SOURCE: Innosight

April 12, 2017 14:18 ET

Three Crises Every Business Leader Will Need to Face to Avoid Death by Disruption

The Best Response to Disruption: A Dual Transformation of Your Business. But That Brings with It Crises of Commitment, Identity and Conflict that CEOs Must Now Learn to Navigate and Resolve, Says Innosight

NEW YORK, NY--(Marketwired - Apr 12, 2017) - Most business leaders tend to avoid crises, like a shareholder revolt or PR disaster, whenever they can. But in order to avoid the ultimate crisis -- extinction -- many of the best CEOs will need to engage with and overcome three others: crises of commitment, identity and conflict.

Disruption is wreaking havoc on America's leading companies: Average company tenure in the S&P 500 is forecast to fall to 14 years in 2026, from 33 years in 1965. The best way to respond is with a two-track, "dual transformation" of the company: repositioning today's business to fortify it, while launching a separate venture to create the growth business of tomorrow. But to transform successfully, leaders will need to deal with three new types of crisis, according to growth strategy consulting firm Innosight.

"Real, authentic transformation is a monumental challenge, and one that more and more CEOs recognize is critical to their company's survival," says Innosight Managing Partner Scott Anthony, co-author of the new book Dual Transformation: How to Reposition Today's Business While Creating the Future (Harvard Business Review Press, April 2017). "When leaders commit to what we call dual transformation -- making their core business more resilient while at the same time building new growth engines -- they will inevitably encounter three crises, and how they respond will make or break their effort."

Anthony and his co-authors, Mark Johnson, Innosight Co-Founder and Senior Partner, and Clark Gilbert, BYU-Idaho President, cite examples of CEOs currently leading dual transformation initiatives.

For example, Aetna Chairman and CEO Mark Bertolini has managed crises of commitment, identity and conflict in transforming Aetna's business model away from "insurance," and toward population health management, disease prevention and consumer affordability.

To transform successfully in response to market disruption, business leaders will need to guide their companies through three kinds of demanding challenges unlike any others they face:

  • Crises of commitment. Leaders must act, even in the face of high ambiguity, low knowledge and high levels of assumption. Why? Disruption usually plays out over years, not over months, making it difficult to see. Nevertheless, CEOs must act now. Crises of commitment arise as the CEO tries to win, and maintain, a consensus for radical change even when the evidence is not clear-cut.

  • Crises of internal conflict. Successful transformation requires constant intervention to address resource conflicts between the core business of today and the growth business of tomorrow. Resource conflicts are commonplace, but dual transformation raises the bar, and the volume. Fortifying the existing business while simultaneously launching a new one means both groups have everything on the line. The CEO must channel resources away from a core business with proven success, toward a new and unproven venture-but do it in a way that preserves the relevance and resilience of the core business, while maximizing the growth potential of tomorrow's business.

  • Crises of identity. Organizations do not change of their own accord, and the inertia of the traditional organization will rigidly defend its past identity, if allowed to. What will the company look like 10 or 20 years out, and how will it succeed in a market that looks radically different from the one it leads today? Only the CEO and other senior leaders will be able to see that future identity. And without strong and vocal leadership from the top, the organization will likely backslide and revert to its old ways, killing the transformation before it has a chance to succeed.

"Major companies, across many different industries, are using dual transformation to anticipate disruption and craft a long-term, strategic approach for dealing with it," says BYU-Idaho President, and Dual Transformation co-author, Clark Gilbert. "But these kinds of transformations bring their own set of challenges, which most CEOs have never dealt with before. Those are challenges CEOs must learn to solve if their companies are to go beyond mere survival, and become leaders in a radically changed world."

ABOUT INNOSIGHT
Innosight, the strategy and innovation business of global professional services firm Huron, helps organizations design and create the future, instead of being disrupted by it. Acquired by Huron in 2017, Innosight is the leading authority on disruptive innovation and strategic transformation. The company collaborates with clients across a range of industries to identify new growth opportunities, build new ventures and capabilities, and accelerate organizational change. Learn more at www.innosight.com and www.huronconsultinggroup.com.

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