Disruption Is The New Constant: How Do You Reinvent Your Business For Success?
Disruption is the new constant, and transformation is the key to success. Moving from laggards to leaders takes a bold strategic shift towards reinvention in the era of AI and major market shifts. Business transformation has become the strategy for the best performing companies. Surviving and striving for sustained success by growing their vision, committing to a journey of change and adopting purpose-driven missions.
Transformation is inevitable- according to PwC “40% of global CEOs don’t think their businesses will be economically viable in ten years if they continue on their current path”
The process of transformation, while often challenging and resource-intensive, offers substantial rewards for businesses. When executed successfully, reinventions and major transformations can lead to market leadership, market leading sustainable growth and significant economic value.
The examples and case stories highlighted in this chapter illustrate the transformative power of strategic leadership and the importance of break-through innovation and market disruption. As businesses continue to navigate the complexities of a new reality -the strategic transformation will remain a critical determinant of success.
Why Transformation is the Best Way to Business Success
Business transformation is a holistic, strategic approach that organizations undertake to radically change their business models, operations, and overall direction. The impact is achieving significant improvements in performance, competitiveness and ultimately economic value creation. Transformation has proven to be not just an option but a necessity for survival and growth.
Transformation as a key to business success is backed by compelling economic data.
A study by McKinsey & Company found that companies that actively pursue digital transformation achieve, on average, a 20–30% increase in customer satisfaction and economic gains ranging from 20% to 50% in EBITDA.
Another report by the World Economic Forum estimated that digital transformation could generate $100 trillion in value for business and society over the next decade. These figures underscore the significant economic benefits and enhanced market leadership resulting from strategic business transformation.
Creating economic value in a profitable transformation is on the top of the strategic agenda in this decade. In the dynamic world of venture-backed startups, survival hinges on the ability to refit your strategy and transform for profits and long-term growth. In 2023, the venture-backed startup landscape faced unprecedented challenges, with many companies struggling to maintain growth and meet investor expectations. This reality is illustrated by the case of Pitch, a collaborative presentation software company. Faced with sky-high expectations and an unsustainable growth trajectory, Pitch made a bold decision to reinvent itself. By stepping down as CEO, Christian Reber enabled a leadership transition that saw co-founder and CTO Adam Renklint take the lead. Concurrently, the company laid off two-thirds of its workforce and shifted its focus from hyper-growth fueled by venture funding to a strategy centered on achieving profitability and organic growth. This strategic pivot not only preserved the company’s viability but also realigned its objectives with sustainable, long-term success. The example of Pitch underscores that in times of crisis, reinvention and transformation are not just survival tactics — they are pathways to economic and market success.
The world biggest transformers are also the best performers. Which is illustrated by the HBR 2019 top 20 Transformation companies ranked. These S&P500 and ForbesGlobal 2000 companies are the highest in growth transformation measured in new business share of overall revenues in correlation to revenue and stock CAGR.
These examples highlight how transformation fuels growth, competitiveness, and long-term success. Number one on the list is Netflix which went through a transformational shift from digital content distribution to producing original content. Their revenue tripled, profits multiplied 32-fold, and stock CAGR increased 57% annually.
Transformation as the best pathway to business success is evidenced by numerous examples across industries. For instance, Amazon’s transformative approach from the traditional bookstore to a global e-commerce and cloud computing giant showcases how embracing innovation and market adaptation leads to immense economic value creation and sustained category leadership.
Tencent in China went through a transformation expanding into fintech, transportation, and other digital services, achieved 25% of revenue from new growth areas and became the first Asian company to surpass $500 billion in market valuation.
In Denmark, Ørsted’s transformation is a powerful example of how a company can successfully navigate a financial crisis by fundamentally rethinking its business model and embracing a higher-purpose mission. In 2012 the Danish Oil and Natural Gas (DONG) faced a crisis with plummeting natural gas prices and a negative credit rating. Under the leadership of Henrik Poulsen, the company underwent a radical transformation, rebranding as Ørsted and shifting its focus from fossil fuels to renewable energy. This strategic pivot involved significant investments in offshore wind farms and a comprehensive cost-out program. The result was a remarkable turnaround, positioning Ørsted as the world’s leading offshore wind company and a model for sustainable energy transformation. By focusing on renewable energy and combating climate change, Ørsted not only recovered financially but also positioned itself as a global leader in green energy. This strategic transformation highlights the importance of visionary leadership and a commitment to sustainable new growth. Ørsted also reduced the cost of offshore wind by more than 60% and became the world’s largest offshore wind company.
The Imperative for Transformation
Transformation is not merely a buzzword; it is an imperative for survival and growth. Companies that embrace transformation can reposition themselves, create new growth avenues, and stay ahead of competitors.
In the new age of AI , disruption is constant, and transformation is the key to success. According to the Accenture Pulse of Change: 2024 Index, many organizations are eager to reinvent themselves. Disruption is up with a staggering 33% year-on-year. But only a small number have truly excelled. These “Reinventors,” comprising just 9% of companies, have built the capability for continuous reinvention, making swift progress in executing their strategies and redefining performance with technology at the core. Notably, among the largest companies with revenues over US$50 billion, the number of Reinventors has quadrupled in the past year, underscoring the growing imperative for ongoing transformation.
The key drivers of transformation include:
Reinvention Leadership. Reinvention is the ambitious path for companies aiming to shift from laggards to leaders. This strategic transformation focuses on redefining where and how to compete for market leadership, moving beyond incremental changes to adopting entirely new business models. It requires not only a shift in strategy but also significant organizational and cultural readiness for change. Companies must transition from a short-term to a long-term management perspective, fostering an environment that embraces continuous innovation and adaptability. By committing to this comprehensive approach, businesses can ensure sustained success, staying ahead of the curve and positioning themselves at the forefront of their industries. This transformation is not just about keeping up but about setting new standards and leading the market.
Technological Advancements: Innovations in technology compel businesses to evolve. The rise of digital platforms, AI, and automation necessitates a rethinking of business models and processes. Under CEO Steve Balmer and later Satya Nadella, Microsoft undertook a major transformation, pivoting from its traditional software business to a cloud-first strategy followed by the AI transformation. The company’s intelligent cloud segment, led by Azure, has been the centerpiece of this transformation. This shift has revitalized Microsoft’s growth, with cloud services now representing a substantial portion of its revenue. Microsoft’s transformation showcases the power of strategic leadership and a clear vision in driving business success with a +10x stock value creation.
Innovation disruptors: Disruptive innovators drive companies to adapt or risk obsolescence. Transformations enable businesses to pivot in response to these changes. Kodak, once a leader in film photography, was disrupted by the advent of digital imaging and smartphone disruptors. Despite pioneering the first digital camera in 1975, Kodak was slow to embrace the digital revolution, fearing it would cannibalize its lucrative film business. Meanwhile, competitors like Sony, Canon and Apple rapidly advanced digital technology, offering consumers greater convenience, better quality and new features. As digital cameras and smartphones with high-quality imaging capabilities became mainstream, demand for film plummeted. Kodak’s failure to pivot and fully commit to digital transformation led to its bankruptcy in 2012. This disruption illustrates how embracing innovation is crucial for survival, as businesses must adapt to remain competitive.
Customer Expectations: Enhancing the customer journey through digital touchpoints and personalized interactions. Today’s consumers demand more personalized, efficient, and innovative products and services. Transformation helps businesses meet and exceed these expectations. Singapore’s DBS Group transformed from a traditional bank to a digital banking leader. By embracing digital platforms, DBS streamlined its operations and enhanced customer experience. The bank’s digital transformation has been so successful that digital customers now generate twice the income of traditional ones. This shift has driven significant growth and positioned DBS as a model for digital banking transformation..
Social behavioral change: Environmental, Social, and Governance (ESG) criteria are transforming the way companies operate and how society views corporate responsibility. ESG factors are increasingly integrated into business strategies, investment decisions, and consumer preferences, leading to significant changes in corporate behavior and societal expectations. Unilever, a global consumer goods company, embarked on a transformative journey in 2010 under the leadership of then-CEO Paul Polman to integrate the ESG principles deeply into its business strategy. Recognizing the growing consumer demand for sustainable products and responsible corporate behavior. Unilever aimed to lead in sustainability while driving long-term growth and the commitment to ESG principles translated into strong financial performance. The company experienced major growth in market share, particularly among environmentally and socially conscious consumers. Sustainable product lines, such as those under the brands Dove and Ben & Jerry’s, saw significant sales increases
Digital Transformation: involves integrating digital technology into all areas of a business, fundamentally changing how companies operate and deliver value to customers. Siemens’ Vision 2020 initiative marked a significant transformation, focusing on digitalization and the Internet of Things (IoT). The company reoriented its business towards digital industries and smart infrastructure, divesting from its traditional core businesses such as oil and gas. This transformation has enabled Siemens to leverage new technologies, improve efficiency, and create innovative solutions for its customers.
AI transformation is a subset of digital transformation that focuses on the integration of artificial intelligence technologies to automate processes, gain insights, and enhance decision-making. Reducing manual tasks and increasing efficiency through AI-powered automation. Delivering personalized experiences and recommendations to customers and enabling the creation of new products and services that leverage AI capabilities.
The Power of Business Transformation
Business transformation is a strategic multifaceted, holistic and comprehensive process that enables organizations to take the lead in changing market conditions, leverage new technologies and create sustainable competitive advantages. Even disrupt the whole category by new innovation.
The business priority becomes a strategy to be developing new-growth businesses, launching new product categories, embracing digital transformation, adopting disruptive business models. The goal is creating new profitable revenue streams.
Companies have been proven to achieve significant economic value, improvements in performance and long-term competitive success. As the business landscape continues to evolve, the ability to transform will remain a critical determinant of success in the continuous battle of survival of the strategic fittest.
Business transformation involves rethinking, reinventing and reshaping an organization’s structure, processes and strategy to align with the changing market dynamics, technological advancements, and customer behaviors.
It is a comprehensive, long-term initiative that goes beyond incremental improvements to bring about profound changes that redefine the business’s core functions and objectives. The goal is to enhance the organization’s ability to innovate, compete, and thrive in a changing and complex environment to take the lead on the next generation in their industry.
As a framework for strategic approach to business transformation — here are 5 key strategies to explore:
#1 Innovation of New Product Categories and Revenue Streams Outside Core Business
Innovation is key to survival. Creative destruction is the dismantling of long-standing practices in order to make way for innovation and is seen as a driving force of economic value creation and capital success.
Innovation is pawing the way to new revenue streams outside the core business. This is a strategic imperative for long-term sustainability and growth generating the best possible shareholder value, which is the ultimate measures of innovation and transformation. This approach involves identifying and capitalizing on new opportunities that complement or extend the company’s existing capabilities.
Over the last 50 years, Disney has strategically navigated both divergence and convergence by expanding beyond its original core business of animated movies into a multifaceted entertainment empire. Starting with theme parks in the 1950s, Disney ventured into television networks with ABC and ESPN, live-action films, merchandise and continually diversifying its portfolio. In recent decades, the company has embraced digital transformation with the launch of Disney+, entered the media streaming market, and acquired major franchises like Marvel, Star Wars, and Pixar. These strategic moves have enabled Disney to integrate its content across various platforms, creating a cohesive and expansive entertainment ecosystem while maintaining a strong foothold in its foundational animated film industry.
Identifying new revenue streams requires a forward-looking approach, market research, and a willingness to experiment with new business models. Companies must continuously explore new markets, technologies, and customer needs to uncover potential revenue opportunities.
Launching new product categories outside the core business is a critical component of business transformation. This strategic approach allows companies to tap into new customer segments, address unmet needs, and create additional revenue streams. Category leadership is goal for the intruding new innovators.
Take Apple as an example, who have constantly converted into new categories to take leadership starting with its computers, iPod and then smartphones, successfully ventured into the wearable technology market with products like the Apple Watch and AirPods. These new product categories have significantly contributed to Apple’s revenue and have established the company as a major player in the wearable tech industry. Apple’s continuous innovation in product design and technology has cemented its position as a market leader, driving significant revenue growth, profits and customer loyalty.
Successful diversification into new product categories requires a thorough market analysis, strong innovation capabilities and effective marketing strategies. Companies must leverage their existing brand strength and customer loyalty while ensuring that the new products align with their overall vision, core competencies and values.
#2 Digital Transformation of Key Processes and Customer Engagements
Digital transformation involves the integration of digital technologies into all areas of a business, fundamentally changing how the organization operates and delivers value to customers. This transformation is essential for enhancing efficiency, improving customer experiences, and staying competitive in a digital-first world.
Starbucks has undergone a digital transformation by integrating mobile ordering, digital payment systems, and personalized customer engagement through its loyalty program. The Starbucks app enables customers to order and pay ahead, earn rewards, and receive personalized offers, enhancing convenience and customer satisfaction.
Digital transformation requires a strategic approach that encompasses technology adoption, process optimization, and cultural change. Companies must invest in digital infrastructure, data analytics, and cybersecurity while fostering a culture of innovation and agility.
#3 Disruptive Business Models
Adopting disruptive business models is a powerful way to transform an organization and achieve significant competitive advantage. Disruption involves challenging and redefining the existing industry norms to create new market opportunities and value propositions.
Uber’s Ride-Sharing Model revolutionized the transportation industry with its ride-sharing model, disrupting traditional taxi services. By leveraging a digital platform, GPS technology, and a gig economy workforce, Uber created a convenient, cost-effective, and scalable transportation solution that has reshaped urban mobility.
To successfully implement disruptive business models, companies must embrace risk-taking, think creatively, and be prepared to challenge the status quo. It is crucial to understand customer pain points and leverage technology to offer innovative solutions that address these challenges.
Developing new businesses categories requires a deep understanding of customer behaivours, emerging market trends and technological advancements. Companies must be willing to invest in research and development, form strategic partnerships, and allocate resources to nurture these new ventures until they become viable and profitable.
#4 From Transaction to Subscription
Transitioning from a transaction-based to a subscription-based business model is a transformative strategy that provides predictable revenue, enhances customer loyalty, and improves cash flow.
The software industry to a big degree went through a full transformation from selling licenses to subscriptions. Adobe’s transformation from selling perpetual software licenses to a subscription-based model is a textbook example of successful business reinvention. This strategic shift began in 2012 and involved transitioning its core products, such as Photoshop and Illustrator, to the cloud-based Adobe Creative Cloud. The move to a subscription model provided Adobe with a steady revenue stream and closer customer engagement. As a result, Adobe’s revenue and stock price have seen substantial growth, with its digital experience segment becoming a significant revenue driver.
Moving to a subscription model requires a comprehensive understanding of customer value, pricing strategies, and retention mechanisms. Companies must focus on delivering ongoing value, enhancing customer experiences, and building long-term relationships to succeed in a subscription-based model.
#5 From Manual Business Processes to Full Automation
Automating manual processes is a critical component of business transformation that enhances efficiency, reduces costs, and minimizes errors. Automation leverages technologies such as AI, machine learning, and robotics to streamline operations and improve productivity.
Automation happens across both consumer behaviors and industrial automation: Siemens has embraced industrial automation to optimize manufacturing processes, enhance productivity, and reduce operational costs. By integrating AI, IoT, and robotics, Siemens has transformed its manufacturing operations and set a benchmark for industry 4.0.
Implementing automation requires a strategic approach that includes assessing current processes, identifying automation opportunities, and investing in the right technologies. Companies must also focus on workforce culture, skills and change management to ensure a smooth transition to automated operations.
Transformation is key to future success
The examples and case stories highlighted in this chapter underscore the critical importance of transformation in achieving business success. Whether through digital and AI transformations or strategic shifts towards sustainability and innovation, companies that embrace change and align their strategies with a higher purpose are better positioned to thrive in an ever-evolving landscape. By adopting proven transformation frameworks and fostering a culture of continuous improvement, organizations can navigate the challenges of the modern business environment and create lasting value for all stakeholders.
