#1 

Shifted from DVDs by mail into the leading streaming video content service and now a top original content provider.

 #2

Moved beyond core in creative & document software into digital experiences, marketing, commerce platforms and analytics, while changing its business model from packaged software to cloud subscriptions.

#3

Amazon initiated “Amazon Web Services” (Cloud) to overcome the cost of infrastructure required to conduct operations. AWS has turned into a surprisingly lucrative profit engine. Amazon has also built an entire ecosystem of products and services enabled by its Prime membership.

#4

Tencent transformed from an online messenger and video game business to an all-around technology business that has presence in entertainment, autonomous vehicle, cloud computing, and fintech. 

#5

Microsoft has transformed from a business model based primarily on selling products, licensees (IP), and devices to a cloud-based platform-as-a-service business. 

#6

Since inception, Alibaba has long positioned itself as an innovation powerhouse, having successfully transformed from an internet e-commerce and retail company to a technology business. 

#7

Moved from a state-owned oil and gas exploration and production company to stage a 2016 IPO as the largest offshore wind farm company in the world. 

#8

Intuit transformed from a provider of products and services to an online ecosystem of financial services for small and medium enterprises (SMEs).

#9

Established as a financial services and insurance company, Ping An transformed itself into a cloud tech business providing fintech and AI-based medical imaging & diagnostics.

#10

Transforming from a traditional regional bank to a global digital platform company, around a cultural vision of a “27,000-person startup.” In 2018, crowned “Best Bank in the World.”

#11

Shifting focus from its legacy business in automotive parts and motors to seize growth in water technology through M&A. 

#12

A regional oil and gas company transforms into a global leader in renewable biofuels. 

#13

In 2014, Siemens announced Vision 2020, which detailed an organizational overhaul, restructuring, and strategic shift from energy and industrial manufacturing to digitalization. 

#14

Pursuing a digital transformation that would shift it from a pure hardware supplier to an energy management provider via an open IoT platform

#15

Cisco has been transforming its business from selling networking products and services to becoming a digital IT solutions provider while also moving into adjacencies. 

#16

Starting out as a producer of carpet cleaning solution, Ecolab has evolved to become a market leader for cleaning and sanitation products as well as a provider of custom solutions for energy and water conservation. 

#17

Transformed from a photography-centric firm to a healthcare products and medical imaging company.

#18

AIA Group transformed from a health insurance provider into a collaborator with consumers by creating AIA Vitality — a major wellness and prevention business. 

#19

During its time as a private company, Dell shifted from being a hardware company to being a cloud business integrating EMC’s storage management, tripling its value from 2013. 

#20

Split its lighting core from its healthcare growth business, transforming itself into a healthcare technology company. 

To transform a large organization with a legacy business, leaders must identify one or more opportunity areas that are large enough to make a difference and significant enough to inspire a compelling story of change. Within the Transformation 20, there were four distinct themes that emerged – around digital transformation, combating climate change, transforming healthcare, and new fintech-enabled business models.

Overwhelmingly, the biggest theme for growth, especially in core markets, is diving deeply into digital waters by harnessing new business models for the cloud, the Internet of Things, artificial intelligence and other technologies. Among the 20 companies on the list, half of the firms are transforming by creating new kinds of digital experiences or services that are driving new value for customers.

When it comes to new growth areas, the mandate to combat global climate change or and deal with the ramifications of a warming planet has infused organizations with a transformative purpose. Four of the firms—Ørsted, Ecolab, Neste, and A.O. Smith—transformed by creating new growth through cleantech business models in renewable energy or water services.

The theme of healthcare transformation also proved to be a major global opportunity area—with Philips, AIA Group, Fujifilm Holding and Ping An serving as prime cases. The shift from traditional sick care business models to preventative care and wellness has proven to be especially powerful for galvanizing organizations.

Finally, the theme of fintech, turning complex financial services into simple, disruptive technologies, proved to be a vital area of new growth, especially in China for firms such as Alibaba and Tencent Holdings, where a new generation of consumers aren’t wed to traditional banking or financial institutions.

These new global tech powerhouse companies are building new business ecosystem, and in the process turning China into a culture where transformation is part of the DNA of a growing number of companies. Whereas China used to be criticized for producing companies that merely copied existing products and services, the Chinese firms on the T20 are world-class innovators.

Other common threads include the fact that these transformation efforts take considerable time to play out and pay off. Most of the transformations on our list started at least five years ago.

It’s instructive to contrast the T20 list of 2019 with the original T10 list in 2017. While four companies from then—Adobe, Amazon, Netflix, and Microsoft—have also scored near the top of the new list, several firms have dropped off, due either to their transformation momentum fading or, more commonly, having those efforts play out successfully. The most notable of those firms is Apple, which underwent one of the most successful transformations in business history but is now focused on executing its existing strategy rather than aggressively enter new growth areas.

By looking more deeply into these strategic transformations and analyzing the tough decisions made by the leaders of our T20 companies, we saw five deeply-ingrained behaviors that can be distilled into a set of takeaway lessons for leaders who are embarking on their own transformation journey:

1. They create a higher-purpose mission.

 Leaders embarking on transformation often come up against active opposition from those in the organization who are not comfortable with change, as well as the sheer inertia of the way things have been done in the past.

Successful leaders overcome this resistance by creating a galvanizing mission for the organization. Entering new growth markets is the “what” that propels a transformation, but leaders also need to tell the story of “why.” The companies on the list have infused a higher-purpose calling into the culture, and this helps guide big decisions and give clarity to everyday tasks.

The #16 company on our list, Ecolab, is a prime example of finding a higher purpose even when the company was not facing an existential crisis. “We had resistance to change within the core organization,” says Ecolab CEO Douglas Baker Jr. “They didn’t like the idea of not being the biggest anymore. So we had to deal with all this unintended emotional stuff.”

In the early 2000s, when Baker became CEO, Ecolab was a 90-year-old firm growing 10% annually by focusing on industrial cleansers and food safety. “Our strategic plan was to sell more of what we had,” Baker says. To grow much beyond its $3.8 billion in revenue, the company could have kept moving into adjacent markets or new geographies, but Baker felt that wasn’t bold enough.

The transformation began by talking to customers, Baker says. The same customers who were buying its core products were also voicing concerns about access to clean water. And they weren’t alone. Projections for the year 2030 showed that 70% of the world’s GDP would be based in water-stressed regions, California and Southern India being prime examples.

In 2011, Ecolab had a $12 billion market cap when it acquired water technology company Nalco in an $8 billion deal. The combined company is now one of the world’s leading suppliers of hardware and software that helps manufacturers and service firms become more efficient users of water. A primary metric driving the organization is how much water is saved by its clients annually, which now stands at 188 billion gallons, against a 2030 target of 300 billion gallons.

“We broadened our mission and our purpose statement changed, to clean water, safe food, abundant energy, healthy environment,” Baker says. The change in the mission—from the previous “to make the world a cleaner, safer and healthier place”—reflects how Ecolab intends to make the world a better place, and the specificity itself has been galvanizing. “As our teams widened their awareness of global issues, our pride has been enhanced,” Baker adds.

Protecting and healing the planet has also proved to be financially rewarding. Ecolab’s market value now stands at $58 billion, placing it among America’s 100 most valuable firms.

The #1 company, Netflix, is another case in point. In 2013, CEO Reed Hastings released an 11-page memo to employees and investors detailing a mission to move from just distributing content digitally to become a producer of original content that could win Emmys and Oscars.

As the memo said, “We don’t and can’t compete on breadth with Comcast, Sky, Amazon, Apple, Microsoft, Sony, or Google. For us to be hugely successful we have to be a focused passion brand. Starbucks, not 7-Eleven. Southwest, not United. HBO, not Dish.”

Since unveiling that new purpose, Netflix revenue has roughly tripled, its profits have multiplied 32X, and its stock CAGR has increased 57% annually, versus 11% for the S&P 500.

In a comparable way, other organizations on the list have transformed by embracing a purpose-driven mission of making people healthier and preventing illness. China’s AIA Group has moved beyond insurance to become a wellness company, whereas Dutch electronics giant Philips has largely divested its legacy lighting business to focus on healthcare technology.

The information technology companies on our list also discovered ways to infuse purpose into their organizations that recognized a need for fundamental change. Tencent Holdings began as an online chat and video game provider catering to the new generation of digital natives in China. Its original corporate objective, according to early annual reports, was simply to harness the Internet opportunity. As of 2005, shortly after its IPO, Tencent defined its purpose in terms of “implementing our Online Lifestyle strategy, which strives to cater to the basic needs of our users.”

Only in subsequent years did founder and CEO Pony Ma Huateng broaden the firm’s outlook by embracing a mission of “improving the quality of human life through digital innovation.” Since 2011, Tencent has invested heavily in new growth areas ranging from education and entertainment to autonomous vehicles and ride sharing to fintech and the industrial internet—areas that together now represent 25% of its $46 billion revenue. This growth helped Tencent become the first Asian company to surpass $500 billion in market valuation.

In 2019, the company refined its mission once again, in response to the growing global backlash against technology’s dominance in our lives, boiling it down to: tech for social good.

“Rather than the techno-optimism of the past, people are becoming increasingly cautious of technology,” the company announced. “We should make careful choices instead of being blindly optimistic.” 

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This sense, that there is a higher purpose besides growth itself, is a common thread among the T20 companies. As Ørsted’s Poulsen concludes, “It has been important to drive purpose inside the company. It’s been turbulent but the new mission is what has guided us.” The result is somewhat counter-intuitive: Focusing on purpose, rather than growth, is precisely what drives growth, while also keeping employees engaged in executing a worthy mission.

2. They’re not afraid to let go of the past.

To focus on the future, you often need to leave the past behind. Intuit founder and executive committee chairman Scott Cook explains it this way: “We stopped doing a bunch of things on the theory of ‘do less better.'”

The Intuit leadership team concluded that redeploying talent and capital to the new growth business mean that it had to make tough choices of which businesses to exit. “We sold off five divisions and product lines including our oldest franchise, Quicken, which was the original business of the company. We sold it off, and we also stopped all investment in our non-cloud platforms.”

Doing less better was also the mantra for other companies on the list. A.O. Smith completely exited its historic core of auto parts & motors to concentrate its investments on innovating its commercial and residential water heaters as well as entering the global water treatment market. “It’s all about water,” the company says, and that focus required jettisoning parts of its past that didn’t fit that mission.

In a similar way, Ørsted exited its historic fossil fuel business, divesting eight of its 12 divisions, to embark on offshore wind farming, part of its mission to become the world’s greenest energy company. Microsoft and Adobe have nearly completely phased out its once lucrative packaged software businesses to focus on subscription services for the cloud.

In 2014, Siemens launched its Vision 2020 plan, which involved phasing out traditional businesses in serving oil & gas companies and industrial manufacturing, so that it could build new business divisions and transform into a digital services company for some of the same manufacturing companies that also needed to transform themselves.

This was not a small decision for Siemens, as electric power was a core business for 140 years and had generated $30 billion and employed 80,000 people. “It’s the right thing to do,” Siemens chairman Jim Hagemann Snabe told Reuters. “It’s necessary and courageous to trigger the planned changes when the company is doing well.” The spinoff gives Siemens the resources for investing in its Digital Industries (DI) and Smart Infrastructure (SI) divisions as the core of the new Siemens.

3. They leverage a core capability to enter new growth markets.

One of the biggest lessons from successful transformation efforts is the ability to take advantage of being the industry incumbent, with assets such as brand, customer relationships, distribution, and other core capabilities.

Siemens was struggling with what it means to be a cross-sector conglomerate in an age where each industry has focused players. Siemens USA CEO Barbara Humpton says the key was finding new growth opportunities where Siemens could bring its brand clout and technological know-how to the world’s “global megatrends,” from smart cities to climate change to health care for an aging population, while also building new capabilities for its move into the Internet of Things and data analytics (see video).

Once upon a time, Fujifilm Holdings was in the same boat as Eastman Kodak, enjoying a near-monopoly market position in photographic film. But Fujifilm’s more expansive view of its business has been enormously successful, whereas Kodak failed, filing for bankruptcy in 2012.

Fujifilm invested heavily in medical imaging, leveraging existing chemical technology and know-how that the firm used in photographic film, launching a full product line of diagnostic equipment for hospitals and other healthcare providers. The company also developed and marketed pharmaceutical drugs using existing chemical compounds. While its revenue has declined, profits have turned from losses to healthy margins. As of 2010, the company didn’t break out healthcare as a separate business, except for noting that its X-ray film technology has been a mainstay of the company since the 1930s. Currently, 18% of Fujifilm’s $22 billion in revenue comes from healthcare.

In a similar way, Schneider Electric leveraged its ability to create tech platforms to move into creating an Internet of Things data analytics business for energy management. Finland’s Neste seized on the market for renewable biofuels using some of the same industrial processes that it honed for refining oil & gas.

China’s Ping An leveraged its know-how and industry relationships as a traditional health insurance company to launch an online healthcare ecosystem platform called Good Doctor. The advantage of incumbency paid off, as Good Doctor signed up over 3,000 hospitals, 1,000 health clinics, 500 dental clinics and 7,5000 pharmacies. This critical mass has attracted more than 265 million registered users, enabling Ping An to stage an IPO of the platform as a separate company, raising over $1 billion from global investors.

4. They seize the digital opportunity via new platforms and business models.

 For DBS Bank, the transformation has been along many dimensions, from a national bank to a regional and global bank, and from traditional banking services to new kinds of fintech business models. But the common denominator to all these efforts has been building new digital platforms, says Paul Cobban, Chief Data Transformation Officer. “We went public with an economic model that would determine the value of our digital strategy,” Cobban says. “So we can measure how much value we’re getting out of this approach.” Some powerful results: In 2019, DBS became the first bank to simultaneously hold the titles “Bank of the Year” (The Banker), “Best Bank in the World” (Global Finance), and “World’s Best Bank” (Euromoney).

One of the keys to that success was not just going digital but opening up a digital platform that others can play on, taking part of the playbook from companies like Apple, Adobe and Amazon. DBS launched the world’s largest application protocol interface (API) protocol, where financial and retail partners can invisibly integrate DBS’s capabilities into their systems. By late 2018, DBS demonstrated that digital customers are at least twice as profitable as traditional customers.

Netflix mines audience data to create an astonishing range of new shows. Not only does Netflix use data to drive the compelling customer experience (e.g. even tailoring the images they use for each show to match customer preferences), they have fundamentally changed the way that they make decisions about which shows to pursue based on the data they collect on viewing behavior. For example, there are numerous stories of potential showrunners (e.g. The Crown) arriving to meet Reed Hastings thinking they were there to pitch the show only to discover that Netflix had used data to already make the decision about pursuing the show based on their own analytics.

AIA Group’s transformation has taken the Hong Kong-based life insurance company into a new global growth area, with its digital Vitality platform  providing wellness and prevention knowledge, tools, and motivation to AIA members, leading to a business representing 10% of total revenue and growing at an 85% rate last year. Other T20 firms have also reaped benefits of invested heavily in new digital platforms for its customers. Cisco has cultivated customer relationships to find smart niches for new value-added digital subscription services. Ecolab has created new digital platforms for water analytics and distribution.

5. Innovation isn’t isolated to a department but is a strategic capability.

 Jeff Bezos of Amazon.com has famously led the organization to obsess over the customer, rather than competitors, leading to the Internet retail to take its internal cloud technology to customers. Amazon Web Services is now a $26 billion business that provides a lion’s share of the company’s profits.

 In a similar way, Alibaba has always made innovation the key to everything, enabling it to expand beyond its roots as an e-commerce and Internet services company into new growth areas ranging from digital platforms for financial services to digital media to AliHealth and AliSports.

At Microsoft, CEO Satya Nadella has built a different kind of culture of innovation, less technological and more customer-focused, than the company led by his predecessors.

This was accomplished largely by shifting its culture away from one of competition, where managers were told to rank the value of each employee from 1 to 5. Nadella came up through the organization by growing its Azure cloud business by asking questions about customer needs. “We went from a culture of know-it-alls to a culture of learn-it-alls,” says Chris Capossela, Microsoft’s chief marketing officer.

These cultural traits of curiosity and customer obsession are hallmarks of innovative organizations, and it’s precisely this behavior that helps a large organization pivot to a growth mindset.

By many accounts, this has served the organization well as it moved away from its obsolete mission of “a computer on every desktop,” which was technology-focused, to its current mission of “empower every person and every organization on the planet to achieve more,” which is customer-focused.

Ørsted’s Poulsen encapsulates this innovation mindset like this: “We didn’t want to have a corporate innovation department or R&D group but to have innovation out in all the business units, so we can innovate offshore wind as a technology, in the supply chain; in the way we design, operate and maintain, to innovate every aspect, including our partnership business model.”

These finalist companies advanced into the third round of the analysis but fell short in the judge’s ratings to make the T20. In some cases, these companies are only just recently embarking on their transformation journey. For instance, Italian energy giant Enel only began in 2017 to embark on its strategy for smart homes and sustainability services. Others, like Danone (a previous T10 company, for its shift to becoming a nutritionfocused firm), have executed long-running transformations that haven’t yielded new levels of change in recent years. Yet all of these firms remain impressive, considering that more than 95% of public companies haven’t attempted to transform or haven’t achieved measurable new growth.

The takeaway lesson from these mission-changers is clear: In an era of relentless change, a company survives and thrives based not on its size or performance at any given time but on its ability to reposition itself to create a new future. The leaders of the companies we’ve featured here have to varying degrees steered through different types of organizational crises.

As outlined in Dual Transformation (see graphic below), there are three flash points that happen as an organization change effort is proceeding successfully but can derail the entire plan:

1. Crisis of Commitment: when at the early stage of a transformation, many leaders and employees worry about committing to a new trajectory and seeing it through even in the face of evidence that the core is in decline. 

2. Crisis of Conflict: when different parts of the organization fight for scarce capital resources as new growth areas receive a disproportionate share of investment relative to their current size. What happens when key stakeholders complain that new growth progress is too slow?

3. Crisis of Identity: when the organization realizes “If we’re not a [fill in the blank] company anymore, what are we? What happens if key people feel like they don’t belong anymore?

However, the vast majority of leadership teams never encounter these three crises. As a chief technology officer we met with recently asked us: “We basically aren’t at any of these stages yet. What do you call the crisis before all of this?”

That caused us to step back to consider what prevents most companies from making the decision to transform in the first place.

We’d call this the Crisis of Complacency. One driver of this crisis is that existing data misleads because it lags the disruption taking place in the market. By the time the data is clear, it is typically too late. A second problem is that existing customers often serve as poor guides to the future, as they tell companies to provide them better, cheaper versions of what they are currently providing. A final driver of complacency is the constraints that an existing business model places on a company.

Mirroring Netflix’s subscription-based business model, for example, looked financially unattractive to Blockbuster Video, who made most of its money via charging late fees. The lessons are counter-intuitive yet clear:

Data misleads.

Customers deceive.

The business model binds.

This places companies in the prison of the present, where they perpetuate the past versus creating the future. It takes courage to choose the difficult path of breaking out of this prison and challenging the status quo.

Which brings us to the most common argument we encounter when it comes to embarking on transformation: it’s too risky. But as one Fortune 500 CEO recently told us, “Our system of capitalism totally misprices risk. Big moves look like they are really risky. But by and large they are not. Because what you lose when you invest a ton of money is the money you invested. It is capped. However, when you win, you create not only an annuity but a new ecosystem that gives you the opportunity to grow in new areas for a long time to come.”

The Transformation 20 indeed shows the powerful payoff that comes when leaders steer their organization through these crises to imagine and build a bold new future.

We began the process of identifying candidates for the Transformation 20 by screening companies in the S&P 500 and Forbes Global 2000 according to the following questions.

1. How has this company exemplified strategic transformation?

2. Has this transformation had a significant impact on customers and its industry over the past decade?

3. Does the company show potential to sustain its transformation over the next decade?

During this first phase of the methodology, a small team of Innosight consultants pored over each firm in the S&P 500 and Global 2000 to arrive at a list of 52 companies that had made a clear commitment to strategic transformation within the past 10 years. Our team rated each company using a set of criteria measuring their financials (notably revenue growth and stock performance), the degree to which they had built meaningful new growth businesses, and the degree to which they had repositioned their core business.

During round two, we used these comparative metrics to narrow the list to 27 finalist candidates, as voted on by a panel of Innosight partners: Scott D. Anthony, Rob Bell, and Alasdair Trotter. For each company, we created a one-page judging profile. We then sent that presentation of profiles along with instructions out to our panel of judges, who scored each company on a scale of 1 to 5, with 5 being the best example of a successful strategic transformation. We’d like to acknowledge and thank our list of judges and congratulate the T20 winners.

We are the growth strategy consulting firm co-founded in 2000 by Harvard Business School Professor Clay Christensen and business leader Mark W. Johnson. Now the strategy and innovation practice at Huron Consulting (NASDAQ: HURN), Innosight is based in Boston with offices in Singapore and Switzerland.

Disruptive change is accelerating, and companies today face more ambiguity than ever. But with ambiguity comes opportunity. Leaders equipped to act in the face of uncertainty can build paths to growth that have not yet been imagined.

Traditional approaches to strategy and growth are insufficient to meet the challenge. Most strategy consulting firms analyze the past to predict the future. They are facing the wrong way.

Innosight looks at the world differently. We’re in the future business. As the leading expert on disruptive innovation and strategic transformation, we bring a unique set of lenses to growth strategy. We help business leaders develop deep insights into the needs of tomorrow’s customers, align around a shared vision of the future, and then create the organizational momentum to get there. Our approach to innovation consulting is collaborative, and our clients tell us we change the way they think about and see the world, enabling them to do things they could never do before. We build capabilities, not dependence.