Strategy & Corporate Finance

Companies with innovative

cultures have a big edge with
generative AI
It may not be surprising that innovative organizations are ahead on generative AI, but
the degree to which they’re succeeding at deploying it might be. Five practices help
them stay ahead of the pack.

August 2023
 Self-writing, self-learning code, “no touch” between themselves and their peers and surpass
decision making, and large language models. These them when it comes to using gen AI, and how these
and other promising applications of generative factors help create business value.
AI (gen AI) offer a transformative opportunity for
companies. Indeed, the business world is abuzz
with gen AI’s ability to create value by changing how Action, not just talk, on
work gets done across functions and workflows. deploying gen AI
Everyone is talking about generative AI, but top
But like any technology, generative AI is not innovators are actually doing something about it.
a panacea. Most organizations struggle to Thirty percent of top innovators we surveyed1 said
capture the full value of their digital investments, they are already deploying generative AI at scale in
and generative AI could play out the same their innovation and R&D functions, more than six
way if leaders deploy it without priming their times the rate of companies that are lagging behind
organizations to reap the benefits. And it comes on innovation (Exhibit 1).
with challenges, including the use of public gen AI
offerings that could result in the flow of intellectual This is an acceleration from 2022, when top
property or proprietary data into the public innovators deployed gen AI at scale at 3.2 times the
domain, along with privacy and bias concerns. rate of trailing peers, according to our research.2
The widening gap is important, since organizations
In a 2023 McKinsey Global Survey on digital increasingly look to innovation as a primary driver
strategy involving more than 1,000 respondents, of growth and resilience in challenging economic
we found a startlingly strong connection between times. Companies that can harness the speed and
organizations that have built a strong innovative granularity of generative AI to find new growth
culture and operating model and their ability opportunities are likely to have a formidable
to increase value through the newest digital competitive advantage.
technologies, including generative AI.
A strong innovative culture does multiple things well
In this article, we examine five actions that top at once. It emphasizes vision and strategy by giving
innovators are taking to put strategic distance initiatives the resources they need to succeed,
Web <2023> and it focuses on pursuing new and bigger ideas
<CompaniesInnovativeCultures>
Exhibit 1
Exhibit <1> of <4>

Top economic performers are leveraging generative AI roughly at the same

rate as others, while the gap is widening between strong and weak innovators.

Companies that agree or strongly agree that they are using generative AI Agree or strongly agree
at scale to accelerate their R&D and innovation, % of respondents Others

Top economic performers vs all others Strong vs weak innovators

Top economic Strong

12 88 30 70
performers innovators

Weak
All others 13 87 4 96
innovators

Source: McKinsey Global Survey on digital strategy, 2023, n = 1,086

McKinsey & Company

1
The online survey was in the field from February 13 to March 3, 2023, and garnered responses from 1,086 C-level executives, senior
managers, and business unit, department, or division heads representing the full range of regions, industries, company sizes, and
functional specialties. Among respondents who say their companies scored in the top third on innovation, they report that they have a
competitive edge on innovation because of their organizational culture.
2
Laura Furstenthal, Jon McClain, Brian Quinn, and Erik Roth, “Committed innovators: How masters of essentials outperform,” McKinsey,
June 9, 2022.

2 Companies with innovative cultures have a big edge with generative AI

grounded in differentiated business insights— model would need to change “moderately to
even embracing failures along the way. Innovative completely” in order to remain economically viable
cultures also reach scale more quickly in relevant by 2025. Innovation is central to survival, and
markets. And they mobilize the organization by both innovative companies are using tech to beat the
capitalizing on external networks and motivating odds (Exhibit 2).
and rewarding their people to innovate.
While companies typically look to their core to drive
Committed innovators craft operating models the majority of their growth, most organizations in
that reflect these practices and others, including our latest survey are focused as much or more on
investing strongly in R&D and in digital tools “innovating new” as on “scaling old”—even within
such as advanced analytics, AI, digital platforms, their core.
and knowledge management. Overall, they have
a higher willingness to disrupt themselves and
pursue breakthroughs. Top innovators are reaping
significantly better business outcomes
In the current uncertain global context, most from their AI investments
organizations are looking for new sources of growth Innovation has long been a source of growth and
across all growth pathways. In our new survey, 78 competitive advantage for companies that are able
percent of respondents say their current business to get it right. Top innovators win not just by spotting
new opportunities faster and coming up with ideas

Web <2023>
<CompaniesInnovativeCultures>
Exhibit 2
Exhibit <2> of <4>

In the current uncertain environment, organizations are looking to increase

growth through innovation.

Which of the following did you allocate resources to over the past 2 years?, % of respondents
Top economic performers, 15%+ (both revenue + EBIT) over 2 years Other respondents

0 25 50 75 100

Expanding Innovated new offerings within

the core existing business
Utilized commercial levers to grow
existing business
Expand into new geographies or
segments

Innovating Innovated a new business in our

into value chain (eg, vertical integration)
adjacencies
Acquired another player within our
existing business to grow scale
Acquired a new business in our value
chain (eg, vertical integration)

Igniting Built a new business outside of our

breakout current industry or ecosystem
business
Acquired a new business outside of
our current industry or ecosystem

Source: McKinsey Global Survey on digital strategy, 2023, n = 1,086

McKinsey & Company

Companies with innovative cultures have a big edge with generative AI 3

 that address those emerging needs. They are also allowing them to capture the value of these
better at developing them quickly and scaling them investments to drive growth.
ahead of peers, whether launching a new product to
market or innovating their operating model. Indeed, McKinsey research shows that experimentation
we found in our June 2022 research that top and a commitment to evolving ideas, businesses,
innovators are three times more likely than others to and technology are paramount and underpin
encourage experimentation. success at driving new sources of growth. Those
same factors are central to deriving value from
Generative AI can rapidly accelerate this gen AI. Examples include reorganizing from
competitive edge and further widen the gap functional silos to integrated, cross-functional
between top innovators and others. The teams aligned to products or platforms; making
proliferation of available data, as well as the product management a core competency across the
exponential learning curve of AI algorithms, is organization; and frequently reviewing the allocation
creating a seismic shift in their favor (Exhibit 3). of talent and resources to align with the highest-
impact areas.

The need for an innovative There are two ways in which gen AI can accelerate
operating model an organization’s growth strategy. The first is its
Critically, these organizations are already ability to rapidly scan and process huge amounts
hardwiring of certain types of information and synthesize it.
Web <2023> their operating models to be AI-led,
<CompaniesInnovativeCultures>
Exhibit 3 of <4>
Exhibit <3>

Top innovators have been more successful at creating business value from
their investments in tech and R&D.

Companies that agree or strongly agree with the following Strong innovative culture
statements related to business outcomes, % of respondents Weak innovative culture

Average
Our products and services consistently 62
lead the industry in their ability to meet
emerging customer demands 14

We are best in class in speed of new 50

product development 4

Our new products consistently hit their 58

targets in market 13

Our R&D investments drive significant 69

new growth 16

We are consistently ahead in 63

discovering ‘white space’ 7

We successfully scale new businesses 59

or product lines faster than the
industry standard 8

Source: McKinsey Global Survey on digital strategy, 2023, n = 1,086

McKinsey & Company

4 Companies with innovative cultures have a big edge with generative AI

Put more simply, it can answer questions incredibly allow this to happen, since a process is only as fast
quickly. But the quality of the answers depends on as its slowest step.
both the quality of the question and access to the
data that would inform an accurate answer. With services like ChatGPT open to anyone, and
as public platforms scale at exponential rates,
The second accelerant relates to self-learning. access to actual gen AI technology is no longer a
Gen AI can write code that will write more code differentiator. That means the way to compete with
and improve itself. This can be deployed not only gen AI is changing. However, there are five steps
to refine the questions it is being asked but also to that innovative organizations can take to create a
move directly from idea to execution with no human competitive edge with this technology (Exhibit 4):
touch. An organization has to adapt its workflows to
1. Know how to ask the right questions. Top
innovators are already ahead on using other
Web <2023>
<CompaniesInnovativeCultures> forms of AI, and their organizations are already
Exhibit 4 of <4>
Exhibit <4>

Top innovators pursue five actions that capture more value from generative AI,
creating strategic distance from their peers.

Companies that agree or strongly agree that the following statements describe Strong innovator
their company’s practices or level of capability in these areas, % of respondents Weak innovator

Average
Know how to ask the Already have MLOps1 capabilities 40
right questions (eg, data sourcing, model training)
7

Spot ‘wrong’ Integrate end-user focus across the 50

answers fast organization, bringing together cross-
functional teams to innovate at scale 5

Continually build Design internal processes, offerings, 60

proprietary data and customer interactions for data
capture 10

Adopt DevSecOps2 practices and

continuous integration/continuous 49
delivery to enable a faster product 8
release cycle

Make sure the Agile practices are widely adopted in 65

organization learns the organization (not just in IT) 7
quickly

Business leaders and product teams 62

already use real-time data to drive
improvements 10

Create ‘no human Wire touchless workflows to move 46

touch’ workflows to rapidly from idea to execution 5
take advantage of
generative AI’s
speed Agile teams can develop their 57
own code 15

1Machine learning operations.

2Development, security, and operations.
Source: McKinsey Global Survey on digital strategy, 2023, n = 1,086

McKinsey & Company

Companies with innovative cultures have a big edge with generative AI 5

 trained to understand how to use algorithms to practices in place to ensure that they know how
accelerate gen AI. They recognize the “garbage to properly protect their own data, comply with
in, garbage out” trap that gen AI can lay and are complex regulations on how to handle the data
already adept at understanding the roles it can they are accessing externally and internally,
play—and those it cannot. Top innovators are as well as prevent the accidental leak of their
four to five times more likely than their weakest proprietary data into the broader “source
peers to have tech-savvy business leaders material” for public algorithms like ChatGPT.
who understand how to take advantage of new
technologies in their business and deploy them 4. Create an organizational ability to learn quickly.
in the right spot to create value. They are also The fact that top innovators are succeeding
three times as likely to have agile teams that here is no surprise, since the ability to learn
are already used to writing their own code. With quickly is almost the definition of what it takes
gen AI allowing faster self-writing code, these to be a successful innovator. The data bears
organizations are primed for rapid deployment this out, with top innovators more than eight
into teams that already understand the times as likely to have adopted agile practices
limitations and benefits of such tech. organization-wide, not just in information
technology.
2. Spot “wrong” answers fast and weed them out.
The concept of “fail fast,” a cornerstone of top 5. Wire key “no human touch” workflows to take
innovators’ thinking, is critical in the age of gen advantage of gen AI’s speed. In addition to
AI. These companies already have systems and providing organizations with the ability to rapidly
a culture in place to be able to pull the plug on search through huge data sets to find answers
something that isn’t working and move onto to questions, gen AI’s ability to “self-learn”
the next idea. Equally critical, they are nine and evolve, including code that “writes itself,”
times as likely to already have hundreds or even is one of the most talked about benefits of the
thousands of cross-functional teams that are technology. Organizations, especially those
taking a holistic, end-user view of their business, in unregulated industries, that have already
which means they are more likely to not just ask identified key workflows and put in place the
the right questions but also spot “bad” answers. people, mindsets, and processes to enable them
are ahead in harnessing the speed of gen AI.
These organizations also test and learn at “all
levels of the organization.” Executives are three Top innovators are more than eight times as likely
times more likely to believe their organization to have already put this nimble operating model in
encourages risk taking than manager-level place. What’s more, they already have agile teams
employees and below. As gen AI democratizes embedded in their organizations. These teams write
test-and-learn practices across organizations, their own code, increasing the potential speed and
management practices must democratize too. depth of gen AI to permeate their business. Finally,
Leading innovators are already doing this. they have a deep bench of tech-savvy talent that will
understand the limits of the technology and how to
3. Continually build proprietary data. Top ensure it doesn’t go off track.
innovators are also five times more likely to
already have internal processes, products, and
customer interactions that are designed for data
capture, leveraging both internal and external
data. This means that when they run gen AI, they
have sources of insight that others don’t to help
get better answers. They also are more than five
times as likely to have established DevSecOps

6 Companies with innovative cultures have a big edge with generative AI

 an innovative culture is stronger than ever. In the
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The world is changing fast, and organizations have themselves with actions over words, and we believe
to change with it to keep up. While innovation, as the stage is set for many more organizations to
always, remains a choice, the business case for follow suit.

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Matt Banholzer and Jon McClain are partners in McKinsey’s Chicago office, Ben Fletcher is a senior partner in the Sydney
office, and Laura LaBerge is a director of growth strategy and innovation in the Stamford, Connecticut, office.

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