With current advancements in technologies and digitalization, it’s possible for organizations to ramp up bottom-line performance, while at the same time secure game-changing portfolio wins.
Why Standing Still Is Not an Option in Business Transformation
In today’s rapidly evolving business landscape, standing still is never a good idea. Focusing solely on performance-related improvements can boost productivity and improve the bottom line, but organizations that aim to address future challenges and opportunities must go beyond this. To truly thrive, they need to redefine who they are and what they do.
A recent report from the McKinsey Global Institute (MGI), Why Your Next Transformation Should Be ‘All In’, highlights the importance of a dual approach to business transformation. The report suggests that organizations can significantly increase their chances of success by focusing on both performance and portfolio-based improvement strategies. This insight comes from extensive research into the world’s 2,393 largest nonfinancial companies, culminating in what McKinsey calls the "power curve," where companies are categorized based on their economic profits.
The 5 Big Moves
Several factors influence an organization’s ability to move up the power curve, such as its size, debt capacity, and the state of its industry. However, the most influential factor is how effectively a company applies what McKinsey refers to as the “five big moves.” These moves are:
Improving Productivity
Enhancing efficiency and reducing costs through better use of resources.Spurring Innovation
Investing in new technologies, products, and processes to drive growth.Strategic Resource Allocation
Shifting resources to high-potential areas and optimizing the portfolio.Mergers and Acquisitions (M&A)
Expanding capabilities and market reach through strategic acquisitions.Capital Investment
Investing in the infrastructure, equipment, and technologies needed for future growth.
The way you implement these five moves will largely determine your success.
Investment in Both Performance and Portfolio-Based Improvements Wins Every Time
So, how can you propel your organization to the next level and successfully climb the power curve? While there’s no guaranteed formula for success, research suggests that organizations that go “all in” by simultaneously focusing on their products and services, as well as on how they deliver them, are far more successful than those pursuing gradual transformations. This comprehensive approach also results in the highest likelihood of lasting improvement, with companies nearly tripling their chances of reaching the top 20% of the power curve when they adopt it.
However, it’s crucial to recognize that external factors also play a significant role—particularly the performance of your industry. Companies in declining industries face a 4% chance of moving up the power curve, but an 18% chance of moving down, underscoring the importance of timing and strategic foresight.
Are You Ready for “All In” Transformation?
An all-in transformation is challenging for any organization, especially when undertaken proactively. To lay the groundwork for a successful transformation, you need a deep understanding of both your organization and industry trends. This often means stepping out of your comfort zone and confronting tough questions. It requires bold leadership, unwavering commitment from everyone in the organization, and the development of new leadership skills and ways of working.
Are you ready to turn your organization around and deliver lasting improvements? Get in touch today to learn how we can help you successfully navigate your transformation journey.
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