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In brief

Business leaders are used to scanning the horizon for new competitors, taking a
microscope to their operations to uncover inefficiencies, and seeking ways to
get the most from their people. But making business model change real requires a
whole new level of acuity. CEOs need to be constantly awake to impending
disruptions—including novel tech, climate shocks, and geopolitical conflict—that
will trigger value-pool shifts and open doors for rivals. They also need to keep
a close eye on leading indicators that flash red when reinvention pressure
reaches a critical level in their industry. Perhaps most important, executives
must seek opportunity in places they might never have thought to look. Consider
the journey of a specialized B2B manufacturer that’s reinventing itself as a D2C
player:

1. See farther, deeper, and better

2. Turn walls into bridges

Business model change is hard, but three critical abilities will give you the
power to push ahead.

REINVENTION

IN DEPTH

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More issues

The pressure on CEOs to reinvent their business has never been more intense. To
lead their company on the reinvention journey, executives need to sharpen their
acuity for seeing novel threats and opportunities, rethink boundaries with an
eye toward collaboration, and shatter inertia. By building those abilities now,
leaders can make successful business model change a reality.

More issues More from s+b Podcast pwc.com Give feedback

Illustrations by Martin Barreto

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KICK-START YOUR

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7 min

Dive deeper: Make business model reinvention real

1. SEE FARTHER, DEEPER, AND BETTER

QUEST

IN BRIEF

2 min

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9 min

3. Conquer inertia

—Andy Warhol

They always say time changes things, but you actually have to change them
yourself.”

When PwC studied the differentiating characteristics of companies that enjoy a
massive performance edge, an interesting finding emerged. Those top-performing
companies are more than twice as likely as their peers to generate greater than
60% of their revenue from business ecosystems—and they expect that percentage to
increase in the future. Those organizations recognize that working within
business ecosystems, or collaborating across industry boundaries, can deliver
access to new customers and markets, privileged customer data insights, and
complementary skills and capabilities. But ecosystems aren’t just linked to
better performance in the here and now; they’re essential for reinvention, too.
Ecosystems will soon become a primary mode of competition—and the lens through
which CEOs need to view value:

If reaching across boundaries is important, so is understanding where those
boundaries are shifting, and how fast they are doing so. Indeed, PwC research
suggests that achieving a sustainable future requires not only radical corporate
collaboration but a fundamental reconfiguration of the industrial system. This
transformed model is delineated by basic human activities, such as how we feed
ourselves, how we build, how we make and power things, how we care for our
health, and how we move.

Don’t forget tax, the hidden value in business model reinvention

Transformative leadership for extraordinary times

The reconfiguration imperative

PwC Pulse Survey: Finding opportunity in reinvention

When is the right time to reinvent your business?

From stagnation to innovation: Make business model reinvention real

Continue the reinvention journey

Explore the podcast series from strategy+business, which convenes a global
community of solvers to tackle the world’s most important problems

Want to hear more?

EXPLORE

Nicki Wakefield Global Clients and Industries Leader, Partner, PwC UK Email

Carol Stubbings Global Chief Commercial Officer, Partner, PwC UK Email

Rob Silverwood Asia-Pacific Business Model Reinvention Leader, Partner, PwC
Australia Email

Venky Jayaraman Business Model Reinvention, Principal, PwC US Email

Veronique Roos-Emonds EMEA Business Model Reinvention Leader, Partner, PwC
Netherlands Email

Matthew Duffey Global Business Model Reinvention Leader, Principal, PwC US Email

Your ten-minute power-read for December 2024

The takeaway? Often, the best first step on the road to reinvention is
cultivating a more penetrating view into the everyday experience of
customers—their pain points, their unmet needs, and the social dynamics that
inform their decisions. Wait too long, however, and you’ll find yourself stuck
in traffic: more than three-quarters of companies polled in a recent PwC survey
on reinvention have started or completed measures to reach new customers
directly.

Source: Textron

Though Textron is today known for making everything from golf carts to attack
helicopters and weapons systems, the company started out in 1923 in the textile
industry—when it was called the Special Yarns Corporation.

2. TURN WALLS INTO BRIDGES

Seeking to boost growth, executives at a specialized maker of large-format
commercial printers turned their attention to an adjacent market segment that
was large and fragmented, and that—because of the burgeoning creator
community—had ample room for growth. The company explored several potential
business models before creating a platform to serve as an orchestrator between
content providers, end customers, and print service providers. The platform,
still in its early days, has already attracted 25,000 partners and counting.

We’re already seeing that kind of reconfiguration in smart mobility, an
ecosystem that encompasses fleet operators, battery manufacturers, mining
companies, electricity generators, car dealers, and other players. Anticipating
where your company may sit in a reconfigured sectoral landscape goes hand in
hand with reimagining how you can create, capture, and deliver value. Leaders
also need to spark internal change by refocusing their company’s talent and
capabilities to facilitate business model reinvention. PwC has identified five
differentiators that transformative leaders possess:

Leading reinvention ultimately hinges on making the strongest possible case for
systemic change—one that’s informed by a wide range of external voices but that
still secures the buy-in of your people.

Source: Statista

The India-based IT services giant Wipro was founded in 1945 as West India Palm
Refined Oils Limited. The company made vegetable oil, soap, and other related
products.

Dive deeper: The reconfiguration imperative

For companies embarking on reinvention, a logical follow-on to more dynamic and
targeted resource reallocation is investing in an MVP initiative. Such an
approach reduces barriers to buy-in by creating a low-cost pilot that can be
adapted and scaled; in many cases, it can also generate revenue for future
reinvention moves. As the term suggests, the design of any MVP pilot should
comprise the minimum elements needed to test the new business model’s
value-creating potential.

And yet, data from PwC’s 27th Annual Global CEO Survey suggests that many
executives may be taking this reinvention driver for granted; nearly two-thirds
of CEOs said their company reallocates just 20% or less of its resources from
year to year. Take a hard look at how your organization’s human and financial
capital is deployed, and make sure reallocation decisions are based on objective
assessments that aren’t influenced by internal power dynamics or common biases,
such as the sunk cost fallacy (a reluctance to abandon a project because a lot
of money has been sunk into it).

Want to boost momentum for your reinvention efforts? Get your tax and legal
functions on board. They’re well placed to inform vital operating model
decisions by anticipating the nitty-gritty implications of reinvention
moves—including credits and incentives that can offset the costs of change. In
fact, when would-be reinventors consider tax in their strategic decisions, they
mitigate risk in the new business, simplify its operating model, and can
increase profits by 2 to 10 percentage points.

3. CONQUER INERTIA

When weighing the biggest decisions, CEOs often cling to what might seem to be a
piece of solid bedrock: confidence in what’s working. But as reinvention
pressures increase, an abiding faith in the status quo becomes a liability. A
reflexive aversion to the costs of change (such as the cannibalization of
products) can also hold leaders back. So too can a resistance to organizational
transformation (for example, the creation of new departments or lines of
accountability), and a focus on skills that are tailored to present needs
instead of future ones. In an era of reinvention, inertia is your enemy.
Breaking free of it isn’t easy, but CEOs can start by focusing on two things:
more dynamic resource reallocation and a minimum viable product (MVP) approach
to new initiatives.

Resource reallocation

PwC research has shown that higher rates of resource reallocation are associated
with both higher profit margins (except for extreme levels of reallocation) and
greater levels of reinvention:

An MVP initiative

Dive deeper: Don’t forget tax

Source: Louis Vuitton, LVMH

Luxury good maker Louis Vuitton, founded in 1854, specialized in the manufacture
of boxes and trunks for travel on carriages, boats, and trains.

IN CONCLUSION

Source: Nintendo

The road won’t be short or smooth, but that’s no reason to delay getting
started. After all, companies have been successfully reinventing themselves for
a long time. (You’ll see some memorable examples as you scroll down.)

1. Getting better at spotting trends and triggers 2. Transcending traditional
boundaries both inside and outside the company 3. Breaking free of inertia

In the face of climate change, novel technologies, and other external pressures,
many executives are fundamentally rethinking how their company makes money and
creates value. For them, business model reinvention isn’t a question of if, but
when. This issue of strategy+business focuses on three core abilities that
C-suite leaders need to build as they embark on the reinvention journey:

Click for audio

Sources: Museo Ferruccio Lamborghini; history.com

More from s+b Podcast

December 2022

Video transcript

So what are those factors that would cause someone to look for another job?
Well, in our Hopes and Fears survey of 52,000 workers, they told us it was
primarily three things: the ability to be my authentic self at work, the
importance of a fulfilling job, and the importance of fair pay. The good news
for organizations is they can actually control all three of those elements. If
you think about fulfilling work, organizations can really understand what is
causing friction in the workplace. Is it some of our processes? Is it the way we
make decisions? Is it work schedules? Is it the technology we've invested in?
And how do we actually improve that for workers and the business? If you think
about authenticity, do you have mechanisms in your organization for people to
raise issues and concerns? Do you have a really inclusive culture where people
can be free to express themselves without judgment, and it doesn't impact their
future progression in your organization? Are you actually tracking analytics on
this to actually make sure that you're progressing people of all different
genders and races? And finally, is my pay fair? Companies can benchmark pay
externally. They can look inside to understand elements of pay equity. And they
can really engage their employees to say what really motivates you in terms of
pay mix. So that's the good news. The good news is we understand what drives
workers out, and we can understand how organizations can actually keep people
engaged and motivated and productive in the workplace.

Back

Bhushan Sethi, Joint Global Leader, People and Organization

Back

In brief

1. See farther, deeper, and better

2. Turn walls into bridges

3. Conquer inertia

Give feedback

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KICK-START YOUR

REINVENTION

Business model change is hard, but three critical abilities will give you the
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Illustrations by Martin Barreto

IN BRIEF

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1. Getting better at spotting trends and triggers 2. Transcending traditional
boundaries both inside and outside the company 3. Breaking free of inertia

Sources: Museo Ferruccio Lamborghini; history.com

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1. SEE FARTHER, DEEPER, AND BETTER

7 min

IN DEPTH

Dive deeper: Make business model reinvention real

Artboard 98

Source: Textron

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Dive deeper: The reconfiguration imperative

Artboard 98

The India-based IT services giant Wipro was founded in 1945 as West India Palm
Refined Oils Limited. The company made vegetable oil, soap, and other related
products.

Source: Statista

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3. CONQUER INERTIA

Resource reallocation

PwC research has shown that higher rates of resource reallocation are associated
with both higher profit margins (except for extreme levels of reallocation) and
greater levels of reinvention:

An MVP initiative

Dive deeper: Don’t forget tax

Artboard 98

Luxury good maker Louis Vuitton, founded in 1854, specialized in the manufacture
of boxes and trunks for travel on carriages, boats, and trains.

Source: Louis Vuitton, LVMH

—Andy Warhol

IN CONCLUSION

They always say time changes things, but you actually have to change them
yourself.”

Source: Nintendo

MORE ISSUES

Tell us your thoughts

Let us know what you think about s+b

Give feedback

Want more insights?

Get s+b direct to your inbox

Want to hear more?

Explore the podcast series from strategy+business, which convenes a global
community of solvers to tackle the world’s most important problems

Artboard 98

EXPLORE

Continue the reinvention journey

From stagnation to innovation: Make business model reinvention real

PwC Pulse Survey: Finding opportunity in reinvention

When is the right time to reinvent your business?

The reconfiguration imperative

Transformative leadership for extraordinary times

Don’t forget tax, the hidden value in business model reinvention

Matthew Duffey Global Business Model Reinvention Leader, Principal, PwC US Email

Veronique Roos-Emonds EMEA Business Model Reinvention Leader, Partner, PwC
Netherlands Email

Venky Jayaraman Business Model Reinvention, Principal, PwC US Email

Rob Silverwood Asia-Pacific Business Model Reinvention Leader, Partner, PwC
Australia Email

Carol Stubbings Global Chief Commercial Officer, Partner, PwC UK Email

Nicki Wakefield Global Clients and Industries Leader, Partner, PwC UK Email

More issues More from s+b Podcast pwc.com Give feedback

Your ten-minute power-read for December 2024

9 min

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