Amongst many ‘looking back at the decade’ studies, this one is quite fascinating. A study by Innosight of the most transformative businesses of the decade inspired by the need to attach a purpose to business which then drives transformation.
“the Business Roundtable [in August] released a statement signed by 181 CEOs stating that serving shareholders can no longer be the main purpose of a corporation; rather, it needs to be about serving society, through innovation, commitment to a healthy environment and economic opportunity for all.
Our aim was to identify the global companies that have achieved the highest-impact business transformations over the past decade, using the same methodology as our 2017 study. Our research team screened all the firms in the S&P 500 and Global 2000 using three lenses:
- New growth: How successful has the company been at creating new products, services, new markets, and new business models? This includes our primary metric: the percentage of revenue outside the core that can be attributed to new growth areas.
- Repositioning the core: How effectively has the company adapted its traditional core business to changes or disruptions in its markets, giving its legacy business new life?
- Financials: 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? We looked at revenue CAGR (compound annual growth rate), profitability, and stock price CAGR during the transformation period, which was different for each firm.
Our initial phase of research identified 52 companies making substantial progress towards strategic transformation—merely 3% of the public companies in our data set. From this second-round list, an Innosight partner panel voted to narrow it down to 27 finalists. For the third round, the following companies were selected as the Transformation 20 and ranked by a panel of management experts
The list features Netflix at the top and includes companies like Adobe, Amazon, Tencent, Alibaba on the one hand and the likes of Siemens, Philips. Schneider and Fujifilm on the other.
“Each of these companies developed new-growth businesses outside its traditional core which have become a significant share of the overall business. However, we believe it’s the decision to infuse a higher purpose into the culture, one that guides strategic decisions and gives clarity to everyday tasks, that has propelled these companies to success.
The #1 company, Netflix, is a case in point. In 2013, CEO Reed Hastings released an 11-page memo to employees and investors detailing a commitment to move from just distributing content digitally to become a leading producer of original content that could win Emmys and Oscars. As the memo said, “We don’t and can’t compete on breadth with Comcast, Sky, Amazon, Apple, Microsoft, Sony, or Google. For us to be hugely successful we have to be a focused passion brand. Starbucks, not 7-Eleven. Southwest, not United. HBO, not Dish.” Since unveiling that new purpose, Netflix revenue has roughly tripled, its profits have multiplied 32-fold, and its stock CAGR has increased 57% annually, versus 11% for the S&P 500.
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