When McKinsey published the second edition of its State of Organizations research back in February, one number should have stopped every CEO mid-sentence:
72% of the more than 10,000 senior leaders surveyed admitted their organisations are not fully ready for the changes coming at them. Even amongst leaders who are optimistic about the future, only a third feel prepared.
We are now past the halfway point of 2026. If that number described your organisation in February and nothing fundamental has changed since, you haven’t just lost five months. You’ve lost half the runway you had to do something about it this year.
Having spent over two decades advising CEOs, executive teams and governments on innovation strategy, leadership and culture, I read reports like this with one question in mind: what does this actually demand of the people at the top? Not what does it describe — what does it demand?
Because McKinsey’s findings, drawn from leaders across 16 industries worldwide, aren’t really about organisations at all. They’re about leadership. Read properly, this is one of the clearest arguments I’ve seen in years for why CEOs and senior executives must rethink what their job now is.
Three Tectonic Forces, One Common Denominator
The report frames the landscape through three “tectonic forces”: the infusion of technology and AI into the core of how work gets done, economic disruption and geopolitical fragmentation, and deep workforce shifts in expectations, demographics and working models. McKinsey is explicit that these are not temporary fluctuations but deep structural transformations that will test how organisations grow, operate and lead.
I’d go one step further. These three forces share a common denominator the report circles repeatedly but never quite names: none of them can be met with the leadership model most organisations still run on. Command-and-control, annual-cycle, structure-first leadership was built for a world that moved slower than the organisation could reorganise. But, that world has gone! The report’s own closing section says it plainly — the old days of launching a big change programme and returning to “business as usual” are over. The new normal is “business as change.”
That single phrase should reframe every executive agenda for the second half of this year. If change is now a permanent condition rather than an event, the CEO’s job is no longer to lead change programmes. It’s to build an organisation that changes continuously — and that is a culture and capability challenge, not a structural one.
If change is now a permanent condition rather than an event, the CEO’s job is no longer to lead change programmes. It’s to build an organisation that changes continuously.
The AI Numbers Expose an Innovation Problem, Not a Technology Problem
The technology findings are the ones generating headlines, and they deserve scrutiny. Eighty-eight percent of organisations are now deploying AI in some form. Yet 81% report no meaningful bottom-line gains. Meanwhile, 86% of leaders admit their organisations are not prepared to adopt AI in day-to-day operations, and one in six organisations has no clear C-level owner for AI adoption at all. Only 14% see their leaders consistently championing AI with clear strategy and action.
Let’s be honest about what that gap between 88% and 81% actually is. It’s innovation theatre in AI clothing — activity without capability, experimentation without transformation, pilots without the organisational rewiring that turns technology into value.
I’ve argued for years that AI doesn’t create innovation capability; it amplifies whatever capability already exists. Organisations that have built genuine, repeatable innovation capability will use AI to compound growth. Organisations that haven’t will extract thin efficiency gains, usually via headcount, and mistake that for progress. McKinsey’s data now demonstrates this at scale. The report is unambiguous that capturing AI’s value requires a “double transformation” — technological and organisational — and quotes one executive’s rule of thumb that for every $1 spent on technology, $5 should be spent on people. Encouragingly, 55% of leaders recognise that successfully building employees’ AI capabilities will bring exponential productivity gains. The problem is that recognition and action remain very different things.
The question for CEOs in the second half of 2026 is therefore not “what’s our AI strategy?” It’s “do we have the leadership, culture and innovation capability for AI to amplify anything worth amplifying?”
The Middle Is Being Starved of Clarity — and the Middle Is Where Growth Happens
Buried in the report’s chapter on focusing on the core is, for me, its single most important finding. Asked whether they are clear about their organisation’s must-win battles, 56% of executives said yes. Amongst directors and VPs, that falls to 44%. Amongst middle managers, it collapses to 27%.
Read that again. Nearly three-quarters of the layer of the organisation that actually converts strategy into delivered value cannot clearly see what the organisation is trying to win.
This matters enormously, because the middle of the organisation is where problems get solved, opportunities get capitalised on and innovation-led growth is actually generated. In my work with executive teams around the world, I’ve long described middle managers as the most powerful multiplier an organisation has — the essential human bridge between the executives who must own the agenda and the frontline employees who contribute the ideas and insight. When that layer is starved of clarity, everything the C-suite announces simply evaporates on its way down through the organisation.
McKinsey’s leadership findings compound the concern. The primary barriers leaders cite to creating psychologically safe environments are time pressure (47%), fear of failure or judgement (42%), hierarchical culture (38%) and unclear expectations (38%). Every one of those is within the gift of the executive. This is the double bind I see constantly: executives demanding innovative, adaptive behaviour from their organisations whilst presiding over the precise conditions — overload, fear, hierarchy, ambiguity — that make it impossible.
Nearly three-quarters of the layer that converts strategy into delivered value cannot clearly see what the organisation is trying to win.
Leading From the Inside Out: Validation, With a Caveat
The report’s chapter on reinventing leadership argues that leaders now need to take an “inside out” approach — that leading others begins with leading oneself, and that human-centric behaviours such as humility, empathy, vulnerability and deep listening are displacing the old model of simply demanding results.
Leaders surveyed report that human-centric leadership practices deliver increased employee satisfaction and retention (56%), strengthened trust (56%), improved decision-making (42%) and greater adaptability and resilience (40%). Reflective leaders are almost twice as confident in their organisation’s ability to adapt as their least reflective peers (30% versus 17%), and roughly twice as likely to have clear visibility of their must-win battles.
McKinsey also reminds us that successful leadership development doubles the success rate of organisational transformations. For those of us who have spent decades arguing that leadership is the system on which every other organisational outcome runs, this is welcome validation.
But here’s my caveat, and it matters. Reflection alone changes nothing — the report itself concedes that “reflection alone will not make a difference, but acting mindfully will.” Too many organisations will respond to this chapter by commissioning another leadership programme: classroom content, competency models, an inspiring offsite. Offsites and retreats have genuine value, but as thinking time — for reflection, design and imagination — not as the place leaders learn to lead at pace.
The leadership capability this report is really describing gets built in the arena, on the real, painful, expensive problems the organisation is facing right now, in ways that involve the managers and employees who will actually deliver the change. That’s how executives learn to lead for innovation — building the environment in which the middle of the organisation can solve complex problems repeatedly — rather than simply learning about leadership. It’s an approach I’ve seen transform executive teams precisely because the ROI shows up in problems solved and pace gained, not in satisfaction scores.
The Innovation-Led Growth Imperative
For organisations that need innovation-led growth to survive or thrive — which, in this environment, is most of them — the report offers one finding that should shape every budget conversation between now and year end. Asked to identify the biggest unlocks for overcoming productivity barriers in the next one to two years, leaders’ top answer, cited by 47%, was investment in innovation capabilities, alongside a culture of continuous improvement. Not restructuring. Not cost-cutting. Innovation capability and culture.
This is a remarkable admission, because it’s exactly where most organisations underinvest. Two-thirds of leaders say their organisations are overly complex and inefficient, and McKinsey notes that the traditional remedies — structural redesigns, cost cuts, flatter hierarchies — are delivering diminishing returns. The productivity frontier has moved from structure to flow: how work, decisions and information actually move across the enterprise. Structure supports; it doesn’t lead.
The growth findings tell the same story. Only 30% of organisations reallocate resources enterprise-wide. Seventy-four percent of leaders wouldn’t consider reallocating more than 10% of their workforce, and nearly half review budget and talent allocation only annually or less. McKinsey calls the result “peanut buttering” — spreading capital, budget and talent so evenly that nothing gets the concentration required to win. And whilst most organisations say they want higher performance, fewer than 25% achieve sustained impact — though those that invest in both people and performance are 4.3 times more likely to sustain top-tier results. Tellingly, only 20% of leaders believe non-financial rewards meaningfully boost performance, which is to say most organisations remain profoundly underinvested in human motivation — the very fuel innovation runs on.
Put those numbers together and the diagnosis is uncomfortable but clear: leaders know innovation capability is the unlock, yet they run allocation, performance and motivation systems designed for stability, incrementalism and control.
A CEO’s Agenda for the Second Half of 2026
So what should leaders actually do with this report, with six months of the year remaining? My guidance to the CEOs and executive teams I advise comes down to five moves.
- Name the owner and the ambition for AI-enabled transformation — this week, not this quarter. One in six organisations has nobody at C-level owning AI adoption. If value creation from AI is genuinely strategic, it needs an owner, an ambition and an operating rhythm, and it needs the CEO visibly championing it. Remember the ratio: $1 on technology, $5 on people.
- Cascade your must-win battles until the middle can repeat them back. Clarity that stops at the executive floor isn’t clarity; it’s privilege. Test it honestly — ask your middle managers what the organisation must win and listen to what comes back. Then equip that layer to drive, because they are your multiplier.
- Audit the conditions, not the intentions. Time pressure, fear of failure, hierarchy and ambiguity are the four barriers your leaders say prevent psychological safety — and all four are created, or removed, by executive behaviour. Innovation-led growth is impossible in an organisation that punishes intelligent risk.
- Move real resources to the priorities you claim to have. If your reallocation is under 10% and your review cycle is annual, your strategy is an aspiration, not a decision. The report is blunt: leaders need the vision to innovate, the discipline to prioritise and the courage to divest.
- Build leadership capability on live problems, not in classrooms. Take the report’s inside-out message seriously, but turn reflection into action by developing your executives and managers against the real challenges in front of them — so the business gets problems solved whilst its leaders learn to lead for innovation. Use your offsites for what they’re genuinely good for: the thinking time where futures get created.
The Window Is Still Open — Just
McKinsey closes its report by observing that 2026 and beyond will be “testing times — but rewarding ones for those who get it right.” I’d sharpen that. The organisations that thrive from here won’t be the ones that read the report and nodded. They’ll be the ones whose CEOs treated it as a mirror — who accepted that the 72% unreadiness figure, the 81% AI value gap and the 27% clarity collapse in the middle are not commentary on the market but on leadership.
Half of 2026 is gone. The tectonic forces aren’t waiting for your next planning cycle, and “business as change” is no longer a metaphor — it’s the operating environment. The leaders their organisations actually need are the ones who spend the next six months building clarity, capability, and the culture for innovation, at pace.
The rest will spend 2027 explaining why they didn’t.
About the Author
Cris Beswick is a global thought leader on innovation, a strategic advisor on innovation strategy, leadership and culture, and co-author of Building a Culture of Innovation. A former CEO, he has spent over two decades advising CEOs, executive teams and governments worldwide on the gaps this report exposes: helping executives lead for innovation and build the conditions in which the middle of the organisation solves complex problems at pace — capability built on live business challenges, not classroom programmes. His guiding principle for the AI era: technology amplifies whatever capability already exists, so build the capability first.