Idea in Brief
The Opportunity
While new technologies continue to upend industries and shorten the lives of corporations, there has never been a better time for companies to search for new growth engines.
How to Tap It
Half of successful “engine two” businesses are found by entering a fast-growing adjacency, as Ecolab, a provider of industrial cleaning products and services, did when it moved into the industrial water purification business. About a third are next-generation versions of the core business—like Netflix’s move from DVD rentals to streaming. The rest involve building or buying a business totally separate from the core.
Keys to Success
Companies need to identify markets with expanding profit pools, ensure that their offerings are differentiated, and instill an entrepreneurial mindset in the new business while harnessing the skills and assets of the original engine of growth.
In a series of forums we held recently with chief executives of large companies around the world, we uncovered a preoccupation with obsolescence and renewal. When we surveyed them, 65% of the CEOs predicted that in five to seven years their firms’ main competitors would be different from their main competitors today, and 63% said that new competitors with new business models would pose a major threat to their firms’ core business. The CEOs projected that in the next decade 40% of the value their companies created would come from entering new markets and launching new business models. Clearly, the business landscape feels highly unstable to them—which is understandable, given that new technologies continue to upend industries and wipe out businesses at a remarkable rate.
