Dual Transformation

1. Disruptive Change Requires Dual Transformation

The hastening pace of disruptive change means leaders have precious little time to respond.

The Innovator's Clock Accelerates. In today's business environment, disruptive forces are not only more frequent but also unfold at an unprecedented pace. Companies like Kodak, newspapers, Nokia, and RIM experienced drastically different timelines, with the latter two facing near-instant disruption compared to Kodak's drawn-out decline.

Dual Transformation Defined. To navigate this landscape, leaders must embrace dual transformation, simultaneously repositioning their traditional core business (Transformation A) while building a separate and focused team to pursue new growth opportunities (Transformation B). This approach acknowledges that change is not a monolithic process but requires parallel efforts.

The A+B+C=Δ Equation. The dual transformation equation, A + B + C = Δ, encapsulates this approach. Transformation A focuses on repositioning the core, Transformation B creates a new growth engine, and the Capabilities Link (C) leverages difficult-to-replicate assets to gain an unfair advantage. This formula provides a framework for achieving significant change (Δ) in the face of disruption.

2. Transformation A: Repositioning the Core for Resilience

The essence of transformation A is changing the how—finding more effective and efficient ways to address customer needs to maximize the resilience and relevance of your historical core business.

Defensive Maneuvers. Transformation A is about making the core business more resilient in the face of disruption. It involves re-evaluating the customer's job to be done and innovating the business model to deliver against that job more effectively. Examples include Deseret Media's shift to faith and family content, Adobe's move to subscription-based software, and Netflix's transition from DVDs to streaming.

Four Keys to Transformation A. To succeed with Transformation A, leaders must:

• Determine the defensible post-disruption job to be done
• Innovate the business model to deliver against the job
• Determine and monitor new metrics that reflect the new model
• Implement aggressively

Beyond Cost-Cutting. While cost reduction is often a component of Transformation A, the goal is not simply to cut costs but to reposition the business model to increase long-term competitiveness. This requires a fundamental rethinking of operations and a willingness to make bold moves.

3. Transformation B: Creating a New Growth Engine

Disruption opens windows of opportunity to create massive new markets.

Seizing the Innovator's Opportunity. Transformation B is about identifying and capitalizing on new growth opportunities created by disruptive forces. It involves finding new ways to solve different problems, often by breaking constraints that historically bottled up markets. Examples include SingPost's shift to logistics services, Amazon's creation of Amazon Web Services, and universities' expansion into online education.

Three Keys to Transformation B. To successfully drive Transformation B, leaders must:

• Identify constrained markets
• Iteratively develop the business model to serve those markets
• Use partnerships, acquisitions, and new hires to succeed against a new competitive set

Beyond the Core. Transformation B requires a different mindset and skillset than Transformation A. It involves venturing into new markets, competing against new players, and embracing a more iterative, test-and-learn approach.

4. The Capabilities Link: Bridging Core and New Growth

The capabilities link flips the dilemma.

Flipping the Innovator's Dilemma. The Capabilities Link (C) is the bridge between Transformation A and Transformation B. It involves strategically leveraging existing capabilities to gain an unfair advantage in new markets, while avoiding the constraints that can stifle innovation. This requires striking a careful balance between leveraging core assets and allowing the new growth engine to operate independently.

Three Keys to the Capabilities Link. To successfully create a Capabilities Link, leaders must:

• Carefully select critical capabilities
• Strategically manage the interface between the core and the new
• Actively arbitrate when disputes arise

Strategic Selection. The key is to identify capabilities that will truly give the new growth engine an unfair advantage, rather than simply borrowing capabilities because they are readily available. This requires a deep understanding of the new market and the competitive landscape.

5. Courage to Choose Before the Burning Platform

Paradoxically, the more obvious the need to transform, the harder it is to do it.

The Burning Platform Fallacy. Waiting until a crisis hits before initiating transformation is a recipe for disaster. By then, options are limited, and the organization is often paralyzed by fear and uncertainty. Leaders must have the courage to choose to transform before the need is obvious.

Early Warning Signs. To identify the need for transformation, leaders must be vigilant in monitoring early warning signs of disruptive change, such as:

• Decreases in customer loyalty
• Significant venture capital investment in emerging technologies
• Policy changes that open the door to new entrants
• Emergence of disruptors at the low end or market fringes
• Shifts in customer habits and preferences
• Development of viable disruptive business models
• Slowing revenue growth coupled with increased profit margins

Proactive Leadership. The key is to be proactive rather than reactive, anticipating future challenges and opportunities before they become mainstream. This requires a willingness to challenge conventional wisdom and embrace uncertainty.

6. Clarity to Focus on a Select Few Moonshots

Innovation is saying ‘no’ to 1,000 things.

Strategic Clarity. Dual transformation requires a laser focus on a select few high-potential opportunities. Leaders must resist the temptation to pursue too many initiatives, as this can dilute resources and create confusion. The goal is to identify a handful of "moonshots" that have the potential to transform the organization.

Three Steps to Strategic Clarity. To achieve strategic clarity, leaders must:

• Determine their growth gap
• Determine the goals and boundaries of their new growth efforts
• Identify strategic opportunity areas

Future-Back Thinking. This process requires a "future-back" mindset, starting with a clear vision of the desired future state and then working backward to identify the steps needed to achieve it. This approach helps to prioritize efforts and avoid getting bogged down in incremental improvements.

7. Cultivate the Curiosity to Explore New Frontiers

Even though focus is important, leaders must recognize that the specific strategy that will power transformation B will come out of a process of trial and error, with many efforts failing along the way.

Balancing Predictability and Curiosity. While predictability is essential for managing the core business, curiosity is crucial for exploring new growth opportunities. Leaders must create an environment that encourages experimentation, learning, and a willingness to challenge assumptions.

Three Ways to Infuse Curiosity:

• Create safe spaces for innovation
• Expose leaders to new thinking
• Reinforce curiosity in routines and rituals

Embracing Failure. A key aspect of cultivating curiosity is embracing failure as a learning opportunity. Leaders must create a culture where it is safe to experiment and where mistakes are seen as valuable sources of insight.

8. The Conviction to Persevere Through Predictable Crises

There will be dark days—times when a board member doubts, when shareholders question, when even committed executives waver.

The Inevitability of Crises. The dual transformation journey is fraught with challenges and setbacks. Leaders must be prepared to face crises of commitment, conflict, and identity. These crises are predictable, but their timing and intensity are not.

Two Keys to Perseverance. To navigate these crises, leaders must:

• Repeat the mantra, "A does A, B does B," to maintain focus and avoid distractions
• Ground their efforts in a motivating purpose that unites the organization

The Power of Purpose. A clear and compelling purpose provides a guiding light during difficult times. It helps to align the organization, clarify priorities, and inspire employees to persevere through challenges.

Last updated: March 10, 2025