Innovation. Disruption. Transformation.
These are the buzzwords of today’s business climate, and for good reason: it’s simply no longer enough to be the biggest or the best in your market. In fact, it might just be meaningless.
We’re in an era of constant, relentless change. The companies that not just survive, but thrive in their markets are those that embrace the chaos and figure out how to make it work for them. The new business imperative is strategic transformation: successfully adapting a core business to changing conditions, while at the same time creating new products, services or business models.
But with huge opportunity comes huge challenges. It’s one thing to know what you need to do; knowing how to do it is another thing entirely. And for many companies, it can be difficult to know the difference between change - executing a finite shift in the way things work - and transformation - reinventing the company based on a vision of the future. So what does strategic transformation really look like? And, most importantly, how do we actually do transformation successfully?
Innosight decided to find out. They ranked the 10 global companies that have achieved the highest impact business transformations over the past 10 years - the Transformational 10.
Their analysis revealed that to transform your company, you don't need to be a tech giant - you just need a few common characteristics.
#1: Amazon (tie)
The online retail giant developed technology to streamline internal operations, then turned it into a highly profitable web services business.
#1: Netflix (tie)
The video entertainment company shifted dramatically along the dimensions of its business and delivery models while becoming a top original content provider.
#3: Priceline
In becoming the world’s most valuable travel company, Priceline pursued radically different business models including the “long tail” of reservations at properties beyond the major hotels.
#4: Apple
Apple repositioned the Mac platform as the hub for a new constellation of devices while building the world’s largest digital content ecosystem.
#5: Aetna
While redefining the model of selling health insurance through employers, Aetna now sells care management directly to consumers and healthcare IT to providers.
#6: Adobe
Adobe moved beyond its core in packaged software for document creation into cloud services for the digital marketing of content.
#7: DaVita
The kidney dialysis-center leader now also operates physician’s offices and partners with other providers to manage the total care of patients with kidney problems.
#8: Microsoft
The software giant transcended the business model of packaged software to one of selling cloud services and AI.
#9: Danone
The diversified food and drinks business has transformed by refocusing its mission on health and nutrition.
#10: Thyssenkrupp
One of the world’s largest steel producers reduced reliance on commoditized manufacturing and transformed into a high-value industrial technology solutions company.
So what do all of these transformational companies have in common?
At the least, a transformational leader at the helm But there's more. Innosight’s research found 5 patterns that serve as important takeaway lessons around strategy, culture, innovation, and leadership.
Lesson #1: Transformational CEOs tend to be “insider outsiders”
The list is topped by companies headed by visionary founders with no prior experience in their industries. The others tended to rise to the position after running an internal new growth venture that inspired a proactive plan for change.
Lesson #1 in action: Priceline CEO Glenn Fogle
As head of strategy and M&A, Fogle bought three startups that were opposite to Priceline's "merchant model". Building on those, he launched their Bookings.com unit, which now accounts for the majority of their over $80 billion stock market capitalization.
Lesson #2: Transformation involves two separate journeys
Leaders often look at change as one monolithic event, under which the old company eventually begins a new company. Instead, they should seek to reposition their core business to thrive in a disrupted market, while also launching a new growth venture.
Lesson #2 in action: Adobe CEO Shantanu Narayen
Upon becoming CEO in 2008, he launched Adobe in two directions: repositioning their core software platforms as cloud-based subscription services, and building a new Marketing Cloud service as a separate business unit.
Lesson #3: You cannot execute transformation without highly engaged employees
Organizations must find a way to bring the correct set of values to life. Whatever the strategic transformation plan may be, organizations won’t be able to carry it out without building a culture based around a higher purpose.
Lesson #3 in action: Microsoft CEO Satya Nadella
Known for listening, learning, and analyzing, Nadella has been credited with transforming Microsoft's culture from type-A, sales-based hustling to more inquisitive, and creating an environment of exploration and empowerment.
Lesson #4: Transformation can only take root if you are constantly telling the story of your future
Leaders must be tireless about communicating the vision they see for the organization. Tell different aspects of the same transformation narrative to different stakeholders, from the leadership team to customers to investors.
Lesson #4 in action: Aetna CEO Mark Bertolini
While steering new growth efforts toward value-based care, Bertolini developed a narrative about building new skills to help consumers make better health choices—resulting in a new organization that can make money doing so.
Lesson #5: Develop a road map before disruption takes hold
Many of the most famously disrupted companies ran into their deepest troubles a decade or more after some of the first warning signs appeared. Transformation leaders spot fault lines that help shape proactive plans for moving ahead.
Lesson#5 in action: Netflix CEO Reed Hastings
Fearing a new wave of disruption, Hastings laid the groundwork for online streaming in 2007 and, building on its success, disrupted network television with its own catalogue of original binge-worthy on-demand content.
Whever you are in your transformation journey, take a moment to reflect on these lessons. Where's the biggest gap? What can you do to close it?