The findings of Accenture’s Innovation Maturity Index indicate that 76% of South African companies are struggling to release trapped value – ie., they are finding it hard to convert potential opportunities, such as those presented by digital technologies, into actual value. This makes them vulnerable to disruption. A wise pivot could save them.
“Our research shows there is a small group of high-growth companies–we call them ‘value releasers’–that consistently outperform the rest in the creation of both current and future value” says Vukani Mngxati, CEO of Accenture in South Africa. “Their advantage: these leaders focus on and building innovation structures and practices that drive differentiation and shareholder value and they know how to pivot their businesses wisely to the new.”
For South African companies, the need for a dramatically different approach to strategy and execution is obvious. Yet, even as CEOs across industries see with clarity the need to change, most struggle to translate vision into action. Fewer still have the tools to steer their organisations decisively and sustainably.
“Almost half of the South African executives we surveyed feel unsure or dissatisfied that their company’s innovation efforts will position them well to overcome future disruption, and concede that their companies are not prepared for disruption. There is an answer.
“Our guidance in terms of how executives can respond to disruption: execute a Wise Pivot strategy that is repeatable,” says Mngxati.
In a Wise Pivot strategy, companies manage their core assets not as discrete resources with diminishing value from creation through to retirement, but as a dynamic investment portfolio, continuously balanced across three lifecycle stages–the old, the now and the new.
• The “old” are products and services that have reached the peak of their growth and either have or are soon likely to stall.
• The “now” are offerings in the middle of the development, growing rapidly but already shifting from a focus on innovation to one based on efficiency and eventual commoditisation.
• The “new”, are emerging parts of the business just beginning their journey, whose speed and trajectory are largely unknown.
To pivot wisely means embracing a constantly evolving strategy, one that integrates all three stages as executives manage their portfolios from one set of assets to the next, growing and reshaping their old core into a new one built with new technologies.
In a recent survey of 100 executives from large companies in South Africa, 72% said that they generate less than a quarter of their revenues and profits from new business activities. Even more concerning is the fact that these businesses also do not anticipate that they will be able to generate more than half of their revenues and profits from new business three years from now.
In comparison, Accenture’s global survey, which spanned 11 industries and 12 countries, revealed that over 50% of large companies optimistically expect that new business will generate more than one half of their revenues and profits three years from now.
Several factors prevent South African companies from accelerating their journeys. These include capital-intensive infrastructures, contractual agreements, outdated technology and a relentless devotion to legacy products, services, and brands. In short, they are tied to the past. It’s a serious challenge they need to move quickly to overcome.
Companies that do survive disruption are constantly re-inventing themselves, making their businesses relevant to the future. If companies remain overly focused on their core business, they are unable to pursue new opportunities. If they neglect their core business in a dash to the New, they may find themselves short of the investment capacity they need. Finding the right balance between these extremes takes skill and courage.
To pivot successfully companies, need to adopt a new approach to organisational change. This involves making a series of decisions about how to transform and grow the existing businesses, and how to scale new businesses, continuously and synchronously. A wise pivot also requires the right investment strategy to ensure the timing, scale and direction of investments are calibrated.