Investment Rating - The report does not explicitly provide an investment rating for Rolls-Royce or the industry [1][2][3] Core Viewpoints - Rolls-Royce has undergone a significant transformation under CEO Tufan Erginbilgiç, with profits more than doubling and the share price surging [1] - The transformation focuses on creating a high-performing, competitive, resilient, and growing business, moving beyond mere restructuring to a more ambitious transformation [2][3] - The CEO emphasizes the importance of culture, strategy, performance management, and execution intensity as key pillars for successful transformation [3][4][6] - Rolls-Royce has implemented 17 strategic initiatives, with a focus on granularity, alignment, and engagement across the organization [7][8] - The company has improved its resilience, with the ratio of total cash cost to gross margin reduced from 0.9 in 2019 to less than 0.5, aiming for 0.4 [11][12] Strategy and Execution - The CEO advocates for a chaotic and inclusive strategy development process, involving 500 key people to ensure alignment and ownership [6] - Strategy is translated into clear initiatives and cascaded down the organization, making it relevant and actionable for employees [7] - Execution is relentless, with a focus on intensity, pace, and rigor, while maintaining clarity and alignment [4][8] Leadership and Culture - The CEO prioritizes assembling a leadership team of individuals who are good business and people leaders, willing to learn, and passionate about success [10] - Culture change is driven by consistent expectations, reinforcement, and performance management, with a focus on purpose and behaviors [13][14][15] - The company's new purpose statement emphasizes powering, protecting, and connecting people everywhere, with behaviors centered on safety, simplicity, and making a difference [15][16] Future Outlook - Rolls-Royce is focused on becoming an execution machine, with further work needed to embed the performance culture and achieve full alignment [19] - The company sees growth opportunities in small modular reactors (SMRs) and microreactors, while continuing to strengthen its competitive position in safety, operational effectiveness, and customer service [19] - The CEO views Rolls-Royce's history and iconic brand as assets for talent attraction and believes the transformation effort is worthwhile [20]

Industry Investment Rating - Brazil has a significant decarbonization opportunity, estimated to add $100 billion to GDP and create 6.4 million jobs by 2030 [3] Core Viewpoints - Brazil's natural endowments position it as a key player in global decarbonization efforts, with potential to export low-carbon materials and services [1][3] - The country could lead in renewable energy, bio-based solutions, and natural climate solutions, contributing to global emission reductions [3][4][17] Energy Solutions Portfolio - Brazil's renewable energy potential, including wind, solar, and biomass, could drive decarbonization and create a $90 billion market by 2040 [5][6] - Wind and solar energy costs are expected to decrease by 27% and 46% respectively by 2040, potentially becoming the main power sources [6] - Green hydrogen production in Brazil is projected to reach $2.50 per kilogram by 2030, making it globally competitive [7] Bio-based Solutions - Brazil could lead in sustainable biofuels, with a market opportunity of $40 billion by 2040, driven by second-generation ethanol and sustainable aviation fuel [8] - The biocarbon market could reach $3-4 billion by 2030, supporting green pig iron production with 90% lower emissions [9] - Biomethane production could exceed $15 billion by 2040, utilizing waste and byproducts [9] Energy and Resource Efficiency - Brazil's industrial energy intensity increased by 2% annually from 2005 to 2021, highlighting the need for efficiency improvements [11][12] - Heavy industries, representing 70% of the industrial segment, could benefit from material substitution and advanced energy management systems [14] - Recycling rates in Brazil are low, with only 4% of municipal solid waste recycled, compared to over 30% in the EU, India, and the US [15] Natural Climate Solutions - Brazil has 15% of the global potential for low-cost natural climate solutions, with opportunities in carbon removal certificates and deforestation prevention [17][18] - Land use and agriculture sectors could contribute to emissions reductions of 2.9-3.3 GtCO2e by 2050 through restoration and improved practices [19][21] - Brazil's CO2 sequestration potential could generate $16-26 billion annually and create 880,000 jobs through restoration and afforestation projects [24] Economic Impact - A "green powerhouse" scenario could boost Brazil's GDP by $100 billion by 2050 and create 6.4 million jobs, with a carbon price of $35 per metric ton of CO2e [25] - Brazil could eliminate 80% of emissions with a carbon price of $15 per metric ton and 95% with $20 per metric ton, significantly lower than other major emitters [24]

Investment Rating - The report does not provide a specific investment rating for the industry Core Insights - The leadership landscape has evolved significantly, with leaders now facing double the critical issues compared to a decade ago, necessitating a shift in leadership development approaches [2][3] - Six essential leadership traits identified for success in the current environment include positive energy, servant leadership, continuous learning, humility, grit, and resilience [2][4] - Organizations are encouraged to treat leadership development as a core capability to enhance resilience and adaptability to disruptions [2][4] Summary by Sections Leadership Traits - Positive energy, personal balance, and inspiration are crucial for leaders to maintain their effectiveness [2] - Servant leadership focuses on the success of the team and organization rather than individual accolades [2] - Continuous learning and a humble mindset are vital for leaders to adapt and grow [2][4] Best Practices in Leadership - Leaders must engage rigorously with stakeholders and foster constructive dialogue to differentiate their organizations [5] - Building an operating model that prioritizes speed and efficiency is essential for modern leadership [5] - Emphasizing a culture of trust is critical, with leaders needing to analyze and address trust dynamics within their teams [6] Leadership Development Strategies - High-potential managers should be placed in challenging situations to foster growth and resilience [7] - Personalized immersion sessions led by senior executives can enhance leadership capabilities at scale [8] - Feedback mechanisms and self-driven learning journeys are essential for developing new leaders [10][12] The Leadership Factory Model - The concept of a leadership factory involves creating environments where leaders can learn from one another and develop essential skills [6][12] - CEOs are encouraged to act as chief talent officers, identifying and nurturing high-potential leaders within their organizations [11][12] - Performance management systems should align with 21st-century leadership attributes to ensure accountability and empowerment [12]

Leap by McKinsey How CEOs are turning corporate venture building into outsize growth Companies are creating meaningful growth by developing new ventures. Those with the most mature capabilities are growing quickly and can show the way for companies that are just beginning. This article is a collaborative effort by Belkis Vasquez-McCall, Daniel Aminetzah, Markus Berger-de León, and Paul Jenkins, with Shaun Collins, representing views from Leap by McKinsey and McKinsey Digital. October 2024 Amid geopolitical ...

McKinsey & Company Strategy & Corporate Finance Practice Child and adolescent mental health as a proving ground for innovation Although one in five people will experience a mental health malady as a child, effective diagnosis and treatment often remain elusive. The Child Mind Institute seeks to bring innovation to the problem. October 2024 | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Industry Overview - The global payments industry handled 3.4 trillion transactions in 2023, accounting for $1.8 quadrillion in value and generating $2.4 trillion in revenue [6] - Payments revenue grew 7% annually from 2018 to 2023, driven by transaction digitization and higher interest rates, but growth is expected to slow to 5% annually through 2028 [6] - Net interest income contributes 47% of total payments revenue, up 3 percentage points from 2021 [8] - Asia-Pacific accounts for nearly half of global payments revenue, with commercial revenues increasing from 60% to 62% of total payments revenue from 2018 to 2023 [11][12] Key Trends Shaping the Industry 1. **Decline of Cash**: Global cash usage is at 80% of 2019 levels and declining 4% annually, with $26 trillion still transacted in cash [16] - Instant payments are rapidly replacing cash in developing markets like India, Malaysia, and Indonesia [18] - In card-dominated markets like the US, cash transactions represent just 5% of consumer payment value [18] 2. **Rise of Instant Payments**: Instant payments are displacing other methods, with two types of markets emerging - card-entrenched (e.g., US, UK) and cash-heavy (e.g., Brazil, India) [19][20] - In the EU, instant payment transactions are expected to grow from 3 billion to 30 billion by 2028, a 50% annual growth rate [21] 3. **Digital Public Infrastructure (DPI)**: DPI initiatives in markets like Brazil, Estonia, and India are catalyzing digital payments through digital ID systems and interoperability [22][23] - India's UPI has been successfully launched in 10 countries, including Singapore and the UAE [25] 4. **Platform Aggregation**: Commerce is aggregating onto platforms like Shopify and Amazon, which process 30% of global consumer purchases [26] - Vertical-specific software solutions captured over 50% of SME spending in the US in 2023 [27] 5. **Transaction Banking Evolution**: Transaction banking is becoming a differentiator for leading institutions, with banks like Citi and HSBC emphasizing these units [31] - Commercial customers are demanding intuitive interfaces and faster integration of bank and corporate systems [31] 6. **Central Bank Digital Currencies (CBDCs)**: Over 90% of central banks are pursuing CBDC projects, with more than 30 pilots launched [33] - CBDCs are expected to set the baseline for digital currency functionality and cost [33] Growth Opportunities - **Cross-Border Payments**: Initiatives like Project Nexus are connecting domestic instant-payment schemes across countries, with 23% of UK SMEs using nonbank providers for cross-border payments [36][38] - **Treasury Management**: The digitization of CFO offices is accelerating, with fintechs like Taulia and C2FO scaling their offerings [39] - **Payouts and Payroll**: Instant payments are enhancing gig economy worker satisfaction and customer loyalty through immediate compensation and refunds [42][43] Challenges and Investments - **Fraud Prevention**: Fraud in online commerce is rising twice as fast as transaction volume growth, with global losses from payment card fraud projected to reach $400 billion over the next decade [44][45] - **Infrastructure Modernization**: Payments players must invest in real-time infrastructure and technology to remain compliant and competitive, with instant payments requiring 24/7/365 availability and enhanced fraud prevention [48][49] - **Regulatory Pressure**: Regulators are intensifying demands for faster, more efficient payment processes while maintaining low costs and increasing consumer protections [51][54]

Industry Overview - The global banking industry generated $7 trillion in revenue and $1.1 trillion in net income in 2023, with a return on tangible equity (ROTE) of 11.7% [7] - The industry intermediated $410 trillion in assets globally in 2023 [8] - Banking remains the largest profit-generating sector globally, surpassing the combined net income of the energy and industrials industries at $1.15 trillion [10] - Despite strong performance, the industry faces skepticism with a price-to-book ratio of 0.9, the lowest among all sectors [12] Performance Drivers - Recent performance improvements are largely attributed to rising interest rates, with net interest margins (NIMs) increasing significantly [6][16] - Labor productivity growth in banking has been mixed, despite high tech spending, with US banks showing declining productivity [27][29] - Regulatory changes continue to require significant investment, adding to operational costs [6] - Competition from non-traditional players, such as private credit and fintech, is intensifying in profitable segments like payments and wealth management [6] Structural Challenges - The industry's profitability is uneven across geographies, with countries like the US, UK, and India showing improved performance, while others like Brazil and China face lower ROTEs [18] - Scale economies remain elusive in many markets, with tech spending not translating into proportional productivity gains [27][29] - The cost of funds is expected to rise due to quantitative tightening and increased competition for deposits [32] Winning Strategies - Top-performing banks focus on a combination of structural advantages (segment selection, scale, and geographic positioning) and operational execution (analytics, marketing, and tech) [6][36] - 14% of banks have achieved a price-to-book ratio above 1 and a price-to-earnings ratio above 13, indicating strong value creation [37][38] - Winners often operate in attractive markets with high margins and strong fundamentals, such as Australia, Canada, and India [41][42] - Execution excellence, including granular pricing, risk selection, and customer-centric strategies, drives outperformance [52][53] Future Outlook - If interest rates decline, NIMs could compress by 50-60 basis points, potentially reducing ROTE to near cost of capital levels [17] - Banks will need to reduce costs by 5% annually to maintain current ROTE levels, a significant challenge given historical cost reduction rates of 1% [31] - AI and advanced analytics offer potential for productivity gains, but widespread adoption and impact remain in early stages [27][57] Management as a Differentiator - 10% of banks have improved their ROTE by five or more deciles over the past decade, demonstrating the potential for breakout performance [58][59] - Management teams must focus on structural and executional leverage, including scale, portfolio mix, and operational efficiency, to drive value creation [62] - Successful banks often adopt a "management quotient" that emphasizes agility, talent optimization, and strategic focus to outperform peers [58][62]

McKinsey Agriculture Practice Global Farmer Insights 2024 Farmers are increasingly prioritizing productivity. A shift toward operations-focused solutions underscores a broader trend in agriculture, where efficiency and sustainability are becoming paramount. This article is a collaborative effort by David Fiocco and Vasanth Ganesan, with Ana Luiza Mokodsi, Franziska Alesso, and Otto Gryschek, representing views from McKinsey's Agriculture Practice. October 2024 Farmers worldwide are navigating challenges suc ...

belfercenter.org/homelandsecurity ESSAY HOMELAND SECURITY PROJECT | OCTOBER 2024 Bounce Back Better: Four Keys to Disaster Resilience in U.S. Communities Mihir Mysore, Tim Ward, and Tom Dohrmann, with David Bibo Editors: Juliette Kayyem, Nate Bruggeman Disasters are accelerating in U.S. communities. An analysis of recovery efforts provides insight into actions leaders can take to help affected communities recover faster and emerge stronger. This essay is part of a continuing publication series for the Globa ...

McKinsey Life Sciences Practice Value creation priorities shaping medtech With pandemic-related volatility subsiding, the strategies separating industry leaders from their peers are coming into focus. by Delphine Nain Zurkiya, Gerti Pellumbi, Peter Pfeiffer, and Tommy Reid October 2024 Medtech value creation has been a story of haves and have-nots in recent years. Since 2019, the top value creators have outpaced the S&P 500, while the rest of the industry has struggled (Exhibit 1).1 Industry and capital mar ...