More than half of company executives think that new business activities will generate at least half of their company's revenues within the next three years but few are making this transition successfully. A report by Accenture (Make your wise pivot to the new), based on a survey of c-level executives, found that only six per cent of companies have successfully achieved what it calls a ‘wise pivot’ to new opportunities. These 'wise pivot' companies reported that at least 75 per cent of their current revenues come from business activities, investments and ventures into previously unexplored markets begun in the past three years.
The report identifies some of the common strategies used by the successful companies. In particular, the following three actions can be used by c-level executives in their financial and business strategies to harness new business areas to achieve an increase in sales and growth in profits:
Build greater investment capacity by revitalising the core business
Seventy-six per cent of the successful companies said they have sufficient investment capacity to transform their legacy business, versus 49 per cent of other companies, on average. In addition, 70 per cent have sufficient investment capacity to scale new businesses, compared with just 46 per cent of other companies.
Adopt a concentrated innovation strategy
Three-quarters (76 per cent) of the successful firms said they combine their company’s innovation-enabling resources under a dedicated function, versus 36 per cent of other companies. They concentrate investment decisions under the same leadership, making them better able to identify and commercialise ideas with high potential. In addition, nearly four-fifths (79 per cent) of the more successful firms said it is very/critically important to collaborate with a wide network of partners and customers to support their innovation strategies, versus two-thirds (66 per cent) of other companies.
Create synergies between their core and new businesses
Firms that have successfully embraced new business areas tend to evaluate the potential impact of new business activities on their core business before accelerating expansion efforts into new opportunities. Sixty per cent (versus 28 per cent of other companies) recognise the potential of their new business activities to reshape the culture of their core business, and half (50 per cent) acknowledge the potential to cross-sell between their core and new businesses, compared with 29 per cent of other companies.
The study highlights how new business areas, whether new product lines, new markets or new technology, don't always bring the revenues that executives hope for. While 54 per cent of company executives think that new business activities will generate at least half of their company's revenues within the next three years, in reality only 33 per cent said their company currently generates more than half of its revenues from business activities started in the past three years. The report also underlines that maximising on and strengthening the core business is key to releasing resources to invest in new business areas. Accenture's Omar Abbosh said: “Our work with clients shows that successful companies are deliberate about the way they foster innovation throughout their organization to both transform their core business and scale the new. Leading companies concentrate innovation capabilities so that they can spot promising ideas from around the company and commercialise them, with the right focus and sponsorship.”
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