Winning through the turns: How smart companies can thrive amid uncertainty

We are living through a period of nearly unprecedented upheaval. Measures of global uncertainty have been rising steadily, according to McKinsey research, and are now nearly double where they stood in the mid-1990s.¹Baseline uncertainty between the mid-1990s and 2025 is measured as a five-year trailing average. The World Uncertainty Index measures uncertainty by reading country reports from the Economist Intelligence Unit. Data from 1993 to 2024 represents the quarterly, unbalanced GDP weighted average for 142 countries. From the pandemic-induced digital acceleration to the ongoing AI revolution, businesses have been caught in a whirlwind of change, which has been exacerbated by new geopolitical tensions and an increasingly uncertain regulatory landscape. This combination of shocks has created one of the most difficult environments leaders have faced—and one that likely won’t change anytime soon.

While this represents a challenge, uncertain conditions can also present opportunities. The late Brazilian Formula 1 champion Ayrton Senna once said, “You cannot overtake 15 cars in sunny weather—but you can when it’s raining.” Of course, that’s only true if the F1 team has prepared itself for unexpected race day mishaps, whether it’s rain-soaked tracks or surprise moves by competitors. The same is true in the world of business. A savvy enterprise can leverage market, trade, and technological disruptions to overtake its rivals—provided it has practiced the skills it needs to thrive when long-standing rules no longer apply.

Leaders in the technology sector need to be particularly adept at navigating their organizations through uncertainty because they grapple with higher levels of disruption and volatility. For example, between 2000 and 2023, the technology industry saw a 40 percent higher churn among the top 20 companies compared with the average across other industries.²According to McKinsey research, the technology industry has a 40 percent higher turnover in the top 20 list by market capitalization compared with other industries from 2000 to 2023 (63 in technology versus an average of 45 across other industries). The technology sector also invests more in innovation and faces greater regulatory scrutiny than other industries.³From 2021 to 2024, there were 74 major full-time-equivalent decisions related to technology companies, compared with 35 for other industries, and 1.6 times higher spend on R&D as a percentage of annual revenues for technology companies, compared with the average across other industries.

Over the past several decades, we’ve witnessed major periods of change driven by successive technological “waves,” with each wave creating both uncertainty and opportunity. These tech waves—from the rise of personal computing and the internet to the emergence of social media, mobile technology, and cloud computing—have reshaped industries, disrupted existing business models, and redefined market leadership (Exhibit 1).

Companies that recognized these shifts early and leveraged new opportunities emerged as winners, consolidating their position as industry leaders for years to come. Microsoft, for example, transitioned from a focus on PCs to cloud computing and AI leadership. Amazon evolved from an online bookseller to an “everything store” that perfected the two-sided marketplace model and is now leveraging AI to enhance its services. In fact, about half of the top 20 companies by market capitalization in today’s S&P 500⁴Alphabet, Amazon, Apple, Broadcom, Meta, Microsoft, Netflix, NVIDIA, and Tesla (as of April 30, 2025). are technology businesses that have successfully navigated multiple pivotal waves of disruption and uncertainty.

McKinsey has identified five strategic moves that help companies build the resilience they need to thrive in periods of tumult. These five essential moves, grounded in deep research and our work with clients, are determining “where to play,” driving business model innovation, linking talent to value, dynamically allocating capital, and taking a programmatic approach to M&A (Exhibit 2).

We have tested this framework by interviewing five exemplary CEOs of leading technology companies, each with lived experience navigating these strategic turns—Dell Technologies CEO Michael Dell, GlobalFoundries Executive Chairman Thomas Caulfield, HubSpot CEO Yamini Rangan, GoDaddy CEO Aman Bhutani, and Juniper Networks CEO Rami Rahim. Their stories illustrate Senna’s insight that even the trickiest conditions can unlock unforeseen opportunities—provided leaders know how to handle the turns. (This article is part of ongoing McKinsey research on how companies can thrive in uncertainty.)

Navigating turns under uncertainty: How tech companies can lead the pack

The average Formula 1 circuit consists of about 60 laps, each with 20 turns. While racers must navigate more than 1,000 turns during a race, winning often comes down to a few crucial factors: investment in technology (such as aerodynamics, durability, tire management, and engines), the team’s preparation, adapting race strategy in real time, the skill of the driver, and the willingness to make a few bold, crucial moves that can drastically alter a race’s outcome.

Similarly, leaders in the technology sector also have a set of strategic moves they can deploy to navigate the challenges and opportunities coming their way. It’s important to understand that companies must master these moves before they find themselves in crisis. Resiliency, after all, is a skill in and of itself—a set of capabilities that are difficult to master and must constantly be exercised if they are to be effectively deployed under pressure. “You should not wait for a crisis to do these things,” says Caulfield. “Changing during a crisis is necessary for survival, but driving change to avoid a crisis and stay ahead of the world shifting around you is what enduring businesses do well.”

1. Where to play

“Where to play”—that is, the choice of which markets to compete in—may be the most important decision a company can make. This is not a one-time decision; instead, it requires constant review and proactive action in response to changing circumstances. For example, in response to growing geopolitical risks and uncertainty, companies in industrials and electronics manufacturing industries are poised to reposition their portfolios (for example, toward software, derisked supply chains, and AI) to drive resilience and growth.⁵“Advanced industries: New technologies and supply chain shifts are driving key portfolio and investment decisions,” McKinsey, February 19, 2025.

Our research shows that companies that “switch lanes,” seeking opportunities in industry segments with higher momentum, delivered more than double the returns of companies that remained in their existing niches over the past decade (see sidebar “Resiliency in action: Changing the playing field” ).⁶Industry is defined based on the McKinsey Industry Classification (MIC) system, which is a systematic breakdown across three levels: 13 MIC1 codes (for example, consumer), split further into 32 MIC2 codes (for example, consumer packaged goods, consumer durables, and retail), and then into 130 MIC3 codes (for example, consumer electronics and home furnishings). Our analysis is based on a sample size of the largest 2,000 corporations by market capitalization in 2022 (Global 2000), excluding banking, insurance, real estate, and companies in Greater China, resulting in a final sample of 1,303 companies. Companies with missing momentum data were also excluded from our analysis. However, making such a switch is a bold move, which perhaps explains why fewer than 10 percent of companies opt to do so (Exhibit 3).

In practice, a robust and regularly updated portfolio strategy is key to capturing where-to-play opportunities. This involves three fundamental steps:

1. Understand the market. Leaders should analyze market attractiveness, considering factors like market maturity, competitive intensity, and economics. This includes evaluating current and adjacent markets to shape the portfolio and identify potential areas for growth or divestment. Evaluating key risks and barriers is important too, including risks related to technological disruption, regulatory and geopolitical risks, macroeconomic risks, and black swan events, among others.
2. Benchmark and analyze the portfolio. Simultaneously, companies should benchmark their current performance against peers to find opportunities for efficiency using metrics such as revenue-to-R&D expense ratios and gross margin ranges. Similarly, decomposing enterprise value into product and sector pools helps companies analyze each segment’s contribution to the overall business value and identify key segments to target for growth.
3. Develop and evaluate portfolio moves. Finally, leaders should analyze underperforming products for their commercial synergy, option value, and strategic fit. Then they should categorize products based on financial performance and strategic importance to determine whether to increase investment, maintain, reduce, or exit.

2. Business model innovation

A business model is not static; it needs to constantly change and evolve. This is especially true today, with the emergence of gen AI promising to upend established business models and open the playing field for new winners.

Typically, business model innovation occurs across three core components—economic models, production models, and delivery models. AI is sparking changes on all three fronts. For example, integrating AI solutions across the software product development life cycle has drastically reduced time to market while increasing the viability of production for new product ideas.⁷Chandra Gnanasambandam, Martin Harrysson, Rikki Singh, and Aditi Chawla, “How an AI-enabled software product development life cycle will fuel innovation,” McKinsey, February 10, 2025. The introduction of AI-first and AI-native products also has led to the adoption of new monetization models (such as outcome-based pricing models for agentic AI products for automated customer assistance).

Companies can develop an approach to business model innovation through a few tested strategies for each of the three core components. They can rethink their economic models by innovating monetization strategies. Consider how software companies have generated value by moving from a licensing to a subscription-based model. When Adobe made this shift in the wake of the financial crisis in 2012 and 2013, for example, it experienced a tenfold increase in market capitalization and a 300-basis-point improvement in gross margins.⁸Impact for the period January 2013 to December 2020, based on analysis of data from Yahoo Finance and Adobe 10-K filings. More recently, companies have updated monetization models by shifting toward consumption-based and outcome-based models, in which pricing is based on the level of consumption of specific resources (such as compute or storage) or successful delivery of predefined outcomes. The number of leading software companies offering consumption pricing has nearly doubled in the past decade,⁹Based on the financial performance of more than 250 software companies from 2015 to 2024. according to McKinsey research. What’s more, these companies have experienced 10 percent greater revenue growth and a 30 percent boost in price and earnings performance compared with peers (Exhibit 4).

Meanwhile, by innovating their production models, technology companies can build specialized excellence in certain areas while utilizing partnerships for other segments—allowing them to capture value from their own products and from third-party products that run on their platforms. In fact, software-as-a-service (SaaS) players that expand into platform as a service wind up receiving about 1.7 times premium multiples (11.2 compared with 8.0 for pure SaaS).¹⁰McKinsey analysis based on IDC and S&P Capital IQ data and on the average financial metrics across companies with more than $250 million in 2018 revenue through “as a service” products.

Finally, companies can revamp their delivery models, for example, by eliminating intermediaries between the company and its customers or creating new ways to deliver products. Open-source models have been a major innovation in recent years, enabling companies to foster innovation through an ecosystem while capturing value from levers such as customer support, hosted services, and training (see sidebar “Resiliency in action: The ever-evolving business model”).

3. Link talent to value

While most companies have a value agenda, not all of them directly connect that agenda to their talent strategy. Linking talent to value is the disciplined approach to ensuring that an organization’s top performers are in the most critical value-driving roles. Almost half (47 percent) of the C-suite leaders recently surveyed by McKinsey, for example, said that their organizations are developing and releasing gen AI tools too slowly, citing talent and skill gaps as a key reason for delay.¹¹“Superagency in the workplace: Empowering people to unlock AI’s full potential,” McKinsey, January 28, 2025. As a result, mapping talent to value and building AI skills within the workforce will be a top priority for most organizations.

Linking talent to value often means paying increased attention to “CEO-2” roles—that is, the array of vice-president-level and director-level positions that are essential for successful execution but do not report directly to the CEO; such positions comprise as much as 90 to 95 percent of a company’s critical roles, according to McKinsey research.¹²McKinsey research (November 2023) linking talent to value is based on insights from more than 50 talent-to-value engagements to identify what winning companies do well. In fact, leading organizations have found that more than 50 percent of value created is concentrated in about 15 of the most critical roles, most of which are at the CEO-2 or more junior level. Winning companies maximize that upside via a four-step approach to mapping talent to value (see sidebar “Resiliency in action: How the right talent can drive transformation”) (Exhibit 5).

4. Dynamic capital allocation

Amid fast-changing circumstances, companies must be able to shift capital toward the biggest opportunities in a swift, decisive manner. Dell Technologies, for example, has masterfully executed pivots with strategic reallocation of capital over multiple turns in the past—from selling direct-to-consumer PCs in the 1980s to pivoting toward offering data storage infrastructure starting in the mid-1990s and cloud computing in the past decade. “Over the past 12 years, there were three times when the ten-year Treasury note was below 2 percent,” Dell told McKinsey. “The first time was when we went private. The second time was when we bought EMC and VMware. The third time was during the coronavirus. When money goes on sale, stuff happens.”

Most recently, Dell Technologies is pursuing a pivot to become an end-to-end provider of AI solutions to enterprises. As it strategically reorients toward AI, Dell explains the importance of precision and speed in reallocating resources: “We want to be very intentional about identifying which activities are the most important for the company and quadrupling down on those. Speed to change is another key to success. In the tech industry, we often say, ‘Change or die.’ There’s the quick or the dead.”

Dell is not unique in its effort to reallocate resources toward AI-driven products and transformations. Over the next three years, 92 percent of companies plan to increase their AI investments.¹³“Superagency in the workplace: Empowering people to unlock AI’s full potential,” McKinsey, January 28, 2025. Getting this reallocation right will be essential if companies are to grasp the opportunities unleashed by AI. But for many businesses, the process of allocating capital across business units is highly correlated to last year’s allocation; they make incremental changes rather than aggressively responding to capitalize on shifts in the marketplace.

A more dynamic approach can yield real results. McKinsey research shows that the top quintile of companies that reallocate capital more frequently between business units¹⁴Excludes financial companies, single-segment companies, and companies with missing capital expenditure data. The analysis was performed at the MIC3 level, resulting in 70,804 company and year segments for 1,955 companies from 2001 to 2023. Reallocation is measured by the deviation from stable capital expenditure and asset per segment. The top quintile is statistically significantly different from other quintiles (p-value = 0.02). experience an estimated 20 percent greater total shareholder returns than those in the medium or low quintiles of reallocators (see sidebar “Resiliency in action: Taking a dynamic approach to capital investment”) (Exhibit 6).

The technology players most successfully conducting capital reallocation tend to embrace these four approaches:

1. Align funding with strategic horizons. Top performers divide R&D and capital expenditures among separate “bets”—such as incremental improvements in the core business, breakthrough or next-level innovations, and disruptive ventures—and update allocations regularly to reflect market shifts and evolving capabilities.
2. Bucket investments by type. Leaders create distinct pools for mandatory spending (such as cost minimization and compliance), short-term discretionary projects (ranked by expected financial return), and long-term discretionary initiatives (ranked by strategic fit, team strength, and risk profile).
3. Use quantitative scorecards. All projects are evaluated objectively, with metrics covering financial returns, strategic alignment (for example, three- to five-year goals), and risk assessment.
4. Innovate financing for disruptors. Top players leverage corporate venture capital arms, incubators, or separate venture funds to back high-risk, high-reward bets without crowding out core business budgets.

5. Programmatic M&A

In the early months of 2025, more companies sought an edge via M&A activity, with the tech sector leading the way. This activity has been led by mid-size deals (between $500 million and $10 billion), which have grown 20 to 40 percent compared with last year.¹⁵Ben Glickman, “The M&A boom Wall Street wanted is here, if you know where to look,” Wall Street Journal, April 1, 2025. While many companies choose to pursue M&A activity on an ad hoc, deal-by-deal basis, McKinsey research shows that a purposeful, or “programmatic,” approach to acquisitions and divestitures yields the best results. In fact, companies programmatically executing three to five deals per year had the greatest odds (more than 70 percent) of positive excess total shareholder returns.¹⁶McKinsey analysis is based on CPA, S&P Capital IQ, Global 2000 (2022) data and the top 2,000 companies by market capitalization as of December 31, 2012, that were still trading as of December 31, 2022. Companies headquartered in Africa and Latin America are excluded. Software companies that actively manage portfolios through M&A and divestments have double the TSR of peers who take a less strategic approach (what we define as “selective M&A”) or who shy away from M&A activity altogether and attempt to grow organically. For technology companies, a programmatic approach to M&A generates an excess TSR of 2.3 percent, far outperforming other M&A strategies (see sidebar “Resiliency in action: The art of growing through acquisition”) (Exhibit 7).¹⁷Lena Koolmann, Anthony Luu, and Suzy Shaw, “Thoughtful M&A strategies are key to growth in tech, media, and telecom,” McKinsey, February 29, 2024.

A successful approach to dealmaking requires a three-pronged strategy: focusing on multiple smaller, purposeful acquisitions rather than single large deals; using programmatic divestitures to exit low-growth areas; and acquiring capabilities in high-growth adjacent markets.

In F1 racing, top drivers pore over every track detail and their driving approach to it so that reacting to changing circumstances in real time becomes muscle memory. As outlined above, business executives need to constantly engage their own set of muscles if they are to build the resiliency they need to thrive during periods of turmoil.

Historically, these periods of uncertainty and disruption have proven to be periods of new opportunities. In each period, we have seen companies successfully chase outsize growth by making bold, strategic moves related to the five levers we describe: deciding “where to play”; implementing business model innovations to facilitate strategic turns; mapping talent to new areas of value; reallocating capital in a dynamic manner to strategic priority areas; and conducting purposeful, programmatic M&A to pivot or bolster areas of strength. Our current moment of technological disruption, led by developments in AI, presents the latest opportunity for technology companies to do so, in an increasingly competitive race to drive growth and transformation.