Does true success lie outside of your comfort zone? It turns out that when companies dare to move beyond their familiar territory, they enjoy better financial performance.
A recent Accenture survey shows that those companies that generated the most revenues from investments in markets and offerings where they had not previously participated (the “new” business activities) were ones that achieved the strongest financial gains between 2014 and 2017. For one company, new could mean shaking up an artisanal brand by introducing digital technology. For another, it might mean launching and scaling an online marketplace. For a third, it could be a matter of focusing on a new product area with great future potential.
We believe this process of embracing new business activities outside of the familiar territory is best characterized by the term rotation.
When we surveyed 1,440 C-level executives in companies with revenues of more than $500 million, in 11 industries and 12 countries, more than half said they expect new business activities to account for more than half of their revenues and profits by 2021. Through this research, we identified four groups of companies at different stages of their rotation to new businesses. We measured their progress by assessing the contribution of new business activities to overall revenues over the past three years. While most companies were rotating, only 6% of the total sample — companies we call the Rotation Masters — have made substantial progress: They have earned more than 75% of their revenues between 2014 and 2017 from new business activities. Notably, 64% of these 90 companies that shifted into new business activities decisively during this time achieved double-digit growth in sales.
We call these companies Rotation Masters because they did the up-front work that enabled them to launch and manage new businesses effectively. Our findings show that companies wishing to move into new businesses successfully must establish the right preconditions for successful change in three areas: investment capacity, innovation strategy, and organizational synergy.
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Build a Strong Investment Capacity
Rotation Masters understand the magnitude of investment required to pursue “rotation to the new” successfully. To build investment capacity, they regularly and decisively reduce costs, divest underperforming businesses, and consolidate tangible assets.