Pivot to the future

In a landscape where market conditions are volatile, the notion of a single, large-scale transformation for a company is no longer sufficient. Instead, what's required is a continuous process of reinvention, with businesses making multiple strategic shifts to seize new opportunities as they arise. The goal is to consistently discover innovative and more effective methods to tap into the latent value that is embedded within the existing business model, and then to realign the company around an optimal combination of both legacy and new assets.

Take the case of Royal Philips in the early 2000s, which foresaw the impending dominance of LED technology over traditional incandescent bulbs. Despite its historical association with and invention of light bulbs, Philips made a strategic pivot. It utilized its established manufacturing, marketing, and distribution capabilities while simultaneously investing in compact fluorescent bulbs as a transitional technology. This move provided marketable products in the short term while Philips intensified its research and development in LEDs. The company strategically divested its incandescent lighting assets to competitors while they still held value. As a result of this pivot, Philips was well-positioned to enter the LED market as a service provider once the technology matured. Moreover, Philips broadened its focus to health technologies, which emerged as its new core business. Despite its long-standing history in lighting, Philips largely withdrew from the industry, exemplifying a classic pivot—selling off the traditional bulb business to finance the next-generation LEDs, and then transitioning to become a high-value health technology provider.

Balancing investments across technologies at varying stages of their life cycles is a complex task but can result in remarkable synergies when executed effectively. As noted by Omar Abbosh, Paul Nunes, and Larry Downes, mastering a wise pivot involves a continuous and bold rotation through the old, the present, and the new. Leaders must regularly reassess and maintain a balance in their investment allocations across these stages, despite the unpredictable nature of market disruptions.

Digital technologies are opening up possibilities to generate new revenue streams from products and services that were previously limited by market inefficiencies. To capitalize on these opportunities, companies must access this trapped value before their competitors do, to fund future growth. This necessitates a shift away from outdated plans, strategies, processes, and systems. Trapped value can manifest in various domains:

At the enterprise level, companies fail to harness new technologies to significantly enhance mundane aspects of business. For instance, Nike collaborates with manufacturers to produce shoe uppers in 30 seconds with 30% less labor, while Adidas employs 3D printing to customize shoes, reducing design time from months to days. Businesses must revise their procedures to take advantage of disruptive technologies.