Face the future, don't fear it
How do you thrive in a tough business environment? By growing your core business while scaling new business models — at the same time.
It might take a modern Dickens to do justice to today’s business world. Depending on where you sit, it could look like the best of times – or the worst.
On the one hand, it is certainly a time of unprecedented economic opportunity. Think personalised medicine, where the market is predicted to hit $149bn by 2020, driven by the logarithmic drop in the costs of human genome sequencing. Or consider the impact of artificial intelligence technologies, which have the potential to double the UK’s economic growth rate by 2035.
On the other hand, we see a range of challenges that could discourage the most optimistic business leader. The economy in the UK grew at a rate of only 0.3 per cent in the second quarter of 2017. That’s half the rate of the eurozone.
And disruption – whether the explosive “overnight” variety or the more insidious slow version, marked by sustained compression of profits – is a factor for every industry you care to name.
Add to that our fragmented world, not just politically but also digitally, as chief information and technology officers plan for restrictions on cross-border flows of data and talent.
Taking effective action
In my experience, which is amply confirmed by our research, business leaders understand both the opportunities and the challenges. But acting on them is very tough.
A lot of companies, for example, are investing in digital as a spur to higher growth and profitability. And yet in a study of nearly 1,000 companies, we found that only 6 per cent have achieved both superior digital performance and outperformed peers on financial performance.
So how can we tilt the scales? Our analysis shows the most successful companies are taking an approach we call “rotating to the new”. This requires leaders to strike the right balance between transforming and growing the core business while at the same time scaling new business models.
In brief, here’s how it works:
“Transforming the core”, in simpler language, is a matter, of getting more efficient and thus more profitable. You need to do this to build your capacity to invest in both core and new businesses.
With more cash on hand to invest, you can use some of it to drive essential, incremental growth in the core business. And which investments are critical? Those that help you be more relevant to customers – investments in service experience, digital marketing and analytics, for example, in better online and mobile interactions.
Your investments must also target innovation – in new areas that are growing up next to the core. Partnering with start-ups or establishing “innovation hubs” can be extremely valuable, to ensure that your innovations don’t stall out at the ideas stage. The key here, however, is to get to scale, and quickly. This requires real commitment to changing; the “new” cannot be scaled at the edge of the company.
Timing it right
All of this activity hinges on what we call a “wise pivot”. Think of it this way: certain companies jump too quickly, overinvesting in a new business, damaging their core through reduced focus, and overstretching their finances. Most organisations, however, “rotate to the new” too slowly, staking too much on the core business and putting everything ultimately at risk in the process.
Companies that master the wise pivot understand that both the core and the new business will have to coexist for a period of time, and probably a substantial one at that.
Let’s not sugarcoat this. What I’ve described here in a few words is a complex, difficult process. But massive new opportunities are out there – including many that no novelist, not even a modern Dickens, could ever fully imagine. Take control.
Accenture is strategic partner for this year's CBI Annual Conference: "A World of Opportunities".