Striking the right balance
Every organization has a core business that produces the bulk of its cash flow and profit stream. Over time, however, a new business often joins the core business at its periphery. The new business is often a result of technological innovation that allows the organization to do new things—solving similar problems; but better, faster and cheaper. And it typically conflicts with the core business.
As an organization’s core business reaches the top of the maturity “S” curve, it must embrace that new, innovative business as its new core business. If it doesn’t, it risks failure through obsolescence.
At Accenture, we call embracing this new business “rotating to the new.” It’s not easy. In fact, the odds are stacked against it—putting a business’s future at risk.
Organizations that rotate too quickly from their core businesses to the new often over-invest, neglect their core and damage themselves by overstretching their financial capacities.
Organizations that rotate too slowly from their core businesses to the new can become obsolete and bankrupt before they make the pivot.
Successfully rotating to the new requires the following:
Transform the core business. An organization must first find ways to increase efficiency and maximize profits from its core business to build investment capacity.
Invest for core business growth. Rather than spending all of the new profits on the new business, the company must dedicate a portion to driving incremental growth in the core business, through strategies such as digital marketing, analytics and web interaction.
Scale the new business. This requires investing the balance of investment capital in creating an innovation architecture that enables the new business to make the transition from concept to mass market.
Make a wise pivot. The business must gradually reallocate investment capacity over time, investing more and more in the new business, without prematurely diminishing the core business.
General Electric is an example of a huge company that is working hard to rotate to the new. It is shifting its business model from one focused on selling products (e.g., locomotives and jet engines) to one selling outcomes. Instead of selling a wind turbine as a product, for example, it sells it as-a-service. So the turbine comes with a digital predictive maintenance program—driven by data analytics—that improves reliability and efficiency.
GE is investing boldly to transform itself into a major player in the Industrial Internet of Things (IIoT). It launched Predix, a cloud-based IIoT platform-as-a-service that enables machine-to-machine communications and industrial-scale analytics. It is also working to put GE at the center of a new digital ecosystem.
Rotating to the new without damaging your existing enterprise is not easy. It requires expertise that might not be available in every organization.
From our research, Accenture has developed the knowledge required to help clients successfully complete all the steps involved in rotating to the new, before innovative competitors have a chance to disrupt them.
Companies have two choices, rotate to the new or fade away. Accenture makes sure that our clients rotate to the new wisely and successfully.