Our global economy has jumped from crisis to crisis, making it difficult for even the most powerful companies to turn a profit. In order to survive, CEOs have had to completely re-evaluate their strategies — over and over again.
BCG looked at 2,500 American public companies and found that demand, industry position, profitability, and market expectations have become increasingly unstable and volatile over time — and the trends are accelerating.
Overall, companies covered in the study grew their market caps eight-fold during stable quarters, but lost a full third of that value in turbulent times. The most successful companies were able to better adapt to economic conditions and bounce back.
BCG identifies four common behaviours of the most adaptive businesses, and gives examples for each:
- The ability to find signals in customer data, and use them to innovate in real time.
Target’s vast customer data has allowed it to target people at inflection points, like marriage, pregnancy, or graduation, and boost sales, even through the financial crisis.
- Continuous experimentation, and rapid incorporation of their successes.
The way 3M generates new products, designating time for employees to innovate, providing multiple sources of internal seed capital, and accelerating successful experiments allows for rapid progress.
- An organisation of flexible units, rather than a rigid hierarchy.
Google makes a concerted effort to maintain a “flat” structure and internally sources information and solutions to perceived bureaucratic roadblocks.
- The use of a variety of external partners while keeping a uniform company standard.
In order to populate its business with products, Amazon partners with a huge variety of third party partners, and uses its market power and fosters customer feedback to manage and improve them.
Those four companies, in addition to other giants like Apple, Nike, and Time Warner, are among those BCG categorizes as “highly adaptive.” They weathered the crisis better, and have recovered faster than their unadaptive peers, as seen in this chart from the report:
Photo: Boston Consulting Group
Companies like Sears — which was just dropped from the S&P 500 — and Blockbuster didn’t respond to disruptive innovators, and have paid the price. Others, like JC Penney, have seen new strategies fall flat, and now they’re playing catch up in a particularly difficult environment.
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