Time for a “wise pivot” to the future … reinventing your business in the age of relentless disruption
May 5, 2019
These are familiar words.
“Disruption” has become synonymous with innovation, and particularly the impact of start-ups on traditional markets, and large corporations. From the definition of Clay Christensen which was more about disruptive technologies, and how a seemingly inferior technology can ultimately beat a superior technology, because it is good enough, to the simplicity of advertising guru Jean Marie Dru who said disruption is about upsetting the status quo.
“Pivot” became a cool word in Silicon Valley, as tech start-ups realised that they needed to change direction in order to succeed. Facebook pivoted from Facemash dating site to social network, Instagram pivoted from Burbn meet-up site to photo sharing and messaging. But of course long before that Western Union pivoted from telegrams to money transfer, Shell from retailing to energy. It means transformation, and typically with a new direction.
So when another book comes along saying “Disruption by digital technologies? That’s not a new story. But what is new is the “wise pivot,” a replicable strategy for harnessing disruption to survive, grow, and be relevant to the future. It’s a strategy for perpetual reinvention across the old, now, and new elements of any business” it still doesn’t sound like anything new. But this is a book is good because most businesses still focus on the past, not the future. They need a dramatic shift.
As I say in almost every article I write, the future should be the obsession of every business, and particularly its leaders. Making sense of it. Exploring it. Creating it. Preparing for it. Making it happen. Investors, of course, are all about the future potential of a company, and quantify it in market values. But it still seems smart to say let’s just focus on today. Mindfulness is one thing, and delivery certainly matters, but the future matters most.
Pivot to the future
The new book “Pivot to the Future: Discovering Value and Creating Growth in a Disrupted World” argues that the emergence of a new wave of technologies — including artificial intelligence, virtual and augmented reality, 5G and quantum computing — requires businesses to continuously reinvent themselves using new management and capital-allocation strategies.
The book is written by three Accenture executives and makes the case that successful innovation is a long-term game that requires constant pivots to evolve and change. They call it the “wise pivot” —repeated renewal and reinvention through a series of strategic shifts, where innovation is applied equally in old, current and emerging businesses. They call on leaders to fight the urge to prematurely abandon legacy businesses and to nurture rather than simply exploit today’s “cash cows.” With the additional value they uncover, companies can fuel their future by embracing the start-up mentality of scaling rapidly as new technologies and markets appear, often suddenly.
They also tell the story of Accenture’s own wise pivot, in which the company nearly doubled its market capitalization in five years to more than US$100 billion. Recognizing that professional services and outsourcing were on course to commoditization, in the early 2010s Accenture invested heavily in five then-up-and-coming digital capabilities — interactive, mobile, analytics, cloud and cybersecurity — with the potential to deliver major benefits to clients and high growth to the company.
Here are the book’s key themes:
- The Trapped Value Gap. Continual improvements in digital and related technologies are creating value faster than companies, industries and society can absorb it. This is a kind of potential energy called trapped value. Targeting and releasing trapped value is the beginning of a new approach to strategic planning the authors call the “wise pivot.”
- The Seven Wrong Turns. Before engaging in a wise pivot, it’s important to understand the mistakes that can stop companies from recognizing and releasing trapped value. The authors call these mistakes the seven wrong turns. They include making the company too lean, creating a capital structure built to fail, losing one’s head, managing to Wall Street, relying on luck, serving regulators rather than customers, and anticipating customers who aren’t likely to show up.
- The Seven Winning Strategies. The book explores seven new strategic options with many examples. Some are companies that Accenture has worked with directly. Other examples are from a detailed research study (1,000 companies/12 industries) of the leaders’ winning ways.
- The Wise Pivot. Between late 2014 and 2018, Accenture’s market value doubled, reflecting the creation of $50 billion in new value. Given accelerating disruption and the growth of trapped value, instead of transforming companies must pivot, and do so repeatedly in order to evolve from today’s core business to tomorrow’s, and the one after that.
- The Old, Now and New. The wise pivot requires integration of strategies, specifically, across three different timeframes or business maturities:
- The old — Transforming the core
- The now — Growing the core
- The new — Scaling new innovations
- The Innovation Pivot. A wise innovation pivot requires leaders to review and adjust their portfolios to change the shape, speed, and trajectory of pivots. One of the keys here is to concentrate innovation capabilities under a strong leadership team, with dedicated investment and defined innovation roles and responsibilities. This enables companies to embed innovation into their corporate DNA. Done right, innovation isn’t something they do. It’s something they are.
- The Financial Pivot. No company successfully pivots without a massive investment in the new. This requires changing commitments and allocations to capital assets across three levers: fixed assets, working capital, and human skills. Rather than following the money, companies must put it to work creating a brave new future.
- The People Pivot. For a successful people pivot, organizations must adjust the way they approach hiring and retaining talent. This includes leadership — the people pivot doesn’t just apply to the “troops.” It includes having the right combination of leaders across all three stages, and being open to contributions from talent sources well outside the confines of executives’ own offices. The wild card here is artificial intelligence (AI). The future is likely to be one in which employees and technology work together in new ways. We’ll still need people, albeit with new, different and constantly-evolving skills.
Rotating to the new requires strong and continual action. It is not a transformation with a set end date; rather, it’s a continual process of getting better through the twin initiatives of core transformation and innovation. There are four key phases to help businesses rotate to the new:
- Transform the core business to release investment capacity. Insurers should apply digital technologies to make the core lower cost, more efficient and more competitive—which, in turn, creates flexibility and frees investment capital for innovation.
- Drive incremental growth in the core business. This is commonly overlooked, but essential for the journey. Some of the investment capacity must be directed at digital Brilliant Basics: initiatives to get closer to the customer and drive growth in the mature, core business. These investments also support the stable foundation that is required to enable agility.
- Scale the new. This is the hard part, and requires an innovation architecture to lift the organization from a perpetual cycle of pilots to identify the winning innovations that will provide the business with future revenue streams. This may involve partnering with start-ups or other partners to determine how to get to mass-market and industrial scale. Notably, this is also a crucial preparatory step before making the shift from the mature business to the new one.
- Pivot wisely. By optimizing investment dollars and capital over time, businesses can align S-curves to enable a transition from the old business to the new one. Timing is critical to identifying when the new initiatives start to become business as usual, and when to shift to the new business. This is a difficult task to pull off—but it is necessary.
In other words, rotating to the new is about nesting two S-curves, and then shifting from one to the other. Businesses today are sitting on the lower, established S-curve. They must start looking at the bottom of the new S-curve with technologies like automation, AI, big data and analytics, and to look at opportunities to engage customers outside the business transaction. The wise pivot is not easy—but done properly, can help insurers not just fend off disruption, but become an agile, innovative organisation that can compete for the long term.