Total Enterprise Reinvention: Setting a new performance frontier
Most large companies are transforming more and faster than ever before.
But an advanced group—Reinventors—are embracing “Total Enterprise Reinvention,” a deliberate strategy centered on a strong digital core.
Reinventors realize 10% higher incremental revenue growth, 13% higher cost-reduction improvements and 17% higher balance-sheet improvements.
Only 8% of companies—Reinventors—are moving to adopt a strategy of Total Enterprise Reinvention. Reinventors unlock benefits including improved financials, the ability to achieve perpetual breakthrough innovation, increased resilience in the face of any disruption and an enhanced ability to create value for all stakeholders.
Most companies—86%—are Transformers. They focus on transforming parts of their business rather than the whole and tend to treat transformation as a finite program rather than a continuous process.
Six percent of companies are what we call Optimizers, focused on functional transformations limited in scope and ambition. Technology is not a significant enabler of their transformations.
For more on what has inspired these companies, download the executive summary.
Overall level of increased disruption based on our Global Disruption Index. In comparison, the Index rose by only 4% from 2011 to 2016.
Total Enterprise Reinvention sets a new performance frontier for companies, and in most cases, the industries in which they operate. Centered around a strong digital core, it helps drive growth and optimize operations. There are six characteristics companies must embrace to succeed at reinvention.
Total Enterprise Reinvention starts with the premise that every part of every business needs to be reinvented. Your current benchmarks don’t reflect what is possible if, as a company, you develop a tech-enabled mindset. It’s a shift from “Is this too much change?” to “We’re all about change.”
Compressed transformations were triggered at the start of the pandemic, as rapid changes in the operating environments exposed gaps in companies’ digital cores. For example, many consumer goods companies accelerated their ability to digitally connect directly with consumers. They later found that not having a modern, cloud-based ERP and infrastructure prevented them from tweaking payments, connecting supply chains and fulfilling purchases.
As a result, we’ve seen many consumer goods companies take on accelerated moves of their ERP to the cloud, crossing multiple functions. Adopting Total Enterprise Reinvention as a core strategy is a natural next step for Transformers and the blueprint for Optimizers who now want to leapfrog to becoming a Reinventor.
By adopting the six key characteristics of Reinventors, companies will also address many of the lessons learned in these past three years of compressed transformations.
Once you accept that every business is a digital business, technology becomes a primary source of competitive advantage that enables companies to build exceptional experiences and achieve breakthrough innovations. It can open new possibilities for accelerating growth and optimizing operations.
To thrive in this world, companies need a strong digital core that will serve as the foundation for reinvention.
While many executives acknowledge that technology plays a critical role in reinvention, the ability to use technology as an execution enabler is a differentiating characteristic of Reinventors. Our survey found 39% of Reinventors say technology is a significant enabler in executing their reinvention, compared with just 21% of Transformers and 3% of Optimizers.
of executives we surveyed agree technology plays a critical role in both their reinvention strategy and in their transformation programs.
of executives across Reinventors, Transformers and Optimizers agree technology is the top priority in transformation programs overall during the past two years.
of Reinventors plan to increase their investments in cloud services over the next year, and 65% are watching and screening next-gen computation technologies.
Consider Siam Commercial Bank (SCB), which focused on developing the company’s technology infrastructure and capabilities to create the foundation for SCB to become a digital bank. It replaced legacy applications and migrated to a new cloud-based data lake. A digital factory was set up to develop the bank’s app and new digital stack. This enabled the bank to grow its digital app user base to more than 13 million users in 2022, up from 2.5 million prior to the transformation program.
The next stage in SCB’s journey to reinvention is to become a “fintech business group”—a technology company that provides customer-centric services, including banking. Restructured into a new entity, SCBx, the firm intends to expand its reach to 200 million people. The company is investing in new technologies, including blockchain, metaverse and Web 3.0.
Before, many companies determined the full potential of their transformation by benchmarking their performance against their peers, as well as targeting current industry best practices. If you’re behind, these metrics can help create a case for change. However, they also can limit the ambition of leaders because they don’t reflect what’s possible as it relates to technology and new ways of working.
Given how quickly technology and customer habits are evolving, what’s best-in-class today will be lagging by tomorrow. Indeed, strong performance increasingly does not endure. Our analysis finds that between 2011 and 2022, the gap between top- and median-performing companies on total shareholder returns declined by 15 percentage points, on average, across industries.
Mentions of the phrase “best practice” in earnings calls among the world’s 2,000 largest publicly traded companies by revenue have declined by 24% since Q1 2020. Nevertheless, more than half (55%) of the executives we surveyed are still focused on matching existing best practices in their industry and see that goal as the full potential they can hope to achieve.
Many human factors can compromise reinvention strategies that look good on paper: a lack of cultural readiness to change, leadership capabilities and alignment, and functional silos. The more people are engaged in reinvention; however, the more likely such hurdles can be overcome.
That’s why executives must start by motivating their people to embrace change. The CEO must champion the Total Enterprise Reinvention strategy, with the C-suite in lockstep.
Reinventors consider change management a core competency. They understand that vision and a call to action must resonate with each person, helping connect individual purpose with the overall goal of the change. And their leaders are more likely to communicate a compelling change story—frequently.
The TQ is how we build and demonstrate our understanding of transformative technologies and how they deliver on the promise of technology and human ingenuity. From the C-suite to the front line, employees at all levels will need to develop a TQ to drive successful reinvention.
We invest in continuous training across Accenture, and each employee receives an individual TQ score. Accenture’s TQ learning series is a simple and effective way to ensure every team member learns about technology, how it’s applied, why it matters and how it works with other technologies.
To reach the comprehensive scale of Total Enterprise Reinvention, companies must connect people, processes and data across the enterprise and beyond, creating a boundaryless organization.
Creating capabilities at the performance frontier requires an enterprise-wide approach that cuts across business units and functions to become more interconnected. For example, consumer goods and retail companies looking to build capabilities (such as value-chain business planning and intelligent manufacturing) need an end-to-end approach that impacts the entire organization.
Changing the operating model, though, means changing how people work. Adopting agile principles empowers employees and enables cross-functional ways of working. The move to multidisciplinary teams challenges people to take on more complex roles that combine tasks once performed by two or more individuals in traditional roles.
Boundaryless doesn’t mean a lack of controls, though. Those adopting reinvention recognize the need for a dedicated Transformation Office. The office sets the schedule and tracks progress, developing a fully integrated plan with financial projections, clear operational performance indicators and targets for each workstream. The office acts as a single source of truth for the entire organization.
Transformation typically has been sequential and time-bound. Reinvention, however, is as dynamic as the changing technological and market landscape. It requires both speed of execution and an approach toward continuous change that seeks progress over perfection. The earlier value is released, the quicker it can be invested in new initiatives that further extend the performance frontier.
It’s therefore critical for companies to focus on initiatives that drive the most impact. Companies must be ready to reprioritize initiatives on an ongoing basis, stopping non-value-adding initiatives at the right time, while regularly restocking their pipeline with new initiatives.
Partners bring resources—assets, ideas and skills—that can accelerate and support compressed transformation. Partners can also support the investment required to deliver reinvention through gain-sharing agreements, or help build a capability to deliver continuous reinvention. In fact, 69% of companies that are moving to adopt a strategy of Total Enterprise Reinvention say that having a partner that helps select and build solutions and platforms is important to the successful delivery of their strategy.
Verizon, for example, has systematically built an ecosystem to support the development of the 5G economy by forming strong partnerships across its value chain. Device manufacturers help ensure that Verizon’s network can support all devices.
Cloud providers and system integrators have partnered to develop Verizon’s mobile edge compute (MEC) ecosystem. Customers test new use cases. Partners are helping Verizon, too. Verizon and Meta are working together to leverage complementary capabilities to build the foundations of the metaverse, with a focus on the MEC infrastructure for extended reality experiences.
There are clear financial benefits to pursuing Total Enterprise Reinvention. Reinventors report generating higher incremental revenue growth, more cost-reduction improvements and higher balance-sheet improvements than Transformers.
The value Reinventors generate is far more than financial, however. Reinventors more actively manage for—and deliver on—non-financial outcomes, generating what we call “360° value." Generating 360° value means looking beyond short-term financials to understand what creates long-term, sustainable value.
Reinventors deliver superior outcomes by thinking more deeply about how their reinvention will enable them to engage with customers and employees, deliver more sustainable outcomes and enhance their approach to innovation. Reinventors also score 11% higher on innovation, 11% higher on “net better off” outcomes for talent, and 7% higher on inclusion and diversity.
For more on what sets Reinventors apart, download the infographic.
1. Where are you today: Are you a Reinventor, Transformer or Optimizer?
2. Have you defined the performance frontier for your company, and how does it measure against the best in your industry and the best in other relevant industries? Are you matching the leaders or setting the new benchmark?
3. Is your entire C-suite held accountable, as a primary metric, for the success of your current transformation programs, or is the business or function lead accountable?
1. How would you assess your digital core? What is its level of maturity and what are its known gaps?
2. Is the ability to use technology investments to achieve sustainability and other 360° value objectives and any negative impacts formally included in technology investment decisions?
1. Do leaders have sufficient technology acumen to understand the art of the possible and what it can do to drive reinvention?
2. Do you have existing change management capabilities to support your continuous transformation journey, or are you standing these up for each transformation project?
3. Do you use data to measure your transformation, and is the same form of measurement used for all programs?
1. Are the leaders of your current transformational initiatives able to articulate the changes that will occur across the enterprise, and are they using metrics that take a cross-functional view?
2. Can your leaders articulate the partnership strategy for each transformation program, how that strategy is enabling them to deliver outcomes faster and increase the certainty of outcomes as well as how the partner fits into your talent strategy?