Learning from Business Transformation Successes – Keys to Successful Business Transformation – Part 3
“Change is the law of life. And those who look only to the past or present are certain to miss the future.” John F Kennedy
In this post we are continuing the Keys to Successful Business Transformation series. If you missed our previous articles in the series, check out Part 1 and Part 2.
If, as an individual or business leader, you don’t want to miss the future, here’s what you must do. Before everything, get out of the prison of the present. That is when your transformation journey really begins.
The Transformation 20, a report by Innosight spotlights 20 global companies that achieved the highest-impact business transformations over the decade ending 2019.
Criteria for transformation success
The study looked beyond the traditional business ranking metrics like revenue and market value and screened all the companies in the S&P 500 and the Global 2000 by considering three categories of data: new growth, repositioning the core and of course, financials.
- New Growth looked at how successful a company has been at creating new products, services, markets and business models. Their primary for this was the percentage of revenue that can be attributed to new growth areas, outside the core business.
- Repositioning the Core looked at how effectively a company has adapted to market disruptions affecting its core operations and how it has managed to give new life to its legacy business.
- In respect of financials, they asked the following questions: Has the company posted strong financial and stock market performance, or has it turned around its business from losses or slow growth to get back on track? They also looked at the compound annual growth rate (CAGR) probability for revenue and stock price during the transformation period.
Who made it to Transformation Top 20?
- #1 Netflix shifted from DVDs by mail into the leading streaming video content service and is now a top original content provider.
- #2 Adobe moved beyond core in creative & document software into digital experiences, marketing, commerce platforms and analytics, while changing its business model from packaged software to cloud subscriptions.
- #3 Amazon. Not settling with a retail industry disruptor status, the company initiated Amazon Web Services (AWS) in the cloud in order to overcome the cost of infrastructure of their operations. AWS has become a lucrative profit engine. Amazon has also developed an entire ecosystem of products and services around its Prime membership.
The rest of the list includes many familiar names and some others: Tencent, Microsoft, Alibaba, Ørsted, Intuit, Ping An, DBS, AO Smith, Neste, Siemens, Schneider Electric, Cisco, EcoLab, Fuji Film, AIA Group, Dell Technologies and Philips.
If you’ve been involved in any of these, I’d love to hear from you and maybe you can join me on a future episode of the Inside Track – Business Transformation Journeys podcast and share you experience.
Lesson from transformation leaders
The five key lessons we can take away from the transformational leaders are:
- They created a higher-purpose mission.
- They were not afraid to let go of the past.
- They leveraged a core capability to enter new growth markets.
- They seized the digital opportunity via new platforms and business models.
- They recognised that innovation as a strategic capability.
Role of a higher-purpose mission
We have discussed the critical need for visioning of business transformations and will discuss how it effects those within the business who must execute the work of transforming the business.
Letting go of the past
Here’s how some leaders did it:
- Intuit sold off five divisions and product lines including Quicken, their oldest franchise, the original business, and stopped investing in non-cloud platforms.
- A.O. Smith concentrated investments on innovating their commercial and residential water heaters and entered the global water treatment market. The company exited its historic core of auto parts and motors.
- Orsted found a new mission of becoming the world’s greenest energy company by concentrating on offshore wind farming. It exited fossil fuels, the previous core, divesting eight divisions.
- Both Microsoft and Adobe focused on cloud service subscriptions, phasing out the packaged software businesses.
Leveraging the core to grow new markets
People have transferrable skills they can take from job to job, even out of their original fields of expertise. This applies to companies too. Some transformation leaders managed to do this exceedingly well.
- Ping An, a Chinese traditional health insurance company made use of its know-how and relationships and launched Good Doctor, an online healthcare ecosystem platform.
- Neste, a oil and gas refining company from Finland embraced renewable biofuels making use of some of the same industrial processes they acquired over the years in refining oil and gas.
Through building new digital platforms, DBS Bank went from a national bank in Singapore to a regional and then global bank. It also moved from traditional banking services to fintech business models.
Under this category the Transformation Top 20 also discusses how Netflix, AIA Group, Cisco and Ecolab managed to embrace new business models, platforms and innovative new assets.
We will be discussing digital transformation topics in depth in the future.
Innovation as a strategic capability
Recognition of innovation to be a strategic capability that cannot be delegated to an isolated division or business unit is a key lesson we need to learn from transformation leaders.
- Microsoft transformed its culture by going from “a culture of know-it-alls to a culture of learn-it-alls” according to former Chief Marketing Officer Chris Capossela.
- Alibaba uses innovation as a key to everything. This is what has enabled it to expand beyond its original roots as an ecommerce and internet service firm to eneter growth areas in financial service digital platforms and into digital media including AliSports and AliHealth.
- Leveraging strategic capabilities is also at the heart of Amazon.com’s obsession over customers, rather than over their competitors. It is also the key to its foray into the now lucrative AWS operation.
To sum up, the lessons to be learned from transformation leaders over the past decade can be distilled thus:
“Strategic transformation—adapting a core business to disruptive change while also creating new growth around new products, services, or business models—may be the leadership imperative of the 21st century.” – Innosight.com
Its your job to recognize that and act accordingly.
For success in business transformation…
Ask yourself these questions:
- Have we created a higher-purpose mission that we can use to get everyone of our stakeholders on our side, especially our employees and leadership?
- Are we unafraid about letting go of the past?
- Do we know how to leverage our core capabilities to reach for new growth?
- Are we willing to seize digital opportunities via new platforms, ecosystems and business models?
- Do we recognize innovation as a strategic capability?
- Are we ready for an all-of-company approach to transformation?
You can read more about the study in the Harvard Business Review.
Share your thoughts
Is your business is able and willing to answer the above questions? We invite you to share your thoughts in the comments