Leaders: Do you know your company’s superpower?

• Amidst global economic uncertainty, leaders — and especially CEOs — face unprecedented challenges.Organizations must understand their position in the market in order to thrive.A new approach outlines how to create a distinctive institutional capability.

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:

• Vision and leadership: The most successful CEOs have an ambitious outline for what they want to be known for – and commit to the journey completely.Employees: Superpowered organizations build a full system of people and talent to ensure sustainable growth. In fact, developing robust people and talent strategies are among the highest-value actions a business can take. Tech talent, therefore, should be a CEO’s top priority when strengthening institutional capabilities.Culture and mindset: A mindset shift is required when building or enhancing a capability. Companies creating a superpower in building new businesses, for example, usually shift their mindsets to accept occasional failures and thrive on experimentation.Technology: A combination of human capital and technology, data, and AI must be at the core of any institutional capability.Organization: Companies cannot rely on temporary constructs such as SWAT teams and pilot programmes when creating a new capability. That’s because the organizational structure and ways of operating must be designed and constructed to ensure clear roles, responsibilities, and accountabilities to enable the capability to grow and thrive.Routines: Critically, organizations must get into the habit of continuous improvement across all elements of an organization – processes, tools, products, services. Leading companies treat their superpower like a craft that needs to be continually practiced, with world-class coaching, to ensure ever-increasing quality and performance.

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