, a keen sense of their own limitations, an insatiable curiosity, and an orientation to learning and development.

Understanding this can have significant implications. For example, a group of private-equity leaders began to chart different leadership styles required at their various portfolio companies. Eventually, they realized that CEO searches were too often based on a one-size-fits-all model. Even as they fought their anxiety about breaking the standard mold, they came to understand that fluid circumstances require flexibility. Their awareness of the very different requirements of leadership in unpredictable settings helped them select-and develop-the leaders they really needed.

Transformative change is certain to happen, often in unforeseen ways and not necessarily led from the front. Unintended repercussions often stymie our best-laid plans. The world is neither simple nor static. It is patterned but not predictable. In the face of new challenges, we all default to how we think we should act and to what seems to have worked before. Managing the probable is reassuring but leaves us more open to being blindsided. Some problems do not lend themselves to rote methods, simple models, or sophisticated algorithms. When we treat them as different, complex, and uncertain, we can unlock solutions of immense creativity and power. And by exercising three simple habits of mind, we can begin to delight in the possible.

Article - McKinsey Quarterly

# data[].attributes.attachment_link.description
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands.

# data[].attributes.body
"Asking different questions helps slow down the process. We begin to take in the full range of data available to us and in consequence have a significantly wider set of possible options."

# data[].attributes.attachment_link.readable_text
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands. Nowadays, late nights of number crunching, feasts of modeling, and the familiar rituals of presentations have replaced the rain dances of old. But often, the odds of generating reliable insights are not much better.

Perhaps that's because our approach to the hardest problems-and the anxiety those problems create-is fundamentally misdirected. When most of us face a challenge, we typically fall back on our standard operating procedures. Call this "managing the probable." In much of our education, and in many of our formative experiences, we've learned that some simple problems have one right answer. For more complicated problems, accepted algorithms can help us work out the best answer from among available options. We respond to uncertainty with analysis or leave that analysis to the experienced hands of others. We look for leaders who know the way forward and offer some assurance of predictability.

This way of approaching situations involves a whole suite of routines grounded in a mind-set of clarity if not outright certainty. To that end, they are characterized by sharp-edged questions intended to narrow our focus: What is the expected return on this investment? What is the three-year plan for this venture? At what cost are they willing to settle? But asking these kinds of questions, very often legitimate in business-as-usual settings, may constrain management teams in atypical, complex situations, such as responding to a quickly changing market or revitalizing a privatized utility's culture. Our tendency to place one perspective above all others-the proverbial "fact-based view" or "maximizing key stakeholders' alignment"-can be dangerous. All too often, we operate with an excessively simple model in enormously messy circumstances. We fail to perceive how different pieces of reality interact and how to foster better outcomes.

Moving from "managing the probable" to "leading the possible" requires us to address challenges in a fundamentally different way. Rather than simply disaggregating complexities into pieces we find more tractable, we should also broaden our range of interventions by breaking out of familiar patterns and using a whole new approach that allows us to expand our options, experiment in low-risk ways, and realize potentially outsized payoffs. But be warned: leading the possible involves coping with our own anxieties about an unknowable and uncontrollable world. A few simple habits of mind presented here can prod us toward thinking and acting differently. These should not be considered a checklist of to-dos; indeed, the very point is to move beyond a check-the-box mentality.
McKinsey Quarterly
Unexpected possibilities

We relish stories of unexpected possibilities-little bets that created huge and unforeseen benefits. Twitter, for instance, was born when its creators noticed how alive and engaged they felt when communicating with each other in real time over SMS. The concept was brilliant, and the platform has reshaped the way the world communicates. But the initiative arose from brainstorming rather than an elaborate business plan. Tweeting caught on, in large part, because it grants its users freedom. In fact, Twitter cofounder Evan Williams has explained that, in general, his rule is to do less. We can't foresee how uncertain conditions will unfold or how complex systems will evolve, but we can conduct thoughtful experiments to explore the possibilities.

That's what happened at the birth of Emirates Airline. We've grown accustomed to thinking of Dubai as a major transit hub, but its development was hardly inevitable. During the mid-1980s, Gulf Air, the area's regional flag carrier at the time, began to cut back its services to the city. Faced with the possibility of hundreds of stranded passengers in the short term, and the threat of long-term decline, the government tried something new. With a small infusion of cash (by airline standards), it leased two planes with crews from another airline and converted a couple of jets from the royal fleet for commercial use. In time, the fledgling Emirates Airline flew high. Traffic through Dubai International Airport seeded a local tourism industry and, on the cargo side, a logistics platform. This in turn attracted ever more traffic in what became a fantastically virtuous cycle. Not even the most optimistic of the airline's founders could have reasonably imagined that Emirates Airline would be an industry giant-or that Dubai would become the world's busiest international-passenger airport.

The leaders of these new ventures used unconventional approaches to try new, unexpected moves-with enormous payoffs. But it's not just large innovations that make a difference. When people think in new ways, very small shifts can have unexpected and significant consequences.

Habits of mind

Uncertainty can't be solved with pat procedures; it takes new habits of mind to lead the possible. In our experience, three such habits stretch the capabilities of leaders and help them not only to lead the possible but also to delight in it.

Ask different questions

The questions we ask emerge from our typical patterns of thought. We focus on narrowing down a problem so that we can find a solution. But we often fail to notice that in doing so we constrain the solution and make it ordinary. Asking different questions helps slow down the process. We begin to take in the full range of data available to us and in consequence have a significantly wider set of possible options. Examples of such questions include the following:

What do I expect not to find? How could I attune to the unexpected?

What might I be discounting or explaining away a little too quickly?

What would happen if I shifted one of my core assumptions on an issue, just as an experiment?

The two of us have seen this approach applied successfully to real-life situations. For example, a government agency struggling with ever-shrinking resources and ever-increasing demands had asked two questions for years: "How will we get enough money to meet the demands?" and "Which services can we cut to stay within our budget?" The senior team, tired of running in circles searching for untapped financing streams or arguing over which core services to cut, intentionally explored a new idea: "How can we share our workload with others so that our current financing becomes sufficient without cutting back on services?" This new question significantly widened the available possibilities, and the organization set out to conduct a long series of small-scale experiments with businesses, other government departments, and community members to keep the same level of service for far less money. Asking a different question opened up dynamic possibilities.

Take multiple perspectives

No one can predict when or where the next vital idea will emerge, but we can support an expansive view of our present conditions. We can start by pushing back on our natural inclination to believe that the data we see are all the data we need and by distrusting our natural craving for alignment. Considering multiple perspectives opens up our field of vision. Diversity might create more disagreement and short-term conflict, but in an uncertain environment, a more expansive set of solutions is desirable.

We can try these approaches:

Take the perspective of someone who frustrates or irritates us. What might that person have to teach us?

Seek out the opinions of people beyond our comfort zone. The perspectives of, among others, younger people, more junior staff, and dissatisfied customers can be insightful and surprising.

Listen to what other people have to say. We should not try to convince them to change their conclusions; we should listen to learn. If we can understand their perspectives well enough, we might even find that our own conclusions change.

New perspectives often arise from unexpected sources. At a large consumer-goods organization that prided itself on its customer-centric approach, the leadership team rightly asserted that it understood the perspectives of its diverse customer base and key suppliers. The team was asked whether any group-anywhere at all-"just wasn't getting it." Rueful laughter followed; of course there was such a group: a set of consumers written off some time ago and now never considered. Taking a new approach, the leaders probed that group's perspectives, not to win over these consumers or to sell them something but to learn from them. The leaders discovered the possibility of a whole new product line that slipped easily into the company's supply chain but hadn't been on the horizon previously. Taking multiple perspectives radically opened up a new set of possibilities.

See systems

This approach is about seeing patterns of behavior, and then developing and trying small "safe-to-fail" experiments to nudge the system in a more helpful direction. Leaders are best served when they get a wider, more systemic view of the present. Yet we've been trained to follow our natural inclination to examine the component parts. We assume a straightforward and linear connection between cause and effect. Finally, we look for root causes at the center of problems. In doing these things, we often fail to perceive the broader forces at work. The more we can hold on to the special features of systems, the more we can create experiments in unexpected places to open up new possibilities.

To best understand systems, it's helpful to resist the urge to disaggregate problems and to solve them right away. Here are some alternatives:

We can hold opposing ideas without reconciling them. If it looks as though we're confronting an either/or choice, we can reconsider our narrow framing and wonder what we're missing.

We shouldn't waste time arguing about the best solution; instead, we can pick several good but different solutions and experiment with them all in a small way.

We can give up the hunt for the root cause and instead look to the edges of an issue for our experiments. The system's center is most resistant to change, but tinkering at the periphery can deliver outsized returns.

Elements in a system can be connected in ways that are not immediately apparent. For example, call-center employee turnover is notoriously high across industries-an expensive drain on this particular system. Many managers have tried to develop better hiring practices to eliminate some of the turnover before it begins; others beef up their HR departments to deal with the inevitable churn.

Would you like to learn more about our Organization Practice?

One executive, looking at the edges of the issue in his district, noticed that many skilled people outside the workforce care for their children or sick parents. He experimented with ways to bring these people into his call center in a flexible way: working from home, setting their own shift lengths and hours (a revolutionary idea in call centers), and managing their own performance targets. Over time, he nudged the model so that it became enormously successful. After 12 months of the new system, when the call-center staff had been ramped up to more than 200 employees, upward of 90 percent of them felt engaged with their work-a remarkable achievement in the traditionally transient and disengaged world of call centers-and turnover fell to under 10 percent a year. Looking at the whole system and experimenting with (and learning from) different approaches helped the executive to solve a number of related problems: turnover, customer satisfaction, local unemployment, and even rates of depression among people who provide care for family members.

Leadership implications

Of course, such shifts of mind have implications, and opening ourselves up to the delights of the possible comes at a cost. One casualty may be our cherished image of the traditional leader. The default model of a clear-minded person, certain of his or her outlook and ideas, is not consistent with the qualities that allow possibilities to flourish. In a complex world, we're often better served by leaders with humility, a keen sense of their own limitations, an insatiable curiosity, and an orientation to learning and development.

Understanding this can have significant implications. For example, a group of private-equity leaders began to chart different leadership styles required at their various portfolio companies. Eventually, they realized that CEO searches were too often based on a one-size-fits-all model. Even as they fought their anxiety about breaking the standard mold, they came to understand that fluid circumstances require flexibility. Their awareness of the very different requirements of leadership in unpredictable settings helped them select-and develop-the leaders they really needed.

Transformative change is certain to happen, often in unforeseen ways and not necessarily led from the front. Unintended repercussions often stymie our best-laid plans. The world is neither simple nor static. It is patterned but not predictable. In the face of new challenges, we all default to how we think we should act and to what seems to have worked before. Managing the probable is reassuring but leaves us more open to being blindsided. Some problems do not lend themselves to rote methods, simple models, or sophisticated algorithms. When we treat them as different, complex, and uncertain, we can unlock solutions of immense creativity and power. And by exercising three simple habits of mind, we can begin to delight in the possible.

Article - McKinsey Quarterly

# data[].attributes.attachment_link.description
It's only natural to seek certainty, especially in the face of the unknown. Long ago, shamans performed intricate dances to summon rain. It didn't matter that any success they enjoyed was random, as long as the tribe felt that its water supply was in capable hands.

# data[].attributes.body
"the most active companies in resource allocation achieved an average of 30 percent higher total returns"

# data[].attributes.attachment_link.readable_text
The collision of technological disruption, rapid emerging-markets growth, and widespread aging is upending long-held assumptions that underpin strategy setting, decision making, and management.

Intuition forms over time. When McKinsey began publishing the Quarterly, in 1964, a new management environment was just beginning to take shape. On April 7 of that year, IBM announced the System/360 mainframe, a product with breakthrough flexibility and capability. Then on October 10, the opening ceremonies of the Tokyo Olympic Games, the first in history to be telecast via satellite around the planet, underscored Japan's growing economic strength. Finally, on December 31, the last new member of the baby-boom generation was born.

Fifty years later, the forces symbolized by these three disconnected events are almost unrecognizable. Technology and connectivity have disrupted industries and transformed the lives of billions. The world's economic center of gravity has continued shifting from West to East, with China taking center stage as a growth story. The baby boomers have begun retiring, and we now talk of a demographic drag, not a dividend, in much of the developed world and China.

We stand today on the precipice of much bigger shifts in each of these areas, with extraordinary implications for global leaders. In the years ahead, acceleration in the scope, scale, and economic impact of technology will usher in a new age of artificial intelligence, consumer gadgetry, instant communication, and boundless information while shaking up business in unimaginable ways. At the same time, the shifting locus of economic activity and dynamism, to emerging markets and to cities within those markets, will give rise to a new class of global competitors. Growth in emerging markets will occur in tandem with the rapid aging of the world's population-first in the West and later in the emerging markets themselves-that in turn will create a massive set of economic strains.

Any one of these shifts, on its own, would be among the largest economic forces the global economy has ever seen. As they collide, they will produce change so significant that much of the management intuition that has served us in the past will become irrelevant. The formative experiences for many of today's senior executives came as these forces were starting to gain steam. The world ahead will be less benign, with more discontinuity and volatility and with long-term charts no longer looking like smooth upward curves, long-held assumptions giving way, and seemingly powerful business models becoming upended. In this article, which brings together years of research by the McKinsey Global Institute (MGI) and McKinsey's Strategy Practice, we strive to paint a picture of the road ahead, how it differs from the one we've been on, and what those differences mean for senior executives as they chart a path for the years to come.

Forces at work

In an article of this length, we can only scratch the surface of the massive forces at work. Nonetheless, even a brief look at three of the most important factors-emerging-markets growth, disruptive technology, and aging populations-is a useful reminder of the magnitude of change under way.

Dynamism in emerging markets

Emerging markets are going through the simultaneous industrial and urban revolutions that began in the 18th century in England and in the 19th century in the rest of today's developed world. In 2009, for the first time in more than 200 years, emerging markets contributed more to global economic growth than developed ones did. By 2025, emerging markets will have been the world's prime growth engine for more than 15 years, China will be home to more large companies than either the United States or Europe, and more than 45 percent of the companies on Fortune's Global 500 list of major international players will hail from emerging markets-versus just 5 percent in the year 2000.

The new wave of emerging-market companies now sweeping across the world economy is not the first. In the 1970s and 1980s, many US and European incumbents were caught unaware by the swift rise of Japanese companies that set a high bar for productivity and innovation. More recently, South Korean companies such as Hyundai and Samsung have shaken up the leading ranks of high-value-added industries from automobiles to personal electronics. The difference today is that new competitors are coming from many countries across the world and in numbers that far outpace those of past decades. This new wave will be far tougher on some established multinationals. The shift in the weight of the global economy toward emerging markets, and the emergence of nearly two billion consumers who for the first time will have incomes sufficient to support significant discretionary spending, should create a new breed of powerful companies whose global expansion will take place on the back of strong positions in their home markets.

Within those markets, the locus of economic activity is also shifting, particularly in China (Exhibit 1). The global urban population is growing by 65 million a year, and nearly half of global GDP growth between 2010 and 2025 will come from 440 cities in emerging markets. Ninety-five percent of them are small and medium-sized cities that many executives haven't heard of and couldn't point to on a map: not Mumbai, Dubai, or Shanghai, of course, but Tianjin (China) and Porto Alegre (Brazil) and Kumasi (Ghana), among many others. Hsinchu, in northern Taiwan, is already the fourth-largest advanced-electronics and high-tech hub in the China region. In Brazil, the state of Santa Catarina, halfway between São Paulo and the Uruguayan border, has become a regional hub for electronics and vehicle manufacturing, hosting billion-dollar companies such as WEG Indústrias.

Technology and connectivity

From the mechanization of the Industrial Revolution to the computer-driven revolution that we are living through now, technological innovation has always underpinned economic change and disrupted the way we do things. But today is different-because we are in the "second half of the chessboard." The phrase comes from the story told by Ray Kurzweil, futurist and director of engineering at Google, about the inventor of chess and the Chinese emperor. The inventor asked to be paid in rice: a single grain on the first square, two on the second square, four on the third, and so on. For the first half of the chessboard, the inventor was given spoons of rice, then bowls, and then barrels. The situation changed dramatically from there. According to one version of the story, the cost of the second half of the chessboard bankrupted the emperor as the continued doublings ultimately required 18 million-trillion grains of rice, enough to cover twice the surface area of the Earth. Similarly, the continuation of Moore's law means that the next 18 months or so will bring a doubling of all the advances in computational power and speed we've experienced from the birth of the transistor until today. And then it will happen again. We're accustomed to seeing Moore's law plotted on a logarithmic scale, which makes all this doubling look smooth. But we don't buy computers logarithmically. As power increases, prices decrease, devices proliferate, and IT penetration deepens, aggregate computing capacity surges at an eye-popping rate: we estimate the world added roughly 5 exaflops of computing capacity in 2008 (at a cost of about $800 billion), more than 20 in 2012 (to the tune of just under $1 trillion), and is headed for roughly 40 this year (Exhibit 2).

These extraordinary advances in capacity, power, and speed are fueling the rise of artificial intelligence, reshaping global manufacturing, and turbocharging advances in connectivity. Global flows of data, finance, talent, and trade are poised to triple in the decade ahead, from levels that already represent a massive leap forward. For example, less than 3 percent of the world's population had a mobile phone and less than 1 percent was on the Internet 20 years ago. Today, more than two-thirds of the world's population has access to a mobile phone, and one-third of it can communicate on the Internet. As information flows continue to grow, and new waves of disruptive technology emerge, the old mind-set that technology is primarily a tool for cutting costs and boosting productivity will be replaced. Our new intuition must recognize that businesses can start and gain scale with stunning speed while using little capital, that value is shifting between sectors, that entrepreneurs and start-ups often have new advantages over large established businesses, that the life cycle of companies is shortening, and that decision making has never had to be so rapid fire.

Aging populations

Simultaneously, fertility is falling and the world's population is graying dramatically (Exhibit 3). Aging has been evident in developed economies for some time, with Japan and Russia seeing their populations decline. But the demographic deficit is now spreading to China and will then sweep across Latin America. For the first time in human history, the planet's population could plateau in most of the world and shrink in countries such as South Korea, Italy, and Germany.

Thirty years ago, only a few countries had fertility rates considerably below those needed to replace each generation (approximately 2.1 children per woman), comprising only a small share of the global population. But by 2013, about 60 percent of all people lived in such countries. This is a sea change. Germany's Federal Statistical Office expects that by 2060 the country's population will shrink by up to one-fifth and that the number of people of working age will fall to 36 million (from roughly 50 million in 2009). Thanks to rigorous enforcement of the one-child policy, the size of China's core, working-age population probably peaked in 2012. In Thailand, the fertility rate has fallen from 6.1 in 1960 to 1.4 in 2012. These trends have profound consequences. Without a boost in productivity, a smaller workforce will mean lower consumption and constrain the rate of economic growth. (For more on these dynamics, see " A productivity perspective on the future of growth.")

The great collision

Declaring an inflection point, particularly when the underlying forces at work have been operating for some time, is a major claim. What justifies it, we believe, isn't just the growing pace and scale of these forces, but the ways in which they are coming together to change the dynamics we are accustomed to experiencing on both the demand and the supply side of the global economy.

On the demand side, since the 1990s we've been enjoying a virtuous cycle of export-led emerging-market growth that created jobs, raised incomes, and generated enormous opportunities in those markets, while also reducing prices for goods in developed ones and enabling faster consumption growth in the West. For example, in the United States, real prices for nonpetroleum imports fell more than 30 percent between the early 1990s and today. As emerging markets get richer, it will be harder for them to play the low-cost-labor arbitrage game, making it critical for local consumers to emerge as growth drivers in place of ever-rising exports to developed markets. It will also be harder for Western consumers to continue enjoying de facto gains in living standards resulting from ever-falling import prices. As all this happens, trade between emerging markets, already on the rise, should continue growing in importance.

On the supply side, we've been operating for many years on a two-track productivity model, with developed markets continually pushing forward and emerging markets playing catch-up. Emerging markets are still less productive than developed ones, and those with capital-intensive catch-up models will find them difficult to maintain as their economies become more consumer and service oriented. As anyone who has seen row after row of empty brand-new high-rise apartments in overbuilt Chinese fringe cities can attest, the transition from investment-led growth is unlikely to be smooth, even for countries like China with explicit policies aimed at shifting to more consumer- and service-oriented economies. On the other hand, digitization and mobile technologies should provide a platform for product and service innovation, as we are already seeing in Africa, where 15 percent of transactions are carried out via mobile banking (versus 5 percent in developed markets), and in China, where Alibaba has proved that consumer online markets can take on unprecedented scope and scale.

How these interdependencies in supply and demand will play out is far from clear. We've modeled optimistic and pessimistic global GDP scenarios for a decade from now. They diverge by more than $17 trillion, a spread approaching the size of current US GDP. Variables at play include the pace and extent of the shift to emerging-market consumers as the critical global growth engine, the adjustment of developed markets to a world where they can no longer draft off the combined benefits of low-cost imports and low-cost capital enabled by emerging markets, and the emergence of new productivity solutions as developed and emerging markets alike try to advance the frontier in response to their demographic and other growth challenges.

It's likely that different regions, countries, and individuals will have different fates, depending on the strength and flexibility of their institutions and policies. Indeed, we're already seeing this in portions of Southern and Eastern Europe that remain mired in recession and debt and in the United States, where some local governments are on the verge of failure as their economic bases can't keep up with the needs of their aging populations. Similarly, as aging boosts the importance of productivity-led growth in many emerging markets, progress will be uneven because many known productivity solutions depend on effective regulatory regimes and market mechanisms that are far from standard in emerging markets.

Given the multiple stresses that are occurring at once in the global economy, we should not expect uniform success-but neither should we become too pessimistic. The massive pressures created by the dynamism of emerging markets, technological change, and rapid aging will help stimulate the next era of innovation and growth in a variety of areas. They will include the more productive natural-resource use that will be necessary to support the world's growing global consuming class, the more efficient use of capital, and the more creative management of talent.

Management implications

Emerging on the winning side in this increasingly volatile world will depend on how fully leaders recognize the magnitude-and the permanence-of the coming changes and how quickly they alter long-established intuitions.

Setting strategic direction

McKinsey research suggests that about two-thirds of a company's growth is determined by the momentum-the underlying growth, inflation, income, and spending power-of the markets where it competes. Harnessing market momentum in the years ahead will require covering more geographies, more industries, and more types of competitors, prospective partners, and value-chain participants-as well as more governmental and nongovernmental stakeholders. Rather than thinking of a primary national market broken into three to five value segments, tomorrow's strategist must comprehend a world where offerings may vary by city within a country, as well as by distribution channel and demographic segment, with aging and income inequality necessitating increasingly diverse approaches. All this will place a premium on agility: both to "zoom out" in the development of a coherent global approach and to "zoom in" on extremely granular product or market segments.

The importance of anticipating and reacting aggressively to discontinuities also is rising dramatically in our increasingly volatile world. That means monitoring trends, engaging in regular scenario-planning exercises, war-gaming the effects of potential disruptions-and responding rapidly when competitive conditions shift. For example, few of the traditional mobile-phone manufacturers protected themselves against Apple's disruption via the iPhone. Samsung, however, managed to turn that revolution into an opportunity to rise dramatically in the mobile-phone league tables.

Finally, the strategist increasingly needs to think in multiple time frames. These include a company's immediate tactics and ongoing improvements to counteract new competitive threats, market selection and emphasis given current capabilities and competitive positions, investments to enhance capabilities within the current strategic construct and to enable entry into adjacent markets, and, for the longest term, the selection and pursuit of new, long-lived capabilities. The latter point is worthy of emphasis-advances in technology and the interconnectedness of geographic and product markets make the half-life of "normal" competitive advantages very short indeed. This puts a premium on the selection and development of difficult-to-replicate capabilities. (For more, see Dan Simpson's essay in " Synthesis, capabilities, and overlooked insights: Next frontiers for strategists.")

Building new management muscle

It will be increasingly difficult for senior leaders to establish or implement effective strategies unless they remake themselves in the image of the technologically advanced, demographically complex, geographically diverse world in which we will all be operating.

Everyone a technologist. Technology is no longer simply a budget line or operational issue-it is an enabler of virtually every strategy. Executives need to think about how specific technologies are likely to affect every part of the business and be completely fluent about how to use data and technology. There is a strong argument for having a chief digital officer who oversees technology as a strategic issue, as well as a chief information officer, who has tended to be in charge of the nuts and bolts of the technology the company uses. Technological opportunities abound, but so do threats, including cybersecurity risks, which will become the concern of a broader group of executives as digitization touches every aspect of corporate life.

Managing the new workforce. Technology is increasingly supplanting workers, and the pace of IT innovation is transforming what constitutes work as well as how, when, and where we work. MGI research suggests that as many as 140 million full-time knowledge workers could be displaced globally by smart machines-at the same time aging workforces are becoming commonplace and labor shortages are emerging for pockets of technical expertise. New priorities in this environment include ensuring that companies are using machine intelligence in innovative ways to change and reinvent work, building the next-generation skills they need to drive the future's tech-led business models, and upskilling and retraining workers whose day-to-day activities are amenable to automation but whose institutional knowledge is valuable. (For more on artificial intelligence, see " Manager and machine: The new leadership equation.")

For workers with more replicable skills, there's a danger of doing less well than their parents-which will create social stresses and challenge managers trying to energize the entire workforce, including employees dissatisfied about falling behind. Developed and emerging markets will experience different flavors of these issues, making the people side of the equation particularly challenging for geographically dispersed organizations. (For more, see " The past and future of global organizations.")

Rethinking resources. The convergence of IT and materials science is spawning a surge in innovation that will dramatically change when, where, and how we use natural resources. In their new book Resource Revolution, our colleague Matt Rogers and his coauthor, McKinsey alumnus Stefan Heck, argue that combining information technology, nanoscale materials science, and biology with industrial technology will yield substantial resource-productivity increases. Taken together, those improvements represent an extraordinary wealth-creation opportunity and will be the key to achieving high-productivity economic growth in the developing world to support billions of new members of the global middle class. Capturing these resource-technology opportunities will require new management approaches, such as substitution (replacing costly, clunky, or scarce materials with less scarce, cheaper, and higher-performing ones), optimization (embedding software in resource-intensive industries to improve, dramatically, how companies produce and use scarce resources), and virtualization (moving processes out of the physical world).

Breaking inertia

Change is hard. Social scientists and behavioral economists find that we human beings are biased toward the status quo and resist changing our assumptions and approaches even in the face of the evidence. In 1988, William Samuelson and Richard Zeckhauser, economists at Boston University and Harvard, respectively, highlighted a case in which the West German government needed to relocate a small town to mine the lignite that lay beneath. The authorities suggested many options for planning the new town, but its citizens chose a plan that looked "extraordinarily like the serpentine layout of the old town-a layout that had evolved over centuries without (conscious) rhyme or reason."

Businesses suffer from a surprising degree of inertia in their decisions about how to back up strategies with hard cash to make them come to fruition. Research by our colleagues showed that between 1990 and 2010, US companies almost always allocated resources on the basis of past, rather than future, opportunities. Even during the global recession of 2009, this passive behavior persisted. Yet the most active companies in resource allocation achieved an average of 30 percent higher total returns to shareholders annually compared with the least active. The period ahead should raise the rewards for moving with agility and speed as digitization blurs boundaries between industries and competition in emerging markets heats up.

It would be easy, though, for organizations and leaders to become frozen by the magnitude of the changes under way or to tackle them on the basis of outdated intuition. Taking the long view may help. In 1930, the great British economist John Maynard Keynes boldly predicted that 100 years on, the standard of living in progressive countries would be four to eight times higher. As it turned out, the upper end of his optimistic expectation turned out to be closer to the truth. Those who understand the depth, breadth, and radical nature of the change and opportunity that's on the way will be best able to reset their intuitions accordingly, shape this new world, and thrive.

About the author(s)

Richard Dobbs is a director of the McKinsey Global Institute, where Sree Ramaswamy is a senior fellow; Elizabeth Stephenson is a principal in McKinsey's Southern California office; and Patrick Viguerie is a director in the Atlanta office.

The authors would like to acknowledge the contributions of Ezra Greenberg, Chip Hughes, James Manyika, Catherine Tilley, and Jonathan Woetzel to this article.

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Management intuition for the next 50 years

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The collision of technological disruption, rapid emerging-markets growth, and widespread aging is upending long-held assumptions that underpin strategy setting, decision making, and management. Intuition forms over time. When McKinsey began publishing the Quarterly, in 1964, a new management environment was just beginning to take shape.

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"McKinsey research suggests that about two-thirds of a company's growth is determined by the momentum [...] of the markets where it competes."

"tomorrow's strategist must comprehend a world where offerings may vary by city within a country"

Forces a wide and deep product distribution model.

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The collision of technological disruption, rapid emerging-markets growth, and widespread aging is upending long-held assumptions that underpin strategy setting, decision making, and management.

Intuition forms over time. When McKinsey began publishing the Quarterly, in 1964, a new management environment was just beginning to take shape. On April 7 of that year, IBM announced the System/360 mainframe, a product with breakthrough flexibility and capability. Then on October 10, the opening ceremonies of the Tokyo Olympic Games, the first in history to be telecast via satellite around the planet, underscored Japan's growing economic strength. Finally, on December 31, the last new member of the baby-boom generation was born.

Fifty years later, the forces symbolized by these three disconnected events are almost unrecognizable. Technology and connectivity have disrupted industries and transformed the lives of billions. The world's economic center of gravity has continued shifting from West to East, with China taking center stage as a growth story. The baby boomers have begun retiring, and we now talk of a demographic drag, not a dividend, in much of the developed world and China.

We stand today on the precipice of much bigger shifts in each of these areas, with extraordinary implications for global leaders. In the years ahead, acceleration in the scope, scale, and economic impact of technology will usher in a new age of artificial intelligence, consumer gadgetry, instant communication, and boundless information while shaking up business in unimaginable ways. At the same time, the shifting locus of economic activity and dynamism, to emerging markets and to cities within those markets, will give rise to a new class of global competitors. Growth in emerging markets will occur in tandem with the rapid aging of the world's population-first in the West and later in the emerging markets themselves-that in turn will create a massive set of economic strains.

Any one of these shifts, on its own, would be among the largest economic forces the global economy has ever seen. As they collide, they will produce change so significant that much of the management intuition that has served us in the past will become irrelevant. The formative experiences for many of today's senior executives came as these forces were starting to gain steam. The world ahead will be less benign, with more discontinuity and volatility and with long-term charts no longer looking like smooth upward curves, long-held assumptions giving way, and seemingly powerful business models becoming upended. In this article, which brings together years of research by the McKinsey Global Institute (MGI) and McKinsey's Strategy Practice, we strive to paint a picture of the road ahead, how it differs from the one we've been on, and what those differences mean for senior executives as they chart a path for the years to come.

Forces at work

In an article of this length, we can only scratch the surface of the massive forces at work. Nonetheless, even a brief look at three of the most important factors-emerging-markets growth, disruptive technology, and aging populations-is a useful reminder of the magnitude of change under way.

Dynamism in emerging markets

Emerging markets are going through the simultaneous industrial and urban revolutions that began in the 18th century in England and in the 19th century in the rest of today's developed world. In 2009, for the first time in more than 200 years, emerging markets contributed more to global economic growth than developed ones did. By 2025, emerging markets will have been the world's prime growth engine for more than 15 years, China will be home to more large companies than either the United States or Europe, and more than 45 percent of the companies on Fortune's Global 500 list of major international players will hail from emerging markets-versus just 5 percent in the year 2000.

The new wave of emerging-market companies now sweeping across the world economy is not the first. In the 1970s and 1980s, many US and European incumbents were caught unaware by the swift rise of Japanese companies that set a high bar for productivity and innovation. More recently, South Korean companies such as Hyundai and Samsung have shaken up the leading ranks of high-value-added industries from automobiles to personal electronics. The difference today is that new competitors are coming from many countries across the world and in numbers that far outpace those of past decades. This new wave will be far tougher on some established multinationals. The shift in the weight of the global economy toward emerging markets, and the emergence of nearly two billion consumers who for the first time will have incomes sufficient to support significant discretionary spending, should create a new breed of powerful companies whose global expansion will take place on the back of strong positions in their home markets.

Within those markets, the locus of economic activity is also shifting, particularly in China (Exhibit 1). The global urban population is growing by 65 million a year, and nearly half of global GDP growth between 2010 and 2025 will come from 440 cities in emerging markets. Ninety-five percent of them are small and medium-sized cities that many executives haven't heard of and couldn't point to on a map: not Mumbai, Dubai, or Shanghai, of course, but Tianjin (China) and Porto Alegre (Brazil) and Kumasi (Ghana), among many others. Hsinchu, in northern Taiwan, is already the fourth-largest advanced-electronics and high-tech hub in the China region. In Brazil, the state of Santa Catarina, halfway between São Paulo and the Uruguayan border, has become a regional hub for electronics and vehicle manufacturing, hosting billion-dollar companies such as WEG Indústrias.

Technology and connectivity

From the mechanization of the Industrial Revolution to the computer-driven revolution that we are living through now, technological innovation has always underpinned economic change and disrupted the way we do things. But today is different-because we are in the "second half of the chessboard." The phrase comes from the story told by Ray Kurzweil, futurist and director of engineering at Google, about the inventor of chess and the Chinese emperor. The inventor asked to be paid in rice: a single grain on the first square, two on the second square, four on the third, and so on. For the first half of the chessboard, the inventor was given spoons of rice, then bowls, and then barrels. The situation changed dramatically from there. According to one version of the story, the cost of the second half of the chessboard bankrupted the emperor as the continued doublings ultimately required 18 million-trillion grains of rice, enough to cover twice the surface area of the Earth. Similarly, the continuation of Moore's law means that the next 18 months or so will bring a doubling of all the advances in computational power and speed we've experienced from the birth of the transistor until today. And then it will happen again. We're accustomed to seeing Moore's law plotted on a logarithmic scale, which makes all this doubling look smooth. But we don't buy computers logarithmically. As power increases, prices decrease, devices proliferate, and IT penetration deepens, aggregate computing capacity surges at an eye-popping rate: we estimate the world added roughly 5 exaflops of computing capacity in 2008 (at a cost of about $800 billion), more than 20 in 2012 (to the tune of just under $1 trillion), and is headed for roughly 40 this year (Exhibit 2).

These extraordinary advances in capacity, power, and speed are fueling the rise of artificial intelligence, reshaping global manufacturing, and turbocharging advances in connectivity. Global flows of data, finance, talent, and trade are poised to triple in the decade ahead, from levels that already represent a massive leap forward. For example, less than 3 percent of the world's population had a mobile phone and less than 1 percent was on the Internet 20 years ago. Today, more than two-thirds of the world's population has access to a mobile phone, and one-third of it can communicate on the Internet. As information flows continue to grow, and new waves of disruptive technology emerge, the old mind-set that technology is primarily a tool for cutting costs and boosting productivity will be replaced. Our new intuition must recognize that businesses can start and gain scale with stunning speed while using little capital, that value is shifting between sectors, that entrepreneurs and start-ups often have new advantages over large established businesses, that the life cycle of companies is shortening, and that decision making has never had to be so rapid fire.

Aging populations

Simultaneously, fertility is falling and the world's population is graying dramatically (Exhibit 3). Aging has been evident in developed economies for some time, with Japan and Russia seeing their populations decline. But the demographic deficit is now spreading to China and will then sweep across Latin America. For the first time in human history, the planet's population could plateau in most of the world and shrink in countries such as South Korea, Italy, and Germany.

Thirty years ago, only a few countries had fertility rates considerably below those needed to replace each generation (approximately 2.1 children per woman), comprising only a small share of the global population. But by 2013, about 60 percent of all people lived in such countries. This is a sea change. Germany's Federal Statistical Office expects that by 2060 the country's population will shrink by up to one-fifth and that the number of people of working age will fall to 36 million (from roughly 50 million in 2009). Thanks to rigorous enforcement of the one-child policy, the size of China's core, working-age population probably peaked in 2012. In Thailand, the fertility rate has fallen from 6.1 in 1960 to 1.4 in 2012. These trends have profound consequences. Without a boost in productivity, a smaller workforce will mean lower consumption and constrain the rate of economic growth. (For more on these dynamics, see " A productivity perspective on the future of growth.")

The great collision

Declaring an inflection point, particularly when the underlying forces at work have been operating for some time, is a major claim. What justifies it, we believe, isn't just the growing pace and scale of these forces, but the ways in which they are coming together to change the dynamics we are accustomed to experiencing on both the demand and the supply side of the global economy.

On the demand side, since the 1990s we've been enjoying a virtuous cycle of export-led emerging-market growth that created jobs, raised incomes, and generated enormous opportunities in those markets, while also reducing prices for goods in developed ones and enabling faster consumption growth in the West. For example, in the United States, real prices for nonpetroleum imports fell more than 30 percent between the early 1990s and today. As emerging markets get richer, it will be harder for them to play the low-cost-labor arbitrage game, making it critical for local consumers to emerge as growth drivers in place of ever-rising exports to developed markets. It will also be harder for Western consumers to continue enjoying de facto gains in living standards resulting from ever-falling import prices. As all this happens, trade between emerging markets, already on the rise, should continue growing in importance.

On the supply side, we've been operating for many years on a two-track productivity model, with developed markets continually pushing forward and emerging markets playing catch-up. Emerging markets are still less productive than developed ones, and those with capital-intensive catch-up models will find them difficult to maintain as their economies become more consumer and service oriented. As anyone who has seen row after row of empty brand-new high-rise apartments in overbuilt Chinese fringe cities can attest, the transition from investment-led growth is unlikely to be smooth, even for countries like China with explicit policies aimed at shifting to more consumer- and service-oriented economies. On the other hand, digitization and mobile technologies should provide a platform for product and service innovation, as we are already seeing in Africa, where 15 percent of transactions are carried out via mobile banking (versus 5 percent in developed markets), and in China, where Alibaba has proved that consumer online markets can take on unprecedented scope and scale.

How these interdependencies in supply and demand will play out is far from clear. We've modeled optimistic and pessimistic global GDP scenarios for a decade from now. They diverge by more than $17 trillion, a spread approaching the size of current US GDP. Variables at play include the pace and extent of the shift to emerging-market consumers as the critical global growth engine, the adjustment of developed markets to a world where they can no longer draft off the combined benefits of low-cost imports and low-cost capital enabled by emerging markets, and the emergence of new productivity solutions as developed and emerging markets alike try to advance the frontier in response to their demographic and other growth challenges.

It's likely that different regions, countries, and individuals will have different fates, depending on the strength and flexibility of their institutions and policies. Indeed, we're already seeing this in portions of Southern and Eastern Europe that remain mired in recession and debt and in the United States, where some local governments are on the verge of failure as their economic bases can't keep up with the needs of their aging populations. Similarly, as aging boosts the importance of productivity-led growth in many emerging markets, progress will be uneven because many known productivity solutions depend on effective regulatory regimes and market mechanisms that are far from standard in emerging markets.

Given the multiple stresses that are occurring at once in the global economy, we should not expect uniform success-but neither should we become too pessimistic. The massive pressures created by the dynamism of emerging markets, technological change, and rapid aging will help stimulate the next era of innovation and growth in a variety of areas. They will include the more productive natural-resource use that will be necessary to support the world's growing global consuming class, the more efficient use of capital, and the more creative management of talent.

Management implications

Emerging on the winning side in this increasingly volatile world will depend on how fully leaders recognize the magnitude-and the permanence-of the coming changes and how quickly they alter long-established intuitions.

Setting strategic direction

McKinsey research suggests that about two-thirds of a company's growth is determined by the momentum-the underlying growth, inflation, income, and spending power-of the markets where it competes. Harnessing market momentum in the years ahead will require covering more geographies, more industries, and more types of competitors, prospective partners, and value-chain participants-as well as more governmental and nongovernmental stakeholders. Rather than thinking of a primary national market broken into three to five value segments, tomorrow's strategist must comprehend a world where offerings may vary by city within a country, as well as by distribution channel and demographic segment, with aging and income inequality necessitating increasingly diverse approaches. All this will place a premium on agility: both to "zoom out" in the development of a coherent global approach and to "zoom in" on extremely granular product or market segments.

The importance of anticipating and reacting aggressively to discontinuities also is rising dramatically in our increasingly volatile world. That means monitoring trends, engaging in regular scenario-planning exercises, war-gaming the effects of potential disruptions-and responding rapidly when competitive conditions shift. For example, few of the traditional mobile-phone manufacturers protected themselves against Apple's disruption via the iPhone. Samsung, however, managed to turn that revolution into an opportunity to rise dramatically in the mobile-phone league tables.

Finally, the strategist increasingly needs to think in multiple time frames. These include a company's immediate tactics and ongoing improvements to counteract new competitive threats, market selection and emphasis given current capabilities and competitive positions, investments to enhance capabilities within the current strategic construct and to enable entry into adjacent markets, and, for the longest term, the selection and pursuit of new, long-lived capabilities. The latter point is worthy of emphasis-advances in technology and the interconnectedness of geographic and product markets make the half-life of "normal" competitive advantages very short indeed. This puts a premium on the selection and development of difficult-to-replicate capabilities. (For more, see Dan Simpson's essay in " Synthesis, capabilities, and overlooked insights: Next frontiers for strategists.")

Building new management muscle

It will be increasingly difficult for senior leaders to establish or implement effective strategies unless they remake themselves in the image of the technologically advanced, demographically complex, geographically diverse world in which we will all be operating.

Everyone a technologist. Technology is no longer simply a budget line or operational issue-it is an enabler of virtually every strategy. Executives need to think about how specific technologies are likely to affect every part of the business and be completely fluent about how to use data and technology. There is a strong argument for having a chief digital officer who oversees technology as a strategic issue, as well as a chief information officer, who has tended to be in charge of the nuts and bolts of the technology the company uses. Technological opportunities abound, but so do threats, including cybersecurity risks, which will become the concern of a broader group of executives as digitization touches every aspect of corporate life.

Managing the new workforce. Technology is increasingly supplanting workers, and the pace of IT innovation is transforming what constitutes work as well as how, when, and where we work. MGI research suggests that as many as 140 million full-time knowledge workers could be displaced globally by smart machines-at the same time aging workforces are becoming commonplace and labor shortages are emerging for pockets of technical expertise. New priorities in this environment include ensuring that companies are using machine intelligence in innovative ways to change and reinvent work, building the next-generation skills they need to drive the future's tech-led business models, and upskilling and retraining workers whose day-to-day activities are amenable to automation but whose institutional knowledge is valuable. (For more on artificial intelligence, see " Manager and machine: The new leadership equation.")

For workers with more replicable skills, there's a danger of doing less well than their parents-which will create social stresses and challenge managers trying to energize the entire workforce, including employees dissatisfied about falling behind. Developed and emerging markets will experience different flavors of these issues, making the people side of the equation particularly challenging for geographically dispersed organizations. (For more, see " The past and future of global organizations.")

Rethinking resources. The convergence of IT and materials science is spawning a surge in innovation that will dramatically change when, where, and how we use natural resources. In their new book Resource Revolution, our colleague Matt Rogers and his coauthor, McKinsey alumnus Stefan Heck, argue that combining information technology, nanoscale materials science, and biology with industrial technology will yield substantial resource-productivity increases. Taken together, those improvements represent an extraordinary wealth-creation opportunity and will be the key to achieving high-productivity economic growth in the developing world to support billions of new members of the global middle class. Capturing these resource-technology opportunities will require new management approaches, such as substitution (replacing costly, clunky, or scarce materials with less scarce, cheaper, and higher-performing ones), optimization (embedding software in resource-intensive industries to improve, dramatically, how companies produce and use scarce resources), and virtualization (moving processes out of the physical world).

Breaking inertia

Change is hard. Social scientists and behavioral economists find that we human beings are biased toward the status quo and resist changing our assumptions and approaches even in the face of the evidence. In 1988, William Samuelson and Richard Zeckhauser, economists at Boston University and Harvard, respectively, highlighted a case in which the West German government needed to relocate a small town to mine the lignite that lay beneath. The authorities suggested many options for planning the new town, but its citizens chose a plan that looked "extraordinarily like the serpentine layout of the old town-a layout that had evolved over centuries without (conscious) rhyme or reason."

Businesses suffer from a surprising degree of inertia in their decisions about how to back up strategies with hard cash to make them come to fruition. Research by our colleagues showed that between 1990 and 2010, US companies almost always allocated resources on the basis of past, rather than future, opportunities. Even during the global recession of 2009, this passive behavior persisted. Yet the most active companies in resource allocation achieved an average of 30 percent higher total returns to shareholders annually compared with the least active. The period ahead should raise the rewards for moving with agility and speed as digitization blurs boundaries between industries and competition in emerging markets heats up.

It would be easy, though, for organizations and leaders to become frozen by the magnitude of the changes under way or to tackle them on the basis of outdated intuition. Taking the long view may help. In 1930, the great British economist John Maynard Keynes boldly predicted that 100 years on, the standard of living in progressive countries would be four to eight times higher. As it turned out, the upper end of his optimistic expectation turned out to be closer to the truth. Those who understand the depth, breadth, and radical nature of the change and opportunity that's on the way will be best able to reset their intuitions accordingly, shape this new world, and thrive.

About the author(s)

Richard Dobbs is a director of the McKinsey Global Institute, where Sree Ramaswamy is a senior fellow; Elizabeth Stephenson is a principal in McKinsey's Southern California office; and Patrick Viguerie is a director in the Atlanta office.

The authors would like to acknowledge the contributions of Ezra Greenberg, Chip Hughes, James Manyika, Catherine Tilley, and Jonathan Woetzel to this article.

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Management intuition for the next 50 years

# data[].attributes.attachment_link.description
The collision of technological disruption, rapid emerging-markets growth, and widespread aging is upending long-held assumptions that underpin strategy setting, decision making, and management. Intuition forms over time. When McKinsey began publishing the Quarterly, in 1964, a new management environment was just beginning to take shape.

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Decreasing emerging market population growth

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Decreasing emerging market population growth

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* "the size of China's core, working-age population probably peaked in 2012"

* "Emerging markets are going through the simultaneous industrial and urban revolutions that began in the 18th century in the rest of today's developed world."

* "As emerging markets get richer, it will be harder for them to play the low-cost-labor arbitrage game"

* "Emerging markets are still less productive than developed ones, and those with capital-intensive catch-up models will find them difficult to maintain"

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The collision of technological disruption, rapid emerging-markets growth, and widespread aging is upending long-held assumptions that underpin strategy setting, decision making, and management.

Intuition forms over time. When McKinsey began publishing the Quarterly, in 1964, a new management environment was just beginning to take shape. On April 7 of that year, IBM announced the System/360 mainframe, a product with breakthrough flexibility and capability. Then on October 10, the opening ceremonies of the Tokyo Olympic Games, the first in history to be telecast via satellite around the planet, underscored Japan's growing economic strength. Finally, on December 31, the last new member of the baby-boom generation was born.

Fifty years later, the forces symbolized by these three disconnected events are almost unrecognizable. Technology and connectivity have disrupted industries and transformed the lives of billions. The world's economic center of gravity has continued shifting from West to East, with China taking center stage as a growth story. The baby boomers have begun retiring, and we now talk of a demographic drag, not a dividend, in much of the developed world and China.

We stand today on the precipice of much bigger shifts in each of these areas, with extraordinary implications for global leaders. In the years ahead, acceleration in the scope, scale, and economic impact of technology will usher in a new age of artificial intelligence, consumer gadgetry, instant communication, and boundless information while shaking up business in unimaginable ways. At the same time, the shifting locus of economic activity and dynamism, to emerging markets and to cities within those markets, will give rise to a new class of global competitors. Growth in emerging markets will occur in tandem with the rapid aging of the world's population-first in the West and later in the emerging markets themselves-that in turn will create a massive set of economic strains.

Any one of these shifts, on its own, would be among the largest economic forces the global economy has ever seen. As they collide, they will produce change so significant that much of the management intuition that has served us in the past will become irrelevant. The formative experiences for many of today's senior executives came as these forces were starting to gain steam. The world ahead will be less benign, with more discontinuity and volatility and with long-term charts no longer looking like smooth upward curves, long-held assumptions giving way, and seemingly powerful business models becoming upended. In this article, which brings together years of research by the McKinsey Global Institute (MGI) and McKinsey's Strategy Practice, we strive to paint a picture of the road ahead, how it differs from the one we've been on, and what those differences mean for senior executives as they chart a path for the years to come.

Forces at work

In an article of this length, we can only scratch the surface of the massive forces at work. Nonetheless, even a brief look at three of the most important factors-emerging-markets growth, disruptive technology, and aging populations-is a useful reminder of the magnitude of change under way.

Dynamism in emerging markets

Emerging markets are going through the simultaneous industrial and urban revolutions that began in the 18th century in England and in the 19th century in the rest of today's developed world. In 2009, for the first time in more than 200 years, emerging markets contributed more to global economic growth than developed ones did. By 2025, emerging markets will have been the world's prime growth engine for more than 15 years, China will be home to more large companies than either the United States or Europe, and more than 45 percent of the companies on Fortune's Global 500 list of major international players will hail from emerging markets-versus just 5 percent in the year 2000.

The new wave of emerging-market companies now sweeping across the world economy is not the first. In the 1970s and 1980s, many US and European incumbents were caught unaware by the swift rise of Japanese companies that set a high bar for productivity and innovation. More recently, South Korean companies such as Hyundai and Samsung have shaken up the leading ranks of high-value-added industries from automobiles to personal electronics. The difference today is that new competitors are coming from many countries across the world and in numbers that far outpace those of past decades. This new wave will be far tougher on some established multinationals. The shift in the weight of the global economy toward emerging markets, and the emergence of nearly two billion consumers who for the first time will have incomes sufficient to support significant discretionary spending, should create a new breed of powerful companies whose global expansion will take place on the back of strong positions in their home markets.

Within those markets, the locus of economic activity is also shifting, particularly in China (Exhibit 1). The global urban population is growing by 65 million a year, and nearly half of global GDP growth between 2010 and 2025 will come from 440 cities in emerging markets. Ninety-five percent of them are small and medium-sized cities that many executives haven't heard of and couldn't point to on a map: not Mumbai, Dubai, or Shanghai, of course, but Tianjin (China) and Porto Alegre (Brazil) and Kumasi (Ghana), among many others. Hsinchu, in northern Taiwan, is already the fourth-largest advanced-electronics and high-tech hub in the China region. In Brazil, the state of Santa Catarina, halfway between São Paulo and the Uruguayan border, has become a regional hub for electronics and vehicle manufacturing, hosting billion-dollar companies such as WEG Indústrias.

Technology and connectivity

From the mechanization of the Industrial Revolution to the computer-driven revolution that we are living through now, technological innovation has always underpinned economic change and disrupted the way we do things. But today is different-because we are in the "second half of the chessboard." The phrase comes from the story told by Ray Kurzweil, futurist and director of engineering at Google, about the inventor of chess and the Chinese emperor. The inventor asked to be paid in rice: a single grain on the first square, two on the second square, four on the third, and so on. For the first half of the chessboard, the inventor was given spoons of rice, then bowls, and then barrels. The situation changed dramatically from there. According to one version of the story, the cost of the second half of the chessboard bankrupted the emperor as the continued doublings ultimately required 18 million-trillion grains of rice, enough to cover twice the surface area of the Earth. Similarly, the continuation of Moore's law means that the next 18 months or so will bring a doubling of all the advances in computational power and speed we've experienced from the birth of the transistor until today. And then it will happen again. We're accustomed to seeing Moore's law plotted on a logarithmic scale, which makes all this doubling look smooth. But we don't buy computers logarithmically. As power increases, prices decrease, devices proliferate, and IT penetration deepens, aggregate computing capacity surges at an eye-popping rate: we estimate the world added roughly 5 exaflops of computing capacity in 2008 (at a cost of about $800 billion), more than 20 in 2012 (to the tune of just under $1 trillion), and is headed for roughly 40 this year (Exhibit 2).

These extraordinary advances in capacity, power, and speed are fueling the rise of artificial intelligence, reshaping global manufacturing, and turbocharging advances in connectivity. Global flows of data, finance, talent, and trade are poised to triple in the decade ahead, from levels that already represent a massive leap forward. For example, less than 3 percent of the world's population had a mobile phone and less than 1 percent was on the Internet 20 years ago. Today, more than two-thirds of the world's population has access to a mobile phone, and one-third of it can communicate on the Internet. As information flows continue to grow, and new waves of disruptive technology emerge, the old mind-set that technology is primarily a tool for cutting costs and boosting productivity will be replaced. Our new intuition must recognize that businesses can start and gain scale with stunning speed while using little capital, that value is shifting between sectors, that entrepreneurs and start-ups often have new advantages over large established businesses, that the life cycle of companies is shortening, and that decision making has never had to be so rapid fire.

Aging populations

Simultaneously, fertility is falling and the world's population is graying dramatically (Exhibit 3). Aging has been evident in developed economies for some time, with Japan and Russia seeing their populations decline. But the demographic deficit is now spreading to China and will then sweep across Latin America. For the first time in human history, the planet's population could plateau in most of the world and shrink in countries such as South Korea, Italy, and Germany.

Thirty years ago, only a few countries had fertility rates considerably below those needed to replace each generation (approximately 2.1 children per woman), comprising only a small share of the global population. But by 2013, about 60 percent of all people lived in such countries. This is a sea change. Germany's Federal Statistical Office expects that by 2060 the country's population will shrink by up to one-fifth and that the number of people of working age will fall to 36 million (from roughly 50 million in 2009). Thanks to rigorous enforcement of the one-child policy, the size of China's core, working-age population probably peaked in 2012. In Thailand, the fertility rate has fallen from 6.1 in 1960 to 1.4 in 2012. These trends have profound consequences. Without a boost in productivity, a smaller workforce will mean lower consumption and constrain the rate of economic growth. (For more on these dynamics, see " A productivity perspective on the future of growth.")

The great collision

Declaring an inflection point, particularly when the underlying forces at work have been operating for some time, is a major claim. What justifies it, we believe, isn't just the growing pace and scale of these forces, but the ways in which they are coming together to change the dynamics we are accustomed to experiencing on both the demand and the supply side of the global economy.

On the demand side, since the 1990s we've been enjoying a virtuous cycle of export-led emerging-market growth that created jobs, raised incomes, and generated enormous opportunities in those markets, while also reducing prices for goods in developed ones and enabling faster consumption growth in the West. For example, in the United States, real prices for nonpetroleum imports fell more than 30 percent between the early 1990s and today. As emerging markets get richer, it will be harder for them to play the low-cost-labor arbitrage game, making it critical for local consumers to emerge as growth drivers in place of ever-rising exports to developed markets. It will also be harder for Western consumers to continue enjoying de facto gains in living standards resulting from ever-falling import prices. As all this happens, trade between emerging markets, already on the rise, should continue growing in importance.

On the supply side, we've been operating for many years on a two-track productivity model, with developed markets continually pushing forward and emerging markets playing catch-up. Emerging markets are still less productive than developed ones, and those with capital-intensive catch-up models will find them difficult to maintain as their economies become more consumer and service oriented. As anyone who has seen row after row of empty brand-new high-rise apartments in overbuilt Chinese fringe cities can attest, the transition from investment-led growth is unlikely to be smooth, even for countries like China with explicit policies aimed at shifting to more consumer- and service-oriented economies. On the other hand, digitization and mobile technologies should provide a platform for product and service innovation, as we are already seeing in Africa, where 15 percent of transactions are carried out via mobile banking (versus 5 percent in developed markets), and in China, where Alibaba has proved that consumer online markets can take on unprecedented scope and scale.

How these interdependencies in supply and demand will play out is far from clear. We've modeled optimistic and pessimistic global GDP scenarios for a decade from now. They diverge by more than $17 trillion, a spread approaching the size of current US GDP. Variables at play include the pace and extent of the shift to emerging-market consumers as the critical global growth engine, the adjustment of developed markets to a world where they can no longer draft off the combined benefits of low-cost imports and low-cost capital enabled by emerging markets, and the emergence of new productivity solutions as developed and emerging markets alike try to advance the frontier in response to their demographic and other growth challenges.

It's likely that different regions, countries, and individuals will have different fates, depending on the strength and flexibility of their institutions and policies. Indeed, we're already seeing this in portions of Southern and Eastern Europe that remain mired in recession and debt and in the United States, where some local governments are on the verge of failure as their economic bases can't keep up with the needs of their aging populations. Similarly, as aging boosts the importance of productivity-led growth in many emerging markets, progress will be uneven because many known productivity solutions depend on effective regulatory regimes and market mechanisms that are far from standard in emerging markets.

Given the multiple stresses that are occurring at once in the global economy, we should not expect uniform success-but neither should we become too pessimistic. The massive pressures created by the dynamism of emerging markets, technological change, and rapid aging will help stimulate the next era of innovation and growth in a variety of areas. They will include the more productive natural-resource use that will be necessary to support the world's growing global consuming class, the more efficient use of capital, and the more creative management of talent.

Management implications

Emerging on the winning side in this increasingly volatile world will depend on how fully leaders recognize the magnitude-and the permanence-of the coming changes and how quickly they alter long-established intuitions.

Setting strategic direction

McKinsey research suggests that about two-thirds of a company's growth is determined by the momentum-the underlying growth, inflation, income, and spending power-of the markets where it competes. Harnessing market momentum in the years ahead will require covering more geographies, more industries, and more types of competitors, prospective partners, and value-chain participants-as well as more governmental and nongovernmental stakeholders. Rather than thinking of a primary national market broken into three to five value segments, tomorrow's strategist must comprehend a world where offerings may vary by city within a country, as well as by distribution channel and demographic segment, with aging and income inequality necessitating increasingly diverse approaches. All this will place a premium on agility: both to "zoom out" in the development of a coherent global approach and to "zoom in" on extremely granular product or market segments.

The importance of anticipating and reacting aggressively to discontinuities also is rising dramatically in our increasingly volatile world. That means monitoring trends, engaging in regular scenario-planning exercises, war-gaming the effects of potential disruptions-and responding rapidly when competitive conditions shift. For example, few of the traditional mobile-phone manufacturers protected themselves against Apple's disruption via the iPhone. Samsung, however, managed to turn that revolution into an opportunity to rise dramatically in the mobile-phone league tables.

Finally, the strategist increasingly needs to think in multiple time frames. These include a company's immediate tactics and ongoing improvements to counteract new competitive threats, market selection and emphasis given current capabilities and competitive positions, investments to enhance capabilities within the current strategic construct and to enable entry into adjacent markets, and, for the longest term, the selection and pursuit of new, long-lived capabilities. The latter point is worthy of emphasis-advances in technology and the interconnectedness of geographic and product markets make the half-life of "normal" competitive advantages very short indeed. This puts a premium on the selection and development of difficult-to-replicate capabilities. (For more, see Dan Simpson's essay in " Synthesis, capabilities, and overlooked insights: Next frontiers for strategists.")

Building new management muscle

It will be increasingly difficult for senior leaders to establish or implement effective strategies unless they remake themselves in the image of the technologically advanced, demographically complex, geographically diverse world in which we will all be operating.

Everyone a technologist. Technology is no longer simply a budget line or operational issue-it is an enabler of virtually every strategy. Executives need to think about how specific technologies are likely to affect every part of the business and be completely fluent about how to use data and technology. There is a strong argument for having a chief digital officer who oversees technology as a strategic issue, as well as a chief information officer, who has tended to be in charge of the nuts and bolts of the technology the company uses. Technological opportunities abound, but so do threats, including cybersecurity risks, which will become the concern of a broader group of executives as digitization touches every aspect of corporate life.

Managing the new workforce. Technology is increasingly supplanting workers, and the pace of IT innovation is transforming what constitutes work as well as how, when, and where we work. MGI research suggests that as many as 140 million full-time knowledge workers could be displaced globally by smart machines-at the same time aging workforces are becoming commonplace and labor shortages are emerging for pockets of technical expertise. New priorities in this environment include ensuring that companies are using machine intelligence in innovative ways to change and reinvent work, building the next-generation skills they need to drive the future's tech-led business models, and upskilling and retraining workers whose day-to-day activities are amenable to automation but whose institutional knowledge is valuable. (For more on artificial intelligence, see " Manager and machine: The new leadership equation.")

For workers with more replicable skills, there's a danger of doing less well than their parents-which will create social stresses and challenge managers trying to energize the entire workforce, including employees dissatisfied about falling behind. Developed and emerging markets will experience different flavors of these issues, making the people side of the equation particularly challenging for geographically dispersed organizations. (For more, see " The past and future of global organizations.")

Rethinking resources. The convergence of IT and materials science is spawning a surge in innovation that will dramatically change when, where, and how we use natural resources. In their new book Resource Revolution, our colleague Matt Rogers and his coauthor, McKinsey alumnus Stefan Heck, argue that combining information technology, nanoscale materials science, and biology with industrial technology will yield substantial resource-productivity increases. Taken together, those improvements represent an extraordinary wealth-creation opportunity and will be the key to achieving high-productivity economic growth in the developing world to support billions of new members of the global middle class. Capturing these resource-technology opportunities will require new management approaches, such as substitution (replacing costly, clunky, or scarce materials with less scarce, cheaper, and higher-performing ones), optimization (embedding software in resource-intensive industries to improve, dramatically, how companies produce and use scarce resources), and virtualization (moving processes out of the physical world).

Breaking inertia

Change is hard. Social scientists and behavioral economists find that we human beings are biased toward the status quo and resist changing our assumptions and approaches even in the face of the evidence. In 1988, William Samuelson and Richard Zeckhauser, economists at Boston University and Harvard, respectively, highlighted a case in which the West German government needed to relocate a small town to mine the lignite that lay beneath. The authorities suggested many options for planning the new town, but its citizens chose a plan that looked "extraordinarily like the serpentine layout of the old town-a layout that had evolved over centuries without (conscious) rhyme or reason."

Businesses suffer from a surprising degree of inertia in their decisions about how to back up strategies with hard cash to make them come to fruition. Research by our colleagues showed that between 1990 and 2010, US companies almost always allocated resources on the basis of past, rather than future, opportunities. Even during the global recession of 2009, this passive behavior persisted. Yet the most active companies in resource allocation achieved an average of 30 percent higher total returns to shareholders annually compared with the least active. The period ahead should raise the rewards for moving with agility and speed as digitization blurs boundaries between industries and competition in emerging markets heats up.

It would be easy, though, for organizations and leaders to become frozen by the magnitude of the changes under way or to tackle them on the basis of outdated intuition. Taking the long view may help. In 1930, the great British economist John Maynard Keynes boldly predicted that 100 years on, the standard of living in progressive countries would be four to eight times higher. As it turned out, the upper end of his optimistic expectation turned out to be closer to the truth. Those who understand the depth, breadth, and radical nature of the change and opportunity that's on the way will be best able to reset their intuitions accordingly, shape this new world, and thrive.

About the author(s)

Richard Dobbs is a director of the McKinsey Global Institute, where Sree Ramaswamy is a senior fellow; Elizabeth Stephenson is a principal in McKinsey's Southern California office; and Patrick Viguerie is a director in the Atlanta office.

The authors would like to acknowledge the contributions of Ezra Greenberg, Chip Hughes, James Manyika, Catherine Tilley, and Jonathan Woetzel to this article.

# data[].attributes.attachment_link.title
Management intuition for the next 50 years

# data[].attributes.attachment_link.description
The collision of technological disruption, rapid emerging-markets growth, and widespread aging is upending long-held assumptions that underpin strategy setting, decision making, and management. Intuition forms over time. When McKinsey began publishing the Quarterly, in 1964, a new management environment was just beginning to take shape.

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"Businesses and consumers will add roughly 40 exaflops of computing capacity in 2014"

"Technology is no longer simply a budget line or operational issue -- it is an enabler of virtually every strategy."

# data[].attributes.attachment_link.readable_text
The collision of technological disruption, rapid emerging-markets growth, and widespread aging is upending long-held assumptions that underpin strategy setting, decision making, and management.

Intuition forms over time. When McKinsey began publishing the Quarterly, in 1964, a new management environment was just beginning to take shape. On April 7 of that year, IBM announced the System/360 mainframe, a product with breakthrough flexibility and capability. Then on October 10, the opening ceremonies of the Tokyo Olympic Games, the first in history to be telecast via satellite around the planet, underscored Japan's growing economic strength. Finally, on December 31, the last new member of the baby-boom generation was born.

Fifty years later, the forces symbolized by these three disconnected events are almost unrecognizable. Technology and connectivity have disrupted industries and transformed the lives of billions. The world's economic center of gravity has continued shifting from West to East, with China taking center stage as a growth story. The baby boomers have begun retiring, and we now talk of a demographic drag, not a dividend, in much of the developed world and China.

We stand today on the precipice of much bigger shifts in each of these areas, with extraordinary implications for global leaders. In the years ahead, acceleration in the scope, scale, and economic impact of technology will usher in a new age of artificial intelligence, consumer gadgetry, instant communication, and boundless information while shaking up business in unimaginable ways. At the same time, the shifting locus of economic activity and dynamism, to emerging markets and to cities within those markets, will give rise to a new class of global competitors. Growth in emerging markets will occur in tandem with the rapid aging of the world's population-first in the West and later in the emerging markets themselves-that in turn will create a massive set of economic strains.

Any one of these shifts, on its own, would be among the largest economic forces the global economy has ever seen. As they collide, they will produce change so significant that much of the management intuition that has served us in the past will become irrelevant. The formative experiences for many of today's senior executives came as these forces were starting to gain steam. The world ahead will be less benign, with more discontinuity and volatility and with long-term charts no longer looking like smooth upward curves, long-held assumptions giving way, and seemingly powerful business models becoming upended. In this article, which brings together years of research by the McKinsey Global Institute (MGI) and McKinsey's Strategy Practice, we strive to paint a picture of the road ahead, how it differs from the one we've been on, and what those differences mean for senior executives as they chart a path for the years to come.

Forces at work

In an article of this length, we can only scratch the surface of the massive forces at work. Nonetheless, even a brief look at three of the most important factors-emerging-markets growth, disruptive technology, and aging populations-is a useful reminder of the magnitude of change under way.

Dynamism in emerging markets

Emerging markets are going through the simultaneous industrial and urban revolutions that began in the 18th century in England and in the 19th century in the rest of today's developed world. In 2009, for the first time in more than 200 years, emerging markets contributed more to global economic growth than developed ones did. By 2025, emerging markets will have been the world's prime growth engine for more than 15 years, China will be home to more large companies than either the United States or Europe, and more than 45 percent of the companies on Fortune's Global 500 list of major international players will hail from emerging markets-versus just 5 percent in the year 2000.

The new wave of emerging-market companies now sweeping across the world economy is not the first. In the 1970s and 1980s, many US and European incumbents were caught unaware by the swift rise of Japanese companies that set a high bar for productivity and innovation. More recently, South Korean companies such as Hyundai and Samsung have shaken up the leading ranks of high-value-added industries from automobiles to personal electronics. The difference today is that new competitors are coming from many countries across the world and in numbers that far outpace those of past decades. This new wave will be far tougher on some established multinationals. The shift in the weight of the global economy toward emerging markets, and the emergence of nearly two billion consumers who for the first time will have incomes sufficient to support significant discretionary spending, should create a new breed of powerful companies whose global expansion will take place on the back of strong positions in their home markets.

Within those markets, the locus of economic activity is also shifting, particularly in China (Exhibit 1). The global urban population is growing by 65 million a year, and nearly half of global GDP growth between 2010 and 2025 will come from 440 cities in emerging markets. Ninety-five percent of them are small and medium-sized cities that many executives haven't heard of and couldn't point to on a map: not Mumbai, Dubai, or Shanghai, of course, but Tianjin (China) and Porto Alegre (Brazil) and Kumasi (Ghana), among many others. Hsinchu, in northern Taiwan, is already the fourth-largest advanced-electronics and high-tech hub in the China region. In Brazil, the state of Santa Catarina, halfway between São Paulo and the Uruguayan border, has become a regional hub for electronics and vehicle manufacturing, hosting billion-dollar companies such as WEG Indústrias.

Technology and connectivity

From the mechanization of the Industrial Revolution to the computer-driven revolution that we are living through now, technological innovation has always underpinned economic change and disrupted the way we do things. But today is different-because we are in the "second half of the chessboard." The phrase comes from the story told by Ray Kurzweil, futurist and director of engineering at Google, about the inventor of chess and the Chinese emperor. The inventor asked to be paid in rice: a single grain on the first square, two on the second square, four on the third, and so on. For the first half of the chessboard, the inventor was given spoons of rice, then bowls, and then barrels. The situation changed dramatically from there. According to one version of the story, the cost of the second half of the chessboard bankrupted the emperor as the continued doublings ultimately required 18 million-trillion grains of rice, enough to cover twice the surface area of the Earth. Similarly, the continuation of Moore's law means that the next 18 months or so will bring a doubling of all the advances in computational power and speed we've experienced from the birth of the transistor until today. And then it will happen again. We're accustomed to seeing Moore's law plotted on a logarithmic scale, which makes all this doubling look smooth. But we don't buy computers logarithmically. As power increases, prices decrease, devices proliferate, and IT penetration deepens, aggregate computing capacity surges at an eye-popping rate: we estimate the world added roughly 5 exaflops of computing capacity in 2008 (at a cost of about $800 billion), more than 20 in 2012 (to the tune of just under $1 trillion), and is headed for roughly 40 this year (Exhibit 2).

These extraordinary advances in capacity, power, and speed are fueling the rise of artificial intelligence, reshaping global manufacturing, and turbocharging advances in connectivity. Global flows of data, finance, talent, and trade are poised to triple in the decade ahead, from levels that already represent a massive leap forward. For example, less than 3 percent of the world's population had a mobile phone and less than 1 percent was on the Internet 20 years ago. Today, more than two-thirds of the world's population has access to a mobile phone, and one-third of it can communicate on the Internet. As information flows continue to grow, and new waves of disruptive technology emerge, the old mind-set that technology is primarily a tool for cutting costs and boosting productivity will be replaced. Our new intuition must recognize that businesses can start and gain scale with stunning speed while using little capital, that value is shifting between sectors, that entrepreneurs and start-ups often have new advantages over large established businesses, that the life cycle of companies is shortening, and that decision making has never had to be so rapid fire.

Aging populations

Simultaneously, fertility is falling and the world's population is graying dramatically (Exhibit 3). Aging has been evident in developed economies for some time, with Japan and Russia seeing their populations decline. But the demographic deficit is now spreading to China and will then sweep across Latin America. For the first time in human history, the planet's population could plateau in most of the world and shrink in countries such as South Korea, Italy, and Germany.

Thirty years ago, only a few countries had fertility rates considerably below those needed to replace each generation (approximately 2.1 children per woman), comprising only a small share of the global population. But by 2013, about 60 percent of all people lived in such countries. This is a sea change. Germany's Federal Statistical Office expects that by 2060 the country's population will shrink by up to one-fifth and that the number of people of working age will fall to 36 million (from roughly 50 million in 2009). Thanks to rigorous enforcement of the one-child policy, the size of China's core, working-age population probably peaked in 2012. In Thailand, the fertility rate has fallen from 6.1 in 1960 to 1.4 in 2012. These trends have profound consequences. Without a boost in productivity, a smaller workforce will mean lower consumption and constrain the rate of economic growth. (For more on these dynamics, see " A productivity perspective on the future of growth.")

The great collision

Declaring an inflection point, particularly when the underlying forces at work have been operating for some time, is a major claim. What justifies it, we believe, isn't just the growing pace and scale of these forces, but the ways in which they are coming together to change the dynamics we are accustomed to experiencing on both the demand and the supply side of the global economy.

On the demand side, since the 1990s we've been enjoying a virtuous cycle of export-led emerging-market growth that created jobs, raised incomes, and generated enormous opportunities in those markets, while also reducing prices for goods in developed ones and enabling faster consumption growth in the West. For example, in the United States, real prices for nonpetroleum imports fell more than 30 percent between the early 1990s and today. As emerging markets get richer, it will be harder for them to play the low-cost-labor arbitrage game, making it critical for local consumers to emerge as growth drivers in place of ever-rising exports to developed markets. It will also be harder for Western consumers to continue enjoying de facto gains in living standards resulting from ever-falling import prices. As all this happens, trade between emerging markets, already on the rise, should continue growing in importance.

On the supply side, we've been operating for many years on a two-track productivity model, with developed markets continually pushing forward and emerging markets playing catch-up. Emerging markets are still less productive than developed ones, and those with capital-intensive catch-up models will find them difficult to maintain as their economies become more consumer and service oriented. As anyone who has seen row after row of empty brand-new high-rise apartments in overbuilt Chinese fringe cities can attest, the transition from investment-led growth is unlikely to be smooth, even for countries like China with explicit policies aimed at shifting to more consumer- and service-oriented economies. On the other hand, digitization and mobile technologies should provide a platform for product and service innovation, as we are already seeing in Africa, where 15 percent of transactions are carried out via mobile banking (versus 5 percent in developed markets), and in China, where Alibaba has proved that consumer online markets can take on unprecedented scope and scale.

How these interdependencies in supply and demand will play out is far from clear. We've modeled optimistic and pessimistic global GDP scenarios for a decade from now. They diverge by more than $17 trillion, a spread approaching the size of current US GDP. Variables at play include the pace and extent of the shift to emerging-market consumers as the critical global growth engine, the adjustment of developed markets to a world where they can no longer draft off the combined benefits of low-cost imports and low-cost capital enabled by emerging markets, and the emergence of new productivity solutions as developed and emerging markets alike try to advance the frontier in response to their demographic and other growth challenges.

It's likely that different regions, countries, and individuals will have different fates, depending on the strength and flexibility of their institutions and policies. Indeed, we're already seeing this in portions of Southern and Eastern Europe that remain mired in recession and debt and in the United States, where some local governments are on the verge of failure as their economic bases can't keep up with the needs of their aging populations. Similarly, as aging boosts the importance of productivity-led growth in many emerging markets, progress will be uneven because many known productivity solutions depend on effective regulatory regimes and market mechanisms that are far from standard in emerging markets.

Given the multiple stresses that are occurring at once in the global economy, we should not expect uniform success-but neither should we become too pessimistic. The massive pressures created by the dynamism of emerging markets, technological change, and rapid aging will help stimulate the next era of innovation and growth in a variety of areas. They will include the more productive natural-resource use that will be necessary to support the world's growing global consuming class, the more efficient use of capital, and the more creative management of talent.

Management implications

Emerging on the winning side in this increasingly volatile world will depend on how fully leaders recognize the magnitude-and the permanence-of the coming changes and how quickly they alter long-established intuitions.

Setting strategic direction

McKinsey research suggests that about two-thirds of a company's growth is determined by the momentum-the underlying growth, inflation, income, and spending power-of the markets where it competes. Harnessing market momentum in the years ahead will require covering more geographies, more industries, and more types of competitors, prospective partners, and value-chain participants-as well as more governmental and nongovernmental stakeholders. Rather than thinking of a primary national market broken into three to five value segments, tomorrow's strategist must comprehend a world where offerings may vary by city within a country, as well as by distribution channel and demographic segment, with aging and income inequality necessitating increasingly diverse approaches. All this will place a premium on agility: both to "zoom out" in the development of a coherent global approach and to "zoom in" on extremely granular product or market segments.

The importance of anticipating and reacting aggressively to discontinuities also is rising dramatically in our increasingly volatile world. That means monitoring trends, engaging in regular scenario-planning exercises, war-gaming the effects of potential disruptions-and responding rapidly when competitive conditions shift. For example, few of the traditional mobile-phone manufacturers protected themselves against Apple's disruption via the iPhone. Samsung, however, managed to turn that revolution into an opportunity to rise dramatically in the mobile-phone league tables.

Finally, the strategist increasingly needs to think in multiple time frames. These include a company's immediate tactics and ongoing improvements to counteract new competitive threats, market selection and emphasis given current capabilities and competitive positions, investments to enhance capabilities within the current strategic construct and to enable entry into adjacent markets, and, for the longest term, the selection and pursuit of new, long-lived capabilities. The latter point is worthy of emphasis-advances in technology and the interconnectedness of geographic and product markets make the half-life of "normal" competitive advantages very short indeed. This puts a premium on the selection and development of difficult-to-replicate capabilities. (For more, see Dan Simpson's essay in " Synthesis, capabilities, and overlooked insights: Next frontiers for strategists.")

Building new management muscle

It will be increasingly difficult for senior leaders to establish or implement effective strategies unless they remake themselves in the image of the technologically advanced, demographically complex, geographically diverse world in which we will all be operating.

Everyone a technologist. Technology is no longer simply a budget line or operational issue-it is an enabler of virtually every strategy. Executives need to think about how specific technologies are likely to affect every part of the business and be completely fluent about how to use data and technology. There is a strong argument for having a chief digital officer who oversees technology as a strategic issue, as well as a chief information officer, who has tended to be in charge of the nuts and bolts of the technology the company uses. Technological opportunities abound, but so do threats, including cybersecurity risks, which will become the concern of a broader group of executives as digitization touches every aspect of corporate life.

Managing the new workforce. Technology is increasingly supplanting workers, and the pace of IT innovation is transforming what constitutes work as well as how, when, and where we work. MGI research suggests that as many as 140 million full-time knowledge workers could be displaced globally by smart machines-at the same time aging workforces are becoming commonplace and labor shortages are emerging for pockets of technical expertise. New priorities in this environment include ensuring that companies are using machine intelligence in innovative ways to change and reinvent work, building the next-generation skills they need to drive the future's tech-led business models, and upskilling and retraining workers whose day-to-day activities are amenable to automation but whose institutional knowledge is valuable. (For more on artificial intelligence, see " Manager and machine: The new leadership equation.")

For workers with more replicable skills, there's a danger of doing less well than their parents-which will create social stresses and challenge managers trying to energize the entire workforce, including employees dissatisfied about falling behind. Developed and emerging markets will experience different flavors of these issues, making the people side of the equation particularly challenging for geographically dispersed organizations. (For more, see " The past and future of global organizations.")

Rethinking resources. The convergence of IT and materials science is spawning a surge in innovation that will dramatically change when, where, and how we use natural resources. In their new book Resource Revolution, our colleague Matt Rogers and his coauthor, McKinsey alumnus Stefan Heck, argue that combining information technology, nanoscale materials science, and biology with industrial technology will yield substantial resource-productivity increases. Taken together, those improvements represent an extraordinary wealth-creation opportunity and will be the key to achieving high-productivity economic growth in the developing world to support billions of new members of the global middle class. Capturing these resource-technology opportunities will require new management approaches, such as substitution (replacing costly, clunky, or scarce materials with less scarce, cheaper, and higher-performing ones), optimization (embedding software in resource-intensive industries to improve, dramatically, how companies produce and use scarce resources), and virtualization (moving processes out of the physical world).

Breaking inertia

Change is hard. Social scientists and behavioral economists find that we human beings are biased toward the status quo and resist changing our assumptions and approaches even in the face of the evidence. In 1988, William Samuelson and Richard Zeckhauser, economists at Boston University and Harvard, respectively, highlighted a case in which the West German government needed to relocate a small town to mine the lignite that lay beneath. The authorities suggested many options for planning the new town, but its citizens chose a plan that looked "extraordinarily like the serpentine layout of the old town-a layout that had evolved over centuries without (conscious) rhyme or reason."

Businesses suffer from a surprising degree of inertia in their decisions about how to back up strategies with hard cash to make them come to fruition. Research by our colleagues showed that between 1990 and 2010, US companies almost always allocated resources on the basis of past, rather than future, opportunities. Even during the global recession of 2009, this passive behavior persisted. Yet the most active companies in resource allocation achieved an average of 30 percent higher total returns to shareholders annually compared with the least active. The period ahead should raise the rewards for moving with agility and speed as digitization blurs boundaries between industries and competition in emerging markets heats up.

It would be easy, though, for organizations and leaders to become frozen by the magnitude of the changes under way or to tackle them on the basis of outdated intuition. Taking the long view may help. In 1930, the great British economist John Maynard Keynes boldly predicted that 100 years on, the standard of living in progressive countries would be four to eight times higher. As it turned out, the upper end of his optimistic expectation turned out to be closer to the truth. Those who understand the depth, breadth, and radical nature of the change and opportunity that's on the way will be best able to reset their intuitions accordingly, shape this new world, and thrive.

About the author(s)

Richard Dobbs is a director of the McKinsey Global Institute, where Sree Ramaswamy is a senior fellow; Elizabeth Stephenson is a principal in McKinsey's Southern California office; and Patrick Viguerie is a director in the Atlanta office.

The authors would like to acknowledge the contributions of Ezra Greenberg, Chip Hughes, James Manyika, Catherine Tilley, and Jonathan Woetzel to this article.

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Management intuition for the next 50 years

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The collision of technological disruption, rapid emerging-markets growth, and widespread aging is upending long-held assumptions that underpin strategy setting, decision making, and management. Intuition forms over time. When McKinsey began publishing the Quarterly, in 1964, a new management environment was just beginning to take shape.