Many executives focused on growth assume that companies can sustain strong top- and bottom-line performance over long periods of time. McKinsey research, however, confirms that this kind of success is exceedingly rare and suggests that its pursuit can lead executives to set unrealistic expectations. Indeed, a study of large global companies finds that less than 1 percent of them outperformed their competitors on both revenue growth and profitability over a decade.
To identify these top performers, we used McKinsey’s proprietary database of more than 20,000 companies around the world, focusing on the 1,077 with revenues exceeding $5 billion in 2004.1 The study examined their performance on two fundamental indicators of sustained competitive advantage—revenue growth and profitability—over the 11-year period from 1994 to 2004.2 It differed from similar analyses in that we did not use parametric methods, such as averages, medians, or regressions. These methodologies force analysts to start with the assumption that the performance of companies is normally distributed (in a bell-shaped curve), when it often isn’t. Moreover, parametric methods can be misleading because averages obscure the performance of outliers (in this case, high-performing companies) and can prompt researchers to misidentify or overlook superior performance.
Instead, we undertook...