The Top 20 Business Transformations of the Last Decade
Sep 24, 2019
In 2012, Denmark’s largest power corporation, Danish Oil and Natural Gas, slipped into financial disaster as the price of gas was plunging by 90% and S&P decreased its credit rating to negative. The board hired a previous executive at LEGO, Henrik Poulsen, as the new CEO. Whereas some leaders might have gone into crisis-management mode, laying off workers until prices recovered, Poulsen saw the moment as an opening for radical transformation.
“We saw the need to build an entirely new company,” says Poulsen. He renamed the firm Ørsted after the legendary Danish scientist Hans Christian Ørsted, who discovered the sources of electromagnetism. “It had to be a radical transformation; we needed to build new core business and find new areas of sustainable growth. We looked at the shift to combat climate change, and we became one of the few companies to wholeheartedly make this profound decision, to be one of the first to go from black to green energy.”
That vital motive—to identify a higher-purpose mission that excites the organization—is a constant thread among the Transformation 20, a new study of the world’s most transformative companies. Fortifying this new view, the Business Roundtable last month released a statement signed by more than 150 CEOs stating that serving shareholders can no longer be the main goal of a company; rather, it needs to be about helping society, through innovation, commitment to a healthy environment, safety culture, and economic opportunity for everyone.
The aim was to recognize the global organizations that have achieved the highest-impact business transformations over the past decade. Our investigation team screened all the firms in the S&P 500 and Global 2000 using three lenses:
- New growth: How strong has the company been at creating new products, services, new markets, and new business standards? This includes our principal metric: the percentage of revenue outside the core that can be associated with new growth areas.
- Repositioning the core: How efficiently has the company adjusted its established core business to changes or disruptions in its markets, giving their legacy markets new life?
- Financials: Has the business posted solid financial and stock market performance, or has it shifted its interest from losses or slow growth to get back on course? We studied the revenue CAGR (combined annual growth rate), profitability, and stock price CAGR throughout the transformation period, which was distinctive for every company.
Each of these businesses formed new-growth businesses outside its traditional core which have become a meaningful portion of the overall market. However, we think it’s the choice to introduce a higher purpose into the safety and leadership culture, one that leads strategic conclusions and gives transparency to everyday responsibilities, that has propelled these corporations to victory.
The #1 company, Netflix, is a case in point. In 2013, CEO Reed Hastings published an 11-page memo to employees and investors describing a dedication to move from just disseminating content digitally to become a foremost producer of original content that could win Emmys and Oscars.
The takeaway lesson from these mission-changers is clear: In an era of constant change, a company persists and prospers based not on its size or performance at any given time but on its capacity to reposition itself to conceive a new future and to leverage a purpose-driven purpose to that end. That’s why strategic transformation may be the business leadership imperative of the 21st century.
Read the source article at Harvard Business Review
In 2012, Denmark’s biggest energy company, Danish Oil and Natural Gas, slid into financial crisis as the price of gas was plunging by 90% and S&P downgraded its credit rating to negative. The board hired a former executive at LEGO, Henrik Poulsen, as the new CEO. Whereas some leaders might have gone into crisis-management mode, laying off workers until prices recovered, Poulsen recognized the moment as an opportunity for fundamental change.
We saw the need to build an entirely new company,” says Poulsen. He renamed the firm Ørsted after the legendary Danish scientist Hans Christian Ørsted, who discovered the principles of electromagnetism. “It had to be a radical transformation; we needed to build a new core business and find new areas of sustainable growth. We looked at the shift to combat climate change, and we became one of the few companies to wholeheartedly make this profound decision, to be one of the first to go from black to green energy.”
