52 companies dropped off the Fortune 500 list in the last decade. In 2016, 15 companies lost their places on the Fortune 500. These companies failed to understand that we are living in an era of constant change. We find that, more and more, the companies that thrive are the those that are able to harness disruption and reposition themselves to create a new future through a strategic transformation. This means that they are able to adapt their core business to changing market conditions while also creating new growth in the form of products, services, or business models. This post will explore the top 10 IT companies that have been able to achieve this feat.
Innosight has put together a list of the 10 global companies that have achieved the highest impact business transformations over the past 10 years – The Transformation 10. The metrics that were used to rank these companies were new growth – how successful has the company been at creating new products, services, and business models, core repositioning – how effectively has the company adapted its legacy business to change and disruption, giving it new life, and financial performance – how have the company’s growth, profits, and stock performance compared to a relevant benchmark (NASDAQ for a tech company, or DAD Index for a German firm) during the transformation.
Amazon: The online retail giant developed technology to streamline internal operations, then turned it into a highly profitable web services business.
Netflix: The video entertainment company shifted the dimensions of its business and delivery models while becoming a top original content provider
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.
Apple: Apple repositioned the Mac platform as the hub for a new constellation of devices while building the world’s largest digital content ecosystem.
Aetna: While redefining the model of selling health insurance through employers, Aetna now sells care management directly to consumers and healthcare to IT providers.
Adobe: Adobe moved beyond its core in packaged software for document and creation into cloud services for the digital marketing of content.
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.
Microsoft: The software giant transcended the business model of packaged software to one of selling cloud services and AI.
Danone: The diversified food and drinks business has transformed by refocusing its mission on health and nutrition.
ThyssenKrupp: One of the world’s largest steel producers reduced reliance on commoditized manufacturing and transformed into a high-value industrial technology solutions company.
There are a few key insights pointed out by Innosight to keep in mind. The list is topped by companies headed by visionary founders with no prior experience in their industries. Those who weren’t seemed to rise to the position after running an internal new growth venture that inspired a plan for change. For example, Priceline’s CEO Glenn Fogle bought startups that were opposite of the company’s merchant model at the time. Off the purchase of those startups, he launched the company’s Bookings.com unit, which is now responsible for their over $80 billion stock market capitalization.
The transformation of the companies on this list also shows that transformation involves two separate journeys. Leaders today need to depart from the idea that change is one big event. This list shows that companies need to reposition their core business to thrive in a disrupted market, while also launching a new growth venture. Adobe’s CEO Shantanu Narayen did exactly that. In 2008, he launched Adobe in two directions: repositioning their software platforms as cloud-based subscription services and building a new Marketing Cloud service as a separate business unit.
Aetna CEO Mark Bertolini showed us that transformation can only take root if you are constantly telling the story of your future. While steering new growth efforts toward value-based care, he developed a narrative about building new skills to help consumers make better health choices, resulting in a new, yet still financially successful, organizational structure.
One of my favorite CEOs Reed Hastings, CEO of Netflix, showed the importance of developing a roadmap before disruption takes hold. He anticipated that there would be a disruptive shift in how people watched and rented their movies/ TV shows. In 2007, he laid the groundwork for online streaming and building on its success, disrupted network television with its own catalog of original binge-worthy on-demand content.
The information gathered from these companies’ transformation journeys can help map a path for your own business’ transformation. If you need help with your own transformation journey or would like more information on aspects of successful transformation, send us an email!