Leaders: Do you know your company’s superpower?

Cluttered markets and ever-changing industry dynamics. Pricing pressures and predictions of recession. Generative AI and the largest capital reallocation of our generation.

There is no shortage of challenges facing leaders at the moment. So how do CEOs navigate the economic tumult, set strategy amid uncertainty, stand out against competitors, and grow? They find their company’s superpower.

Put another way: they identify an institutional capability that they can consistently do better than anyone else – one that not only creates value, but competitive distance from their peers. And then they build it.

Think of Progressive Insurance, broadly admired for its analytics-based pricing of auto insurance. And Netflix, renowned for its “freedom and responsibility” culture. Or Danaher, known for the Danaher Business System.

The common thread among these companies – and others known for a superpower – sits at the intersection of people, processes, and technology. These organizations have identified and built institutional capabilities methodically over time to deliver superior growth. At times, they’ve leapfrogged competitors altogether.

Through our work with thousands of leaders and organizations, we’ve found an approach that can help CEOs chart a route, or VECTOR, to design and build a distinctive institutional capability. In brief, the elements of VECTOR are:

Once companies understand the VECTOR approach, they can use it to align their efforts and resources.

For example, a retail client we partnered with a couple years ago. Despite a long and successful history as an industry leader, the retailer lacked a clear growth path after surviving the earliest challenges of the COVID-19 pandemic. An increasingly fragmented market and new competitors made it even more difficult for the company to create competitive distance.

The CFO turned to analytics-driven pricing as an opportunity and the organization eventually embarked on a transformation journey that saw it build a leading analytics capability, centralize pricing operations, and dramatically change the way it conducts merchandising. The company also reskilled and certified hundreds of employees on this new way of working to ensure the change could be sustained.

In its first year, the retailer’s new superpower in analytics-based pricing led to hundreds of millions of dollars in margin expansion. And the institutional capability means the organization continues to capture value today.

Beyond leveraging the VECTOR approach, it’s also critical for CEOs to prioritize. As we said at the beginning: there’s no shortage of challenges – and opportunities that leaders face. So from the outset, leaders must identify the one superpower that will truly lift performance for their organization. In our experience, the companies that successfully do that well set themselves apart from the rest. And stay there.