Search
Close this search box.
Search
Close this search box.

Don’t Pivot Away From Your Old Businesses, Pivot Around Them

The problem with prematurely abandoning old and existing businesses is that even better and cheaper offerings don’t always scale when you think they will.

The problem with prematurely abandoning old and existing businesses is that even better and cheaper offerings don’t always scale when you think they will.

The relentless digital disruption of one industry after another has led many companies to quickly disengage from their older businesses and enter new, more promising ones. Strategy experts warn against exiting mature businesses too late. CEOs, considering their legacy, understandably focus on the new. But it turns out that the best response to constant and potentially devastating change isn’t a headlong, one-and-done pivot to the new.

Digital-first strategies can not only give you a jump on disruption but also breathe new life into old businesses and enable you to seize new opportunities in existing businesses. That’s what my colleagues and I found in our on-going study of over 1,300 companies, about 100 of which have learned to pursue repeated renewal and reinvention through a series of strategic pivots, applying innovation equally in the old, the now, and the new.

These companies fight the urge to prematurely abandon legacy businesses. They nurture rather than simply exploit today’s “cash cows.” And they use the additional value they uncover to fuel the new, embracing the start-up mentality of scaling rapidly when new technologies and markets solidify, often suddenly.

The problem with prematurely abandoning old and existing businesses is that even better and cheaper offerings don’t always scale when you think they will. Long-time customers may also not be ready to give up on products they have come to rely on, and which they’ve integrated into daily life. (Case in point: Netflix’s hasty abandonment of mail order DVDs in favor of streaming, which CEO Reed Hastings almost immediately realized was a mistake.) You may be more reliant on both healthy revenues from the mature business and the goodwill of legacy customers longer than you think.

In the growing gap between how companies use technology today and its much greater potential lie increasingly rich stores of untapped opportunities, or “trapped value.” Continuing improvements in the speed, size, power, price and efficiency of digital technologies can free that trapped value in all parts of your business.

Consider Google

In the old, rather than simply letting its search and advertising business run on autopilot, the company continues to innovate ferociously. Core algorithms are constantly updated to improve results, tested by a network of 10,000 paid raters. In 2017 alone, Google ran 31,584 side-by-side experiments, resulting in 2,453 separate changes to its core search product. Just in the last ten years, a few of the major innovations the company has added include everything from auto-completion to automated subtitiling service, directions and traffic, versions optimized for a wide range of mobile devices and voice and image-based searching.

In the now, Google’s parent Alphabet is diversifying its revenue sources in businesses like cloud computing, hardware (smart speakers and phones, and IoT products such as Nest smart thermostats), apps in the Google Play store, and subscriptions to YouTube TV and Music products.

In the new, Alphabet is investing nearly 7% of annual operating revenue in what it calls “other bets.” These include the Waymo autonomous vehicle unit; the Tech Lab X, which oversees initiatives including broadband delivered by high altitude balloons; and Project Wing, a drone delivery effort.

Google’s continuous innovation in old and existing businesses grows the bottom line, discourages competitors and helps fund the futuristic disruptions sought by Alphabet. And it points away from old business paradigms focused on linear, lifecycle models of business management.

Companies that are adept at releasing trapped value don’t just pursue new strategies but a new approach to strategy itself. Instead of pivoting prematurely away from the old and the now toward the new, they pivot simultaneously around all three, continually reallocating assets and investments to balance the old, the now, and the new.

Applying this new way of thinking for managing the old and the now can help you create a portfolio that generates revenue and competitive freedom to focus on an increasingly uncertain future. Improving your core and growing it at the same time protects fleeting market share and generates revenue growth that can be reinvested in the higher-risk technologies and innovations that have the potential to help you arrive sustainably at the new.

That’s a legacy any chief executive would be proud of.

Read more: From Home Heating Oil to Healthy Food, The Evolution of Global Partners


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.