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The Transformation 20 STRATEGIC CHANGE RANKINGS FOR 2019

Spotlighting the 20 global companies that have achieved the highest-impact business transformations over the past decade

By Scott D. Anthony, Alasdair Trotter, Rob Bell and Evan I. Schwartz »» Introducingoducing the the Transformation 20 20 THE TRANSFORMATION 20

»» Top-Level Themes from the Transformation 20 ometimes it’s a financial To better understand the dynamics outside the core that can be »» The Five Behaviors S crisis, sometimes it’s the of why and how transformation attributed to new growth areas. of Transformational threat from a disruptive competitor, happens, Innosight developed a Organizations sometimes growth just hits a wall, methodology to evaluate strategic 2. Repositioning the Core sometimes it’s the opportunity change efforts, with the aim of How effectively has the company »» Seven Transformations to ride a global megatrend and identifying best practices across adapted its traditional core to Watch sometimes it’s simply the result of industries and public companies to changes or disruptions in systematic planning for the future. that exemplify leadership its markets, thus giving its »» T20 finalists are headquartered excellence. While other business legacy business new life? across the world Whatever motivates a leadership rankings rely on metrics such as team to embark on strategic revenue, market value or subjective 3. Financials »» Conclusions transformation, it’s often easier in assessments such as “most Has the company posted strong the short term not to undertake innovative,” the Transformation financial and stock market »» T20 Methodology the challenge (or delay the 20 research team screened all performance, or has it turned decision for just one more year), the companies in the S&P 500 around its business from losses or »» T20 Panel of Judges which is why stories of successful and the Global 2000 by looking slow growth to get back on track? corporate change efforts are so across three categories of data: We looked at revenue compound »» About the authors and Innosight rare. Yet strategic transformation annual growth rate (CAGR), — adapting a core business to 1. New Growth profitability and stock price CAGR »» Snapshots of the disruptive change while also How successful has the company during the transformation period, T20 Companies creating new growth around new been at creating new products, which was different for each firm. products, services or business services, markets and business models — may be the leadership models? This includes our primary Our initial phase of research imperative of the 21st century. metric: the percentage of revenue identified 52 companies making

2 »» Introducingoducing the the substantial progress toward “What businesses are doing here is fundamentally Transformation 20 20 transformation — merely 3% changing in form or substance. A piece, if not the of the public companies in our »» Top-Level Themes from data set. From this second- essence, of the old remains, but what emerges the Transformation 20 round list, an Innosight partner is clearly different in material ways. It is a liquid »» The Five Behaviors panel voted to narrow it down of Transformational to 27 finalists. For the third becoming a gas. Lead turning into gold. A caterpillar Organizations round, the Transformation 20 becoming a butterfly.” winners were selected by a panel

»» Seven Transformations of management experts (see —— INNOSIGHT’S SCOTT ANTHONY AND MARK JOHNSON, WITH CLARK GILBERT, to Watch IN THEIR BOOK, DUAL TRANSFORMATION (HBR PRESS, 2017) the full methodology and list of judges on pages 20-21). »» T20 finalists are headquartered Ørsted's Transformation global overproduction sent gas across the world The 2019 list includes 20 firms, Consider the case of Ørsted, prices plunging by 90% over versus 10 for our previous the Copenhagen-based energy several years. S&P downgraded »» Conclusions rankings in 2017. The immediate company which, at No. 7, is the 6,000-employee firm’s reason for the bigger list is the highest-ranked European credit rating to negative, raising »» T20 Methodology that the judges’ scores were firm on the list. While every the cost of its considerable extremely close, as all 20 of transformation story is different debt. The board hired a former »» T20 Panel of Judges these firms have achieved and yields valuable leadership leader of the transformation compelling results. But the wider lessons, this one happened to be at LEGO, Henrik Poulsen, as »» About the authors and Innosight reason may be that awareness triggered by an industry crisis. the new CEO. Whereas some of transformation itself seems leaders might have gone into »» Snapshots of the to be widening, with more and The Crisis crisis management mode, T20 Companies more companies recognizing In 2012, Denmark’s largest laying off workers until prices the urgency of the challenge, energy company, founded as recovered, Poulsen recognized as well as what a profound Danish Oil and Natural Gas, slid the moment as an opportunity shift these efforts represent. into a financial predicament as for fundamental change.

3 » Introducing the the The Transformation Plan TrTransansformationformation 20 20 “We saw the need to build an entirely new company,” Poulsen » Top-Level Themes from told Innosight. “It had to be a the Transformation 20 radical transformation; we needed » The Five Behaviors to build a new core business and of Transformational find new areas of sustainable Organizations growth. We looked at the mandate to combat climate change and » Seven Transformations we became one of the few to Watch companies to wholeheartedly make this profound decision, » T20 finalists are VIDEO: Ørsted’s North America CEO Thomas Brostrøm reveals the biggest challenges of transforming. headquartered to be one of the first to go across the world from black to green energy.” Discovering New The Results » Conclusions Adapting the Core Growth Areas The company was renamed Poulsen emphasized both the The company had invested in Ørsted after the legendary Danish » T20 Methodology short-term and long-term nature offshore wind power, but the scientist Hans Christian Ørsted, of the change. “We looked at the technology was still too expensive, who discovered the principles of » T20 Panel of Judges 12 different lines of business we producing energy that was electromagnetism. This helped more than double the price of infuse a sense of purpose into the » About the authors were in and went through them and Innosight asset by asset, to see where onshore wind. So the company organization that drove it to cut the we saw competitive strength. embarked on a systematic cost of offshore wind power by 63% » Snapshots of the Coal, oil and gas were rapidly “cost-out” program to reduce while building three major, new, T20 Companies eroding as businesses, so we the expense of every aspect of ocean-based wind farms in the U.K. decided to divest eight of our building and running offshore and acquiring a leading company in twelve divisions and use the wind farms while achieving the U.S. to pioneer North American proceeds to reduce our debt.” scale in this emerging market. offshore waters see( video).

4 »» Introducingoducing the the Previously 80% owned by the than $3 billion since 2013, and With this set of criteria and Transformation 20 20 Danish government, Ørsted’s IPO in Ørsted is now the world’s largest such stories in mind, we 2016 was one of the year’s largest. offshore wind company, with a 30% present the T20 for 2019: »» Top-Level Themes from Net profits have surged by more share of a booming global market. the Transformation 20

»» The Five Behaviors The Transformation 20 of Transformational COMPANY CEO NEW GROWTH AREAS STOCK CAGR Organizations (% of total business) (vs. benchmark since base year of transformation) #1. Netflix* Reed Hastings original content (44%) 59% (vs. 10% for S&P 500 since 2012) »» Seven Transformations #2. Adobe* Shantanu Narayen “digital experiences” (27%) 26% (vs. 10% for S&P 500 since 2009) to Watch #3. Amazon* Jeff Bezos Amazon Web Services (11%) 39% (vs. 10% for S&P 500 since 2009) #4. Tencent Pony Ma Huateng fintech, transportation (25%) 32% (vs. 1% for Hang Seng – 2011) »» T20 finalists are headquartered #5. Microsoft* Satya Nadella intelligent cloud (29%) 17% (vs. 9% for S&P 500 since 2010) across the world #6. Alibaba Daniel Zhang fintech/sports/entertainment (14%) 8% (vs. 1% for NYSE Index since 2013) #7. Ørsted Henrik Poulsen offshore wind (37%) 30% (vs. 0% for OMX Copenhagen – 2017) »» Conclusions #8. Intuit Sasan Goodarzi “online ecosystem” (14%) 22% (vs. 10% for S&P 500 since 2012) #9. Ping An Ma Mingzhe fintech and health tech (6%) 17% (vs. 2% for SSE Index since 2012) »» T20 Methodology #10. DBS Group Piyush Gupta global digital platforms (48%) 12% (vs. -1% for Singapore Xchange – 2013) #11. A. O. Smith Kevin Wheeler water tech (100%) 25% (vs. 10% for S&P 500 since 2009) »» T20 Panel of Judges #12. Neste Vanacker renewable fuels (70%) 24% (vs. 7% for OMX Helsinki 25 – 2010) »» About the authors #13. Siemens Joe Kaeser “digital factory” initiative (26%) 8% (vs. 8% for the DAX Index since 2012) and Innosight #14. Schneider Jean-Pascal Tricoire IoT solutions (22%) 8% (vs. 6% for S&P Global 100 since 2012) #15. Cisco Chuck Robbins subscription applications (43%) 9% (vs. 9% for S&P 500 since 2010) »» Snapshots of the #16. Ecolab Douglas Baker Jr. water and energy services (44%) 16% (vs. 9% for S&P 500 since 2011) T20 Companies # 17. Fujifilm Shigetaka Komori healthcare/medical imaging (18%) 7% (vs. 6% for Tokyo Exchange – 2010) #18. AIA Group Ng Keng Hooi wellness & prevention (10%) 15% (vs. 2% for Hong Seng Index – 2013) #19. Dell Tech.** Michael Dell infrastructure & security (51%) 29% (vs. 11% for S&P 500 since 2013) #20. Philips Frans van Houten healthcare (65%) 6% (vs. 6% for S&P 500 since 2014)

*previous winners, from the 2017 T10 ranking **Dell stock includes the periods the stock was public 5 »» Introducing the Transformation 20 TOP-LEVEL THEMES FROM

»» Top-Level Themes Themes from from THE TRANSFORMATION 20 the TransformationTransformation 20 20

»» The Five Behaviors of Transformational transform a large Organizations To organization with a legacy The 4 Major Transformation Themes business, leaders must identify one »» Seven Transformations or more opportunity areas that are to Watch large enough to make a difference and significant enough to inspire a »» T20 finalists are compelling story of change. Within Digital Combating Transforming Fintech-Enabled headquartered Transformation Climate Change Healthcare Business Models across the world the Transformation 20, there were four distinct themes that »» Conclusions emerged — digital transformation, combating climate change, companies on the list, half of Four of the firms — Ørsted, »» T20 Methodology transforming healthcare and new the firms are transforming by Ecolab, Neste and A. O. Smith fintech-enabled business models. creating new kinds of digital — transformed by creating »» T20 Panel of Judges experiences or services that are new growth through cleantech Overwhelmingly, the biggest driving new value for customers. business models in renewable »» About the authors and Innosight theme for growth, especially in energy or water services. core markets, is diving deeply When it comes to new growth »» Snapshots of the into digital waters by harnessing areas, the mandate to combat The theme of healthcare T20 Companies new business models for the global climate change and deal transformation also proved to cloud, the internet of things, with the ramifications of a warming be a major global opportunity artificial intelligence and other planet has infused organizations area — with Philips, AIA Group, technologies. Among the 20 with a transformative purpose. Fujifilm Holding and Ping An

6 » Introducing the serving as prime cases. The “These global tech powerhouses are building new Transformation 20 shift from traditional sick care business models to preventative business ecosystems and, in the process turning China » Top-Levelevel Themes Themes from from care and wellness has proven the TransformationTransformation 20 20 into a culture where transformation is part of the DNA.” to be especially powerful for » The Five Behaviors galvanizing organizations. companies that merely copied to their transformation momentum of Transformational existing products and services, fading or, more commonly, having Organizations Finally, the theme of fintech — the Chinese firms on the T20 those efforts play out successfully. turning complex financial services are world-class innovators. The most notable of those firms is » Seven Transformations into simple, disruptive technologies Apple, which underwent one of the to Watch — proved to be a vital area of new Other common threads include most successful transformations growth. This is especially true in the fact that these transformation in business history but is now » T20 finalists are headquartered China, for firms such as Alibaba efforts take considerable time focused on executing its existing across the world and Tencent Holdings, where to play out and pay off. Most of strategy rather than aggressively a new generation of consumers the transformations on our list entering new growth areas. » Conclusions aren’t wed to traditional banking started at least five years ago. or financial institutions. » T20 Methodology It’s instructive to contrast the T20 These global tech powerhouses are list of 2019 with the original T10 list » T20 Panel of Judges building new business ecosystems, in 2017. While four companies from and in the process turning China then — Adobe, Amazon, Netflix » About the authors and Innosight into a culture where transformation and Microsoft — have also scored is part of the DNA. Whereas China near the top of the new list, several » Snapshots of the used to be criticized for producing firms have dropped off, due either T20 Companies

7 » Introducing the Transformation 20 THE FIVE BEHAVIORS OF

» Top-Level Themes from TRANSFORMATIONAL ORGANIZATIONS the Transformation 20

» The FiveFive BehaBehaviorsviors of TransformationalTransformational looking more deeply Successful leaders overcome not being the biggest anymore. Organizations By into these strategic this resistance by creating a So we had to deal with all this transformations and analyzing galvanizing mission for the unintended emotional stuff.” » Seven Transformations the tough decisions made by the organization. Entering new growth to Watch leaders of our T20 companies, markets is the “what” that propels In the early 2000s, when Baker we saw five deeply ingrained a transformation, but leaders became CEO, Ecolab was an » T20 finalists are headquartered behaviors that can be distilled also need to tell the story of 80-year-old firm growing 10% across the world into a set of takeaway lessons for “why.” The companies on the list annually by focusing on industrial leaders who are embarking on have infused a higher-purpose cleansers and food safety. “Our » Conclusions their own transformation journey: calling into the culture, and this strategic plan was to sell more helps guide big decisions and of what we had,” Baker says. To » T20 Methodology 1. They create a higher- give clarity to everyday tasks. grow much beyond its $3.8 billion purpose mission. in revenue, the company could » T20 Panel of Judges Leadership teams embarking The No. 16 company on our list, have kept moving into adjacent on transformation often come Ecolab, is a prime example of markets or new geographies, but » About the authors and Innosight up against active opposition finding a higher purpose even Baker felt that wasn’t bold enough. from those in the organization when the company was not » Snapshots of the who are not comfortable with facing an existential crisis. “We The transformation began by T20 Companies change, as well as the sheer had resistance to change within talking to customers, Baker inertia of the way things have the core organization,” says says. The same customers who been done in the past. Ecolab CEO Douglas Baker were buying its core products Jr. “They didn’t like the idea of were also voicing concerns

8 »» Introducing the about access to clean water. And “We broadened our mission Transformation 20 they weren’t alone. Projections and our purpose statement for the year 2030 showed that changed, to clean water, »» Top-Level Themes from 70% of the world’s GDP would food, abundant energy, healthy the Transformation 20 be based in water-stressed environment,” Baker says. The »» The FivFivee BehaviorsBehaviors regions, California and Southern change in the mission — from of TransformationalTransformational India being prime examples. the previous “to make the world Organizations a cleaner, safer and healthier In 2011, Ecolab had a $12 billion place” — reflects how Ecolab »» Seven Transformations market cap when it acquired intends to make the world a better to Watch water technology company place, and the specificity itself Nalco in an $8 billion deal. The has been galvanizing. “As our »» T20 finalists are headquartered combined company is now teams widened their awareness across the world one of the world’s leading of global issues, our pride has suppliers of chemistry, hardware been enhanced,” Baker adds. »» Conclusions and software that helps manufacturers and service firms Protecting and healing the planet Douglas Baker, Ecolab »» T20 Methodology become more efficient users of has also proved to be financially water. A primary metric driving rewarding. Ecolab’s market to move from just distributing »» T20 Panel of Judges the organization is how much value now stands at $58 billion, content digitally to becoming a water is saved by its clients placing it among America’s producer of original content that »» About the authors and Innosight annually, which now stands at 100 most valuable firms. could win Emmys and Oscars. 188 billion gallons, against a 2030 »» Snapshots of the target of 300 billion gallons. The No. 1 company, Netflix, is As the memo said, “We don’t and T20 Companies another case in point. In 2013, can’t compete on breadth with CEO Reed Hastings released Comcast, Sky, Amazon, Apple, an 11-page memo to employees Microsoft, Sony, or Google. For us and investors detailing a mission to be hugely successful we have

9 » Introducing the to be a focused passion brand. “Focusing on purpose, rather than growth, is Transformation 20 Starbucks, not 7-Eleven. Southwest, not United. HBO, not Dish.” precisely what drives growth while also keeping » Top-Level Themes from the Transformation 20 employees engaged in executing a worthy mission.” Since unveiling that new purpose, » The FiveFive BehaBehaviorsviors Netflix revenue has roughly recognized a need for fundamental education and entertainment of TransformationalTransformational tripled, its profits have multiplied change. Tencent Holdings began to autonomous vehicles and Organizations 32 times and its stock CAGR as an online chat and video ride-sharing to fintech and the has increased by 59% annually, game provider catering to the industrial internet — areas that » Seven Transformations versus 10% for the S&P 500. new generation of digital natives together now represent 25% of its to Watch in China. Its original corporate $46 billion revenue. This growth In a comparable way, other objective, according to early annual helped Tencent become the first » T20 finalists are headquartered organizations on the list have reports, was simply to harness Asian company to surpass $500 across the world transformed by embracing a the internet opportunity. As of billion in market valuation. purpose-driven mission of making 2005, shortly after its IPO, Tencent » Conclusions people healthier and preventing defined its purpose in terms of In 2019, the company refined illness. China’s AIA Group has “implementing our Online Lifestyle its mission once again, in » T20 Methodology moved beyond insurance to strategy, which strives to cater to response to the growing global become a wellness company, the basic needs of our users.” backlash against technology’s » T20 Panel of Judges whereas Dutch electronics giant dominance in our lives, boiling it Philips has largely divested its Only in subsequent years did down to: tech for social good. » About the authors and Innosight legacy lighting business to focus founder and CEO Pony Ma Huateng on healthcare technology. broaden the firm’s outlook by “Rather than the techno- » Snapshots of the embracing a mission of “improving optimism of the past, people T20 Companies The information technology the quality of human life through are becoming increasingly companies on our list also digital innovation.” Since 2011, cautious of technology,” the discovered ways to infuse purpose Tencent has invested heavily in company announced. “We should into their organizations that new growth areas — ranging from make careful choices instead

10 »» Introducing the of being blindly optimistic.” The Intuit leadership team In a similar way, Ørsted exited Transformation 20 concluded that redeploying talent its historic fossil fuel business, This sense that there is a higher and capital to the new growth divesting eight of its 12 divisions to »» Top-Level Themes from purpose besides growth itself business meant that it had to make embark on offshore wind farming, the Transformation 20 is a common thread among the tough choices of which businesses part of its mission to become »» The FivFivee BehaviorsBehaviors T20 companies. As Ørsted’s to exit. “We sold off five divisions the world’s greenest energy of TransformationalTransformational Poulsen concludes, “It has been and product lines including our company. Microsoft and Adobe Organizations important to drive purpose oldest franchise, Quicken, which have nearly finished phasing out inside the company. It’s been was the original business of the their once lucrative packaged »» Seven Transformations turbulent but the new mission company. We sold it off, and software businesses to focus on to Watch is what has guided us.” The we also stopped all investment subscription services for the cloud. result is somewhat counter- in our non-cloud platforms.” »» T20 finalists are headquartered intuitive: Focusing on purpose, In 2014, Siemens launched its across the world rather than growth, is precisely Doing less better was also the Vision 2020 plan, which involved what drives growth while also mantra for other companies on phasing out traditional businesses »» Conclusions keeping employees engaged in the list. A. O. Smith completely in serving oil and gas companies executing a worthy mission. exited its historic core of auto and industrial manufacturing so »» T20 Methodology parts and motors to concentrate that it could build new business 2. They’re not afraid its investments on innovating divisions and transform into »» T20 Panel of Judges to let go of the past. its commercial and residential a digital services company for To focus on the future, you often water heaters, as well as entering some of the same manufacturing »» About the authors and Innosight need to leave the past behind. Intuit the global water treatment companies that also needed founder and executive committee market. “It’s all about water,” the to transform themselves. »» Snapshots of the chairman Scott Cook explains it this company says, and that focus T20 Companies way: “We stopped a bunch of things required jettisoning parts of its This was not a small decision for on the theory of 'do less better.'" past that didn’t fit that mission. Siemens, as electric power was a core business for 140 years and had generated $30 billion and

11 » Introducing the employed 80,000 people. “It’s Transformation 20 the right thing to do,” Siemens chairman Jim Hagemann Snabe » Top-Level Themes from told Reuters. “It’s necessary and the Transformation 20 courageous to trigger the planned » The FiveFive BehaBehaviorsviors changes when the company is of TransformationalTransformational doing well.” The spinoff gives Organizations Siemens the resources for investing in its Digital Industries (DI) and » Seven Transformations Smart Infrastructure (SI) divisions to Watch as the core of the new Siemens.

» T20 finalists are VIDEO: Siemens USA CEO Barbara Humpton zeros in on adapting the global brand to new growth markets. headquartered 3. They leverage a core across the world capability to enter new growth markets. Humpton says the key was as Eastman Kodak, enjoying a » Conclusions One of the biggest lessons from finding new growth opportunities near-monopoly market position successful transformation efforts where Siemens could bring its in photographic film. But » T20 Methodology is the to take advantage of brand clout and technological Fujifilm’s more expansive view of being the industry incumbent, with know-how to the world’s “global business has been enormously » T20 Panel of Judges assets such as brand, customer megatrends,” from smart cities successful, whereas Kodak failed, relationships, distribution to climate change to healthcare filing for bankruptcy in 2012. » About the authors and Innosight and other core capabilities. for an aging population, while also building new capabilities for its Fujifilm invested heavily in » Snapshots of the Siemens was struggling with what move into the internet of things medical imaging, leveraging T20 Companies it means to be a cross-sector and data analytics (see video). existing chemical technology conglomerate in an age where and know-how that the firm each industry has focused players. Once upon a time, Fujifilm used in photographic film, Siemens USA CEO Barbara Holdings was in the same boat launching a full product line

12 »» Introducing the of diagnostic equipment for honed for refining oil and gas. in order to make it easy to interact Transformation 20 hospitals and other healthcare with, one can digitize the internal providers. The company also China’s Ping An leveraged operations to make things more »» Top-Level Themes from developed and marketed its know-how and industry efficient or one can transform the Transformation 20 pharmaceutical drugs using relationships as a traditional the underlying business models »» The FivFivee BehaviorsBehaviors existing chemical compounds. health insurance company to to take advantage of data in of TransformationalTransformational While its revenue has declined, launch an online healthcare order to create entirely new Organizations profits have turned from losses ecosystem platform called value propositions. While many to healthy margins. As of 2010, Good Doctor. The advantage organizations focus on the first two, »» Seven Transformations the company didn’t break of incumbency paid off, as many of our T20 winners chose to Watch out healthcare as a separate Good Doctor signed up over to power their transformation business, except for noting that 3,000 hospitals, 1,000 health by identifying and launching »» T20 finalists are headquartered its X-ray film technology has clinics, 500 dental clinics and entirely new business models. across the world been a mainstay of the company 7,500 pharmacies. This critical since the 1930s. Currently, mass has attracted more than For DBS Bank, the transformation »» Conclusions 18% of Fujifilm’s $22 billion in 265 million registered users, has been along many dimensions, revenue comes from healthcare. enabling Ping An to stage an IPO from a national bank to a regional »» T20 Methodology of the platform as a separate and global bank, and from In a similar way, Schneider company, raising over $1 traditional banking services to new »» T20 Panel of Judges Electric leveraged its ability to billion from global investors. kinds of fintech business models. create tech platforms to move But the common denominator »» About the authors and Innosight into creating an internet-of- 4. They seize the to all these efforts has been things data analytics business digital opportunity via building new digital platforms, »» Snapshots of the for energy management. new platforms and says Paul Cobban, chief data T20 Companies Finland’s Neste seized on the business models. transformation officer. “We went market for renewable biofuels “Digital” means different things public with an economic model using some of the same to every organization. One can that would determine the value industrial processes that it digitize the customer experience of our digital strategy,” Cobban

13 »» Introducing the says. “So we can measure how Netflix mines audience data to leading to a business representing Transformation 20 much value we’re getting out of create an astonishing range of 10% of total revenue and growing this approach.” Some powerful new shows. Not only does Netflix at an 85% rate last year. Other T20 »» Top-Level Themes from results: In 2019, DBS became use data to drive the compelling firms have also reaped benefits the Transformation 20 the first bank to simultaneously customer experience (e.g., even of investing heavily in new digital »» The FivFivee BehaviorsBehaviors hold the titles “Bank of the Year” tailoring the images it uses for platforms for their customers. of TransformationalTransformational (The Banker), “Best Bank in the each show to match customer Cisco has cultivated customer Organizations World” (Global Finance) and preferences), it has fundamentally relationships to find smart niches “World’s Best Bank” (Euromoney). changed the way that it makes for new, value-added digital »» Seven Transformations decisions about which shows to subscription services. Ecolab has to Watch One of the keys to that success pursue based on the data it collects created new digital platforms for was not just going digital but on viewing behavior. For example, water analytics and distribution. »» T20 finalists are headquartered opening up a digital platform that there are numerous stories of across the world others can play on, taking part potential showrunners (e.g., “The 5. Innovation isn’t isolated of the playbook from companies Crown”) arriving to meet Reed to a department but is »» Conclusions like Apple, Adobe and Amazon. Hastings, thinking they were there a strategic capability. DBS launched the world’s largest to pitch the show, only to discover In many of these organizations, »» T20 Methodology application protocol interface that Netflix had already used data strategic transformation has been (API) protocol, where financial to make the decision to pursue the enabled by organizational-wide »» T20 Panel of Judges and retail partners can invisibly show based on its own analytics. efforts to improve the innovation integrate DBS’s capabilities quotient. Such innovation efforts »» About the authors and Innosight into their systems. By late 2018, AIA Group’s transformation has are most effective when they aren’t DBS demonstrated that digital taken the Hong Kong-based life relegated to any single department »» Snapshots of the customers are at least twice as insurance company into a new and become ubiquitous across T20 Companies profitable as traditional customers. global growth area, with its digital the organizations. Vitality platform providing wellness and prevention knowledge, tools and motivation to AIA members,

14 »» Introducing the A key insight among successful its internal cloud technology value of each employee from 1 Transformation 20 innovators is that the organization to customers. Amazon Web to 5. Nadella came up through clearly defines the different types Services is now a $26 billion the organization by growing its »» Top-Level Themes from of innovation that will enable the business that provides a lion’s Azure cloud business by asking the Transformation 20 transformation. Some employees share of the company’s profits. questions about customer needs. »» The FivFivee BehaviorsBehaviors will have to innovate the core “We went from a culture of know- of TransformationalTransformational business, finding new ways to use In a similar way, Alibaba has it-alls to a culture of learn-it-alls,” Organizations data to strengthen the customer always made innovation the says Chris Capossela, Microsoft’s experience. Other employees will key to everything, enabling it chief marketing officer. »» Seven Transformations have to work on incubating or to expand beyond its roots as to Watch growing a new growth business. an e-commerce and internet These cultural traits of curiosity and Others still will need to continue services company into new customer obsession are hallmarks »» T20 finalists are headquartered doing most of what they have growth areas, ranging from of innovative organizations, and across the world been doing previously while also digital platforms for financial it’s precisely this behavior that looking for operational efficiencies. services to digital media, to helps a large organization pivot »» Conclusions AliHealth and AliSports. to a growth mindset. The firms that clearly define the »» T20 Methodology different types of innovation At Microsoft, CEO Satya By many accounts, this has and then enable all employees Nadella has built a different served the organization well as »» T20 Panel of Judges to contribute in the most kind of culture of innovation, it moved away from its obsolete appropriate way are those that less technological and more mission of “a computer on »» About the authors and Innosight rise to the top of the T20. customer-focused, than the every desktop,” which was company led by his predecessors. technology-focused, to its current »» Snapshots of the Jeff Bezos of Amazon.com has mission of “empower every T20 Companies famously led the organization to This was accomplished largely person and every organization obsess over the customer, rather by shifting its culture away on the planet to achieve more,” than competitors, leading to the from one of competition, where which is customer-focused. internet retail business taking managers were told to rank the

15 »» Introducing the Transformation 20 SEVEN TRANSFORMATIONS TO WATCH

»» Top-Level Themes from the Transformation 20 hese finalist companies only began in 2017 to embark on of change in recent years. Yet all »» The Five Behaviors T advanced into the third round its strategy for smart homes and of these firms remain impressive, of Transformational of the analysis but fell short in the sustainability services. Others, like considering that more than 95% Organizations judge’s ratings to make the T20. In Danone (a previous T10 company, of public companies haven’t some cases, these companies are for its shift to becoming a nutrition- attempted to transform or haven’t »» Seven TransformationsTransformations only just recently embarking on focused firm), have executed achieved measurable new growth. to WatchWatch their transformation journey. For long-running transformations instance, Italian energy giant Enel that haven’t yielded new levels »» T20 finalists are headquartered NEW GROWTH AREAS Stock CAGR across the world COMPANY CEO (% of total business) (vs. benchmark)

»» Conclusions #21. RELX Group Erik Engstrom digital and analytics (15%) 16% (vs. 4% for FTSE since 2009)

»» T20 Methodology #22. Analog Devices Vincent Roche IoT solutions (15%) 19% (vs. 10% for S&P 500 since 2009)

»» T20 Panel of Judges #23. Danone* Emmanuel Faber nutrition products (29%) 7% (vs. 8% for CAC 40 since 2009)

»» About the authors #24. SAP Bill McDermott cloud services (20%) 13% (vs. 0% for Euro Stoxx 50, 2010) and Innosight #25. Singtel Chua Sock Koong digital and data (25%) 5% (vs. -1% for SGX since 2011) »» Snapshots of the #26. ResMed Michael Farrell SaaS services (7%) 26% (vs. 10% for S&P 500 since 2012) T20 Companies

# 27. Enel Francesco Starace smart homes (0.7%) 14% (vs. -3% for Italian Index, 2017)

*previous winner, from the 2017 T10 list

16 »» Introducing the Transformation 20 THE 27 FINALISTS ARE

»» Top-Level Themes from HEADQUARTERED ACROSS THE WORLD the Transformation 20

»» The Five Behaviors of Transformational Organizations

»» Seven Transformations to Watch

»» T20 finalistsfinalists areare headquartered across thethe worldworld

»» Conclusions

»» T20 Methodology

»» T20 Panel of Judges

»» About the authors and Innosight

»» Snapshots of the T20 Companies

USA 11; China 4; Germany 2; France 2; Singapore 2; U.K. 1; Italy 1; Netherlands 1; Denmark 1; Finland 1; Japan 1

17 »» Introducing the Transformation 20 CONCLUSION: OVERCOMING

»» Top-Level Themes from THE CRISIS OF COMPLACENCY the Transformation 20

»» The Five Behaviors of Transformational he takeaway lesson from • Crisis of Commitment: anymore, what are we?” What Organizations T these mission-changers when at the early stage of a happens if key people feel like is clear: In an era of relentless transformation, many leaders they don’t belong anymore? »» Seven Transformations change, a company survives and and employees worry about to Watch thrives based not on its size or committing to a new trajectory However, the vast majority performance at any given time and seeing it through, even of leadership teams never »» T20 finalists are but on its ability to reposition headquartered in the face of evidence that encounter these three crises. across the world itself to create a new future. the core is in decline. As a chief technology officer we met with recently asked us: “We »» Conclusions The leadership teams of the • Crisis of Conflict: when different basically aren’t at any of these companies we’ve featured parts of the organization fight stages yet. What do you call »» T20 Methodology here have, to varying degrees, for scarce capital resources the crisis before all of this?” steered through different types as new growth areas receive »» T20 Panel of Judges of organizational crises. a disproportionate share of That caused us to step back to investment relative to their consider what prevents most »» About the authors and Innosight As outlined in "Dual current size. What happens when companies from making the Transformation" (see graphic key stakeholders complain that decision to transform in the first »» Snapshots of the on page 19), there are three new growth progress is too slow? place. We’d call this the Crisis T20 Companies flashpoints that happen as an of Complacency. One driver of organization change effort is • Crisis of Identity: when the this crisis is that existing data proceeding successfully but organization realizes, “If we’re misleads because it lags the can derail the entire plan: not a [fill in the blank] company disruption taking place in the

18 Deseret Net Income Indexed to 2015 total = 100 »» Introducing the market. By the time the data 150 Transformation 20 Crisis of Crisis of Crisis of is clear, it is typically too late. A Commitment Conflict Identity second problem is that existing 125 »» Top-Level Themes from customers often serve as poor the Transformation 20 100 guides to the future, as they tell

75 New Growth »» The Five Behaviors companies to provide them better,

of Transformational cheaper versions of what they are 50 Organizations currently providing. A final driver New Core Products of complacency is the constraints 25 Legacy Core Products »» Seven Transformations that an existing business 0 to Watch 2015 2016 2017 2018 2019 2020 model places on a company.

In "Dual Transformation," the authors explore three organizational crises that threaten to derail any transformation. As »» T20 finalists are Mirroring Netflix’s subscription- legacy core revenue becomes a smaller part of the business and new growth revenue rises, leaders need to recognize this headquartered common pattern and steer through these flashpoints. Graphic courtesy of Clark Gilbert, former CEO, Deseret News across the world based business model, for example, looked financially courage to choose the difficult when you invest a ton of money »» Conclusions unattractive to Blockbuster Video, path of breaking out of this prison is the money you invested. It is who made most of its money via and challenging the status quo. capped. However, when you win, »» T20 MethodologyMethodology charging late fees. The lessons you create not only an annuity but are counter-intuitive yet clear: Which brings us to the most a new ecosystem that gives you »» T20 Panel of Judges common argument we encounter the opportunity to grow in new Data misleads. when it comes to embarking on areas for a long time to come.” »» About the authors and Innosight Customers deceive. transformation: It’s too risky. The business model binds. But as one Fortune 500 CEO The Transformation 20 indeed »» Snapshots of the recently told us, “Our system shows the powerful payoff that T20 Companies This places companies in the of capitalism totally misprices comes when leaders steer their prison of the present, where risk.Big moves look like they are organization through these they perpetuate the past versus really risky. But by and large they crises to imagine and build creating the future. It takes are not. Because what you lose a bold, new future.

19 »» Introducing the Transformation 20 T20 METHODOLOGY

»» Top-Level Themes from the Transformation 20 began the process of During this first phase of the During round two, we used these »» The Five Behaviors We identifying candidates for methodology, a small team of comparative metrics to narrow of Transformational the Transformation 20 by screening Innosight consultants pored the list to 27 finalist candidates, as Organizations companies in the S&P 500 and over each firm in the S&P 500 voted on by a panel of Innosight Forbes Global 2000 according and Global 2000 to arrive at a partners: Scott D. Anthony, Rob »» Seven Transformations to the following questions: list of 52 companies that had Bell and Alasdair Trotter. For to Watch made a clear commitment to each of company, we created 1. How has this company strategic transformation within a one-page judging profile. We »» T20 finalists are exemplified strategic the past 10 years. Our team then sent that presentation of headquartered across the world transformation? rated each company using a profiles along with instructions set of criteria measuring their out to our panel of judges, who »» Conclusions 2. Has this transformation financials (notably revenue scored each company on a had a significant impact on growth and stock performance), scale of 1 to 5, with 5 being the »» T20 MethodologyMethodology customers and its industry the degree to which they had best example of a successful over the past decade? built meaningful new growth strategic transformation. »» T20 Panel of Judges businesses and the degree to We’d like to acknowledge and 3. Does the company show which they had repositioned thank our list of judges and »» About the authors and Innosight potential to sustain its their core business. congratulate the T20 winners. transformation over »» Snapshots of the the next decade? T20 Companies

20 »» Introducing the Transformation 20 T20 PANEL OF JUDGES

»» Top-Level Themes from the Transformation 20

»» The Five Behaviors of Transformational Organizations

»» Seven Transformations to Watch Rita McGrath Beh Swan Gin Phil Coughlin »» T20 finalists are Chair at Columbia Chair, Singapore Economic Chief strategy officer headquartered Business School Development Board at Expeditors across the world

»» Conclusions

»» T20 Methodology

»» T20 PanelPanel of of Judges Judges

»» About the authors and Innosight Amantha Imber Nathan Furr »» Snapshots of the CEO of Inventium Professor of strategy, INSEAD T20 Companies

21 »» Introducing the Transformation 20 ABOUT THE AUTHORS AND INNOSIGHT

»» Top-Level Themes from the Transformation 20 Scott D. Anthony is a senior Special thanks to the following »» The Five Behaviors partner at Innosight, based Innosight analysts on the T20 of Transformational in Singapore and a co-author research team: Oliver Cheng, Organizations of “Dual Transformation: Amol Gundeti, James Hur, Aditya How to Reposition Today’s Jain, Linh Tran and Bryant Wu. »» Seven Transformations Business While Creating to Watch the Future” (HBR Press). About Innosight The strategy and innovation »» T20 finalists are headquartered Alasdair Trotter is a partner at business of global professional across the world Innosight, based in California, services firm Huron, Innosight who collaborates with senior empowers forward-thinking »» Conclusions leaders on digital transformation. organizations to navigate disruptive change and own the »» T20 Methodology Robert D. Bell is a partner at future. The leading authority Innosight, based in Boston on disruptive innovation and »» T20 Panel of Judges and a leader of its industrial strategic transformation, the & technology business. firm collaborates with clients »» About thethe author authorss and InnosightInnosight across a range of industries to Evan I. Schwartz, a writer create growth strategies, build »» Snapshots of the focused on innovation and innovation capabilities and T20 Companies leadership, is Innosight’s accelerate new growth initiatives. former director of storytelling. Visit us at www.innosight.com.

22 »» Introducing the Nº Transformation 20 NETFLIX 1 »» Top-Level Themes from the Transformation 20 INDUSTRY: Entertainment/ NEW GROWTH: In 2018, Netflix’s »» The Five Behaviors Internet original content accounted for of Transformational 37% of its U.S. streams, up from Organizations REVENUE: $15.8B 14% in 2017. Netflix released 88% more original programming in CEO Reed Hastings »» Seven Transformations HQ: Los Gatos, CA 2018 than it did during 2017. to Watch

TRANSFORMATION STORY: CORE BUSINESS: Netflix’s »» T20 finalists are headquartered Shifted from DVDs by mail into core business of DVD rentals across the world the leading streaming video changed its business model 44% content service and now a top from single-pay DVD rentals to »» Conclusions original content provider subscription-based DVD rentals Of revenue from original content bundled with streaming. While »» T20 Methodology STRATEGY: In 2012, Netflix streaming continues to grow entered the content-production domestically and internationally, FINANCIALS: Netflix’s revenue »» T20 Panel of Judges industry with its first series, DVD rentals continue to increased by 337.6%, from $3. "Lilyhammer." In 2013, "House of experience net losses, with in 2012 to $15.8B in 2018. Net »» About the authors and Innosight Cards" catapulted Netflix to the paid membership dropping income increased more than 70.62 realm of leading original content 17% in 2017 and 19% in 2018 . times, from $17M in 2012 to $1.2B »» Snapshots of the producer. In 2019, "Roma" marked in 2018. Revenue CAGR: 28%. T20 Companies Netflix’s first Academy Award win. Stock CAGR: 57.1% (vs. 10% for the S&P 500 Index) (2012-2018)

23 »» Introducing the Nº Transformation 20 ADOBE SYSTEMS 2 »» Top-Level Themes from the Transformation 20 INDUSTRY: Software/ NEW GROWTH: Adobe’s “Digital »» The Five Behaviors Digital Media Experiences” segment drives of Transformational a significant portion of the Organizations REVENUE: $9.0B company’s growth, representing CEO 27% ($2.44B) of total revenues Shantanu »» Seven Transformations HQ: San Jose, CA in 2018. Only seven years prior Narayen to Watch in 2011, the digital marketing TRANSFORMATION STORY: segment contributed $927.8M. »» T20 finalists are headquartered Moved beyond the traditional across the world core of creative software into CORE BUSINESS: Revenues 27% digital experiences, marketing, from the legacy digital media »» Conclusions commerce platforms and ($6.3B) and print and publishing Of revenue from digital experiences analytics while changing its ($261M) segments are 73% (while reclassifying previous new growth revenue to the new core) »» T20 Methodology business model from packaged of total revenue in 2018, down software to cloud subscriptions from 81% ($3.1B) in 2010. »» T20 Panel of Judges Although “Print and Publishing” surged by 570.3% over the same STRATEGY: In 2009, Adobe is stagnant, “Digital Media” is still period. In addition, Adobe now »» About the authors and Innosight refocused on digital experiences, seeing impressive growth — the gets 88% of its revenue from its marketing and analytics. It segment’s revenue in 2018 was subscription business in 2018, »» Snapshots of the conducted several acquisitions, $6.3B, up from $5.0B in 2017, compared to 3% in 2009. Revenue T20 Companies including Omniture in 2009, representing 26% YOY growth. CAGR: 13.3%, 2009-2018. Stock Neolane in 2013, TubeMogul in CAGR: 26% (vs. 10% for the 2017, and Marketo and Magento FINANCIALS: Revenue more S&P 500 Index), 2009-2018 in 2018, to build required than tripled from 2009 ($2.9B) capabilities and scale quickly. to 2018 ($9.0B) while net income 24 »» Introducing the Nº Transformation 20 AMAZON.COM 3 »» Top-Level Themes from the Transformation 20 INDUSTRY: Online Retail NEW GROWTH: In 2018, AWS »» The Five Behaviors produced $25.7B in net sales of Transformational REVENUE: $232.9B and $7.3B in operating income, Organizations up from $3.1B and $673M, Chairman, HQ: Seattle, WA respectively, in 2013. Through President »» Seven Transformations and CEO M&A, Amazon has also positioned Jeff Bezos to Watch TRANSFORMATION STORY: itself for future new growth Amazon initiated Amazon Web (e.g., Whole Foods, PillPack). »» T20 finalists are headquartered Services (Cloud) to overcome the across the world cost of infrastructure required CORE BUSINESS: Apart from 11% to conduct operations. AWS has being the biggest e-retailer, »» Conclusions turned into a surprisingly lucrative Amazon boasts the best-selling Of revenue from AWS & other cloud services profit engine. Amazon has also e-reader, a sizable share of the »» T20 Methodology built an entire ecosystem of e-book market, a foothold in products and services, enabled the tablet market and a growing FINANCIALS: Revenues »» T20 Panel of Judges by its Prime membership. library of video titles (including increased by 850.2% from 2009 original content). Core businesses to 2018; net income grew by »» About the authors and Innosight STRATEGY: Amazon, at its in North America (outside of AWS) 1016.7% in the same period. roots, is built to transform. recorded 33% YOY revenue growth Revenue CAGR: 28%, 2009-2018. »» Snapshots of the When it finds opportunities in 2018 and account for 61% of Stock CAGR: 39%, (vs. 10% for T20 Companies to serve new customers or Amazon’s total 2018 net sales. the S&P 500 Index), 2009-2018 existing customers in new ways, it conceives and builds new business models to exploit them.

25 »» Introducing the Nº Transformation 20 TENCENT HOLDINGS 4 »» Top-Level Themes from the Transformation 20 INDUSTRY: Internet NEW GROWTH: Non-core »» The Five Behaviors businesses grew revenue by 80% of Transformational REVENUE: $46.9B YOY in 2018, primarily through Organizations Fintech and cloud services. HQ: Shenzhen, China Cloud revenue increased by CEO Pony Ma Huateng »» Seven Transformations over 100% to $1.3B. Tencent’s to Watch TRANSFORMATION STORY: fintech platform managed Tencent transformed from an over $89.3B in assets. »» T20 finalists are headquartered online messenger and video across the world game business to an all-around CORE BUSINESS: Tencent’s core 25% technology business that has business continued to grow strong »» Conclusions presence in entertainment, in 2018. Its social communication Of revenue from Fintech, Cloud and other technologies autonomous vehicle, cloud platforms, Weixin and Wechat, »» T20 Methodology computing and fintech. have more than 1 billion monthly active users by the end of income increased by 682.2%, »» T20 Panel of Judges STRATEGY: From 2011 to 2019, 2018. On the video games side, from $1.5B in 2017 to $12B in Tencent has made a series Tencent’s smart game business 2018. Profit margin declined »» About the authors and Innosight of investments in technology achieved $11.5B in revenue in from 35.9% to 25.6% during this companies and startups in 2018, up 24% YOY. The company period due to heavy investment in »» Snapshots of the entertainment, autonomous also earned $8.6B in online technology and original content. T20 Companies vehicle, ride-sharing and fintech. advertising revenue, up 44% YOY. Revenue CAGR: 41%. Stock The company also launched CAGR: 32% (vs. 1% CAGR for the its own products in cloud FINANCIALS: Revenue increased Hong Kong Index) (2011-2018) computing and online education. by 997.3% from 2011 to 2018. Net

26 »» Introducing the Nº Transformation 20 MICROSOFT 5 »» Top-Level Themes from the Transformation 20 INDUSTRY: Computer NEW GROWTH: In 2017 and »» The Five Behaviors Hardware and Software, 2018 combined, commercial of Transformational Consumer Electronics cloud revenue increased by Organizations 56% to $23.3B, within which REVENUE: $110.4B server products and cloud CEO Satya Nadella »» Seven Transformations services revenue increased to Watch HQ: Redmond, WA by 21% and is driven by Azure revenue growth of 91%. »» T20 finalists are headquartered TRANSFORMATION STORY: across the world Microsoft has transformed from CORE BUSINESS: Microsoft’s 29% a business model based primarily core divisions — productivity »» Conclusions on selling products, licenses (IP) and business processes and Of revenue from Intelligent Cloud and devices to a cloud-based personal computing — still »» T20 Methodology platform-as-a-service business. contribute significantly to the company’s top line. In 2018 and while net income declined by »» T20 Panel of Judges STRATEGY: Microsoft Azure has 2017, Office Commercial revenue 11.7% due to tax payment per the been the catalyst that drives the increased by 11%, which is Tax Cuts. Revenue CAGR: 7%. »» About the authors and Innosight growth of the Intelligent Cloud driven by Office 365 commercial Stock CAGR: 17% (vs. 9% for Business at the company. In revenue growth of 41% . the S&P 500 index), 2010-2018 »» Snapshots of the addition, Microsoft also invested T20 Companies in cloud-based services, AI FINANCIALS: Revenue increased programming and AR/VR. by 76.6% from 2010 to 2018

27 »» Introducing the Nº Transformation 20 ALIBABA 6 »» Top-Level Themes from the Transformation 20 INDUSTRY: Internet NEW GROWTH: Ant grew to have »» The Five Behaviors & Catalog Retail a valuation of $150B in 2018. Its of Transformational flagship Tianhong Yu’e Bao fund Organizations REVENUE: $56.2B has 588 million users to date. AliHealth’s 2018 revenue was CEO Daniel Zhang »» Seven Transformations HQ: Hangzhou, China $368M. AliSports’ estimated to Watch 2017 revenue was $859M. Digital TRANSFORMATION STORY: and Entertainment recorded »» T20 finalists are headquartered Since inception, Alibaba has a 2017 revenue of $2.1B. across the world positioned itself as an innovation 14% powerhouse, successfully CORE BUSINESS: Alibaba’s core »» Conclusions transforming from an internet businesses in e-commerce and Of revenue from Fintech, Sports, Digital Technology e-commerce and retail company cloud computing still contribute and Entertainment »» T20 Methodology to a technology business. significantly to the group’s overall revenue and growth. Alibaba »» T20 Panel of Judges STRATEGY: In 2014, Alibaba Cloud revenue is nearing a $4B FINANCIALS: Revenue increased launched Ant Financial Service, annual run rate (FY2018). While by 356.8% from 2014 to 2018. »» About the authors and Innosight which offers financial services Alibaba e-commerce business Net income increased by 232.7%, and the rebranded Alipay gained $20.8B in revenue in from $3.93B in 2014 to $13.1B »» Snapshots of the platform. The group expanded the same year, new growth in 2018. Profit margin declined T20 Companies into entertainment and original areas accounted for more than from 31.9% to 23.3% during this content through the Digital Media half of the group’s top line. period. Revenue CAGR: 46%. division. In 2015, the company Stock CAGR: 8% (vs. 1% for launched AliHealth and AliSports. the NYSE index) (2014-2018)

28 »» Introducing the Nº Transformation 20 ØRSTED 7 »» Top-Level Themes from the Transformation 20 INDUSTRY: Energy into North America and Asia. »» The Five Behaviors Its biggest investments are in of Transformational REVENUE: $11.5B offshore wind farms, which in Organizations 2018 accounted for DKK$27.8B of HQ: Fredericia, Denmark its DKK$30B in operating profit. CEO »» Seven Transformations Henrik Poulsen to Watch TRANSFORMATION STORY: CORE BUSINESS: In 2017, Moved from a state-owned oil and Ørsted (formerly DONG Energy) »» T20 finalists are headquartered gas exploration and production divested its oil & gas production. across the world company to stage a 2016 IPO Moreover, it decided to phase 93% as the largest offshore wind out coal completely as fuel at »» Conclusions farm company in the world. its power plants by the end of Of operating profit from Offshore Wind Farms 2022. Onshore & offshore wind is »» T20 Methodology STRATEGY: In 2017, Danish Oil rapidly becoming the new core. In and Natural Gas (DONG) changed 2018, the green share of Ørsted’s CAGR: 30% (vs. 0% for the OMX »» T20 Panel of Judges its name to Ørsted and shifted energy generation reached 75%. Copenhagen 20 Index), 2017-2018 its strategy away from gas- and »» About the authors and Innosight oil-based energy production FINANCIALS: Revenue rose 6.5% to green energy, aiming for from 2013 to 2018, while operating »» Snapshots of the 99% renewables by 2025. profit (EBITDA) increased 1325% T20 Companies over the same period. Profit NEW GROWTH: Ørsted has margins improved from -2.2% in invested in green energy assets 2013 to 25.4% in 2018. Revenue since 2009 and is now expanding CAGR: 1%, 2013-2018. Stock

29 »» Introducing the Nº Transformation 20 INTUIT 8 »» Top-Level Themes from the Transformation 20 INDUSTRY: Information NEW GROWTH: The Online »» The Five Behaviors Technology Ecosystem, now offering 1,400 of Transformational apps, has been the key growth Organizations REVENUE: $6B catalyst for Intuit in the past five years. The Online Ecosystem CEO Sasan Goodarzi »» Seven Transformations HQ: Mountain View, CA revenue increased $340M to Watch or by 40% in 2018, driven by TRANSFORMATION STORY: new customer acquisition. »» T20 finalists are headquartered Intuit transformed from a across the world provider of products and services CORE BUSINESS: Sold off 14% to an online ecosystem of founding Quicken personal »» Conclusions financial services for small and finance franchise to focus on Of revenue from Online Ecosystem medium enterprises (SMEs). more profitable growth — such »» T20 Methodology as from its strong-performing STRATEGY: Simplifying QuickBooks (QB) and TurboTax FINANCIALS: Revenue increased »» T20 Panel of Judges accounting and tax prep by businesses. QB online customer by 58.2% from 2012 to 2018; offering financial applications retention rate rose by 16% thanks net income grew by 67.8% in »» About the authors and Innosight in one online platform and to the customer-financial advisor the same period. Profit margins matching SMEs with accredited matchmaking program. QB rose from 20.8% in 2012 to »» Snapshots of the financial advisors allowed the online subscribers rose by 43%, 22.1% in 2018. Revenue CAGR: T20 Companies company to become a one-stop with revenue up 24%. Desktop 8%, 2012-2018. Stock CAGR: shop for financial service. Ecosystem revenue increased 22% (vs. 10% for S&P 500) $115M or by 7% in 2018, driven by QB Enterprise subscribers.

30 »» Introducing the Nº Transformation 20 PING AN 9 »» Top-Level Themes from the Transformation 20 INDUSTRY: Financial NEW GROWTH: In 2018, Lufax »» The Five Behaviors Services and Healthcare had over 33 million registered of Transformational users on its platform, with Organizations REVENUE: $162.3B assets managed up 5.3% from 2017 (to $68.7M). Ping An's CEO Ma Mingzhe »» Seven Transformations HQ: Shenzhen, China Good Doctor platform also to Watch raised $400M at a post-money TRANSFORMATION STORY: valuation of $5.4B, preparing »» T20 finalists are headquartered Established as a financial services for an IPO with the HKEX. across the world and insurance company, Ping 6% An transformed itself into a CORE BUSINESS: Ping An’s »» Conclusions cloud tech business providing core retail business continued Of net profit from Fintech and Health Tech fintech and AI-based medical to record strong growth, with »» T20 Methodology imaging and diagnostics. the division’s revenue growing by 44.4% YOY, accounting for from 7.9% to 11.1% during »» T20 Panel of Judges STRATEGY: In 2012, Ping An 66.2% of the group’s net profit. this period. Revenue CAGR: put all of its systems in the From 2017, retail customers also 20%. Stock CAGR: 17% (vs. »» About the authors and Innosight cloud, investing its revenue into grew by 26.45% to 166 million. 2% for the Hang Seng Stock R&D for 10 years. The company Market Index) (2012-2018) »» Snapshots of the launched the finance platform FINANCIALS: Revenue increased T20 Companies Lufax to increase the bank’s by 199.1% from 2012 to 2018. presence in fintech and health Net income increased by 322.1%, tech. In 2014, Ping An launched from $4.3B in 2012 to $18.1B in its health tech division. 2018. Profit margin increased

31 »» Introducing the Nº Transformation 20 DBS GROUP 10 »» Top-Level Themes from the Transformation 20 INDUSTRY: Banking NEW GROWTH: In 2016, »» The Five Behaviors DBS launched digitbank, a of Transformational REVENUE: $9.6B mobile-only banking service, Organizations in India and Indonesia without HQ: Singapore any prior physical presence CEO Piyush Gupta »» Seven Transformations in these geographies. Digital to Watch TRANSFORMATION STORY: customers are now 48% of Transforming from a traditional total, versus 33% in 2015. »» T20 finalists are headquartered regional bank to a global digital across the world platform company, around a CORE BUSINESS: DBS has 48% cultural vision of a “27,000- been introducing new digital »» Conclusions person startup.” In 2018, crowned offerings to complement its core Of customer base is on digital platforms “Best Bank in the World” offerings in all three of its core »» T20 Methodology business segments, namely, STRATEGY: DBS is on a mission Institutional Banking, Consumer FINANCIALS: Revenue rose by »» T20 Panel of Judges to make its offerings seamless Banking/Wealth Management 33.9% from 2013 to 2018 while and integrate into customers’ and Treasury & Markets. While net income surged by 34.8% over »» About the authors and Innosight lives by delivering simple, fast and Treasury’s income declined by the same period. Profit margins contextual banking experience 24%, that of Institutional Banking increased from 42.6% in 2013 to »» Snapshots of the in the digital age. In pursuit of and Consumer Banking grew by 42.9% in 2018. Revenue CAGR: T20 Companies this, the bank wants to digitize 1% and 9% respectively in 2018. 6%, 2013-2018. Stock CAGR: its services and processes and 12% (vs. -1% for the Singapore become a data-first organization. Exchange Limited), 2013-2018

32 »» Introducing the Nº Transformation 20 A. O. SMITH 11 »» Top-Level Themes from the Transformation 20 INDUSTRY: Industrial/Water Tech NEW GROWTH: After selling »» The Five Behaviors its electrical products, A. O. of Transformational REVENUE: $3.2B Smith became a pure play Organizations water technology/heating firm. HQ: Milwaukee, WI Sales from water technology CEO Kevin Wheeler »» Seven Transformations in 2018 were ~$3.0B, up from to Watch TRANSFORMATION STORY: $1.38B from water technology in Shifting focus from its legacy 2009. In 2009, 69% of revenue »» T20 finalists are headquartered business in automotive parts was from water technology; across the world and motors to seize growth in in 2018, it is now 100%. 100% water technology through M&A. »» Conclusions CORE BUSINESS: In 2009, A. Of revenue from water technology STRATEGY: Once a company O. Smith still had an electrical »» T20 Methodology focused on automotive parts and products division that produced motors, A. O. Smith made the $620.4M in revenue. This CAGR: 10%, 2009-2018. Stock »» T20 Panel of Judges largest acquisition in its history in division was sold in 2011 to CAGR: 25%, (vs. 10% for the 2006 to acquire large assets in the Regal Beloit for $875M. S&P 500 Index), 2009-2018 »» About the authors and Innosight water technology industry (GSW Inc. and American Water Heater FINANCIALS: Revenue increased »» Snapshots of the Company). It doubled down on by 131.8% from 2009 to 2018; T20 Companies water technology in 2011 when it net income grew by 446.3% sold its electric motor business. in the same period. Revenue

33 »» Introducing the Nº Transformation 20 NESTE 12 »» Top-Level Themes from the Transformation 20 INDUSTRY: Energy and renewable solvents, as well »» The Five Behaviors as raw materials for bioplastics. of Transformational REVENUE: $17.2B Renewables now account for Organizations nearly €1 billion in operating HQ: Espoo, Finland profits, 70% of its total. CEO »» Seven Transformations Peter Vanacker to Watch TRANSFORMATION STORY: CORE BUSINESS: Neste, at A regional oil and gas company its core, produces, refines and »» T20 finalists are headquartered transforms into a global leader markets oil products, provides across the world in renewable biofuels. engineering services and licenses 70% production technologies. While »» Conclusions STRATEGY: Neste was revenue from oil products Operating profits from renewables as % of total established in 1948 as the state increased by 19% from 2017 »» T20 Methodology petrol company of Finland to to 2018 (68% of Neste’s total ensure the availability of refined revenue), the segment’s operating over the same period. Profit »» T20 Panel of Judges fuels. The company set out to profit declined by ~70% due margins improved from 2.3% in make renewable biodiesel from to weak USD exchange rate 2009 to 5.2% in 2018. Revenue »» About the authors and Innosight hydrotreated vegetable oil. and lower reference margin. CAGR: 5%, 2009-2018. Stock CAGR: 24% (vs. 7% for the OMX »» Snapshots of the NEW GROWTH: Starting in 2005, FINANCIALS: Revenue rose by Helsinki 25 Index), 2010-2018 T20 Companies shifted to producing renewable 54.8% from 2009 to 2018, while biodiesel, renewable jet fuels net income surged by 246.2%

34 »» Introducing the Nº Transformation 20 SIEMENS 13 »» Top-Level Themes from the Transformation 20 INDUSTRY: Industrial NEW GROWTH: Since 2014, »» The Five Behaviors Siemens’ Digital Factory and of Transformational REVENUE: $95.5B Process Industries have gradually Organizations grown and contributed to the HQ: Munich, Germany company’s topline. Digital CEO Joe Kaeser »» Seven Transformations Factory’s revenue increased by to Watch TRANSFORMATION STORY: 14% between 2017 and 2018. In 2014, Siemens announced »» T20 finalists are headquartered Vision 2020, which detailed CORE BUSINESS: Even though across the world an organizational overhaul, Siemens is driving its focus away 26% restructuring and strategic from industrial manufacturing »» Conclusions shift from energy and industrial and oil and gas, its core business Of revenue from Digital Factory and Process Industries manufacturing to digitalization. in energy management, medtech, »» T20 Methodology and industrial automation still STRATEGY: Vision 2020 saw contributed more than $68.7B in 2018. However, profit margin »» T20 Panel of Judges Siemens shredding its traditional to the company’s overall declined from 7.7% to 7.4% during focus on oil and gas and revenue in 2018. this period. Revenue CAGR: 3%. »» About the authors and Innosight industrial manufacturing, while Stock CAGR: 8% (vs. 8% for adding new business divisions FINANCIALS: Revenues the DAX index) (2014-2018) »» Snapshots of the — Digital Factory and Process increased by 10.7% from 2014 to T20 Companies Industries — to transform into 2018. Net income increased by a digital and service company. 6.5%, from $6.6B in 2014 to $7B

35 »» Introducing the Nº Transformation 20 SCHNEIDER ELECTRIC 14 »» Top-Level Themes from the Transformation 20 INDUSTRY: Electronics/Industrial NEW GROWTH: StruxureWare »» The Five Behaviors Software, an integrated software of Transformational REVENUE: $28.5B suite for operational management, Organizations bridges the gap between IT and CEO HQ: Rueil-Malmaison, France other systems. EcoStruxure, Jean-Pascal »» Seven Transformations a platform that delivers IoT- Tricoire to Watch TRANSFORMATION STORY: enabled solutions, reported Pursuing a digital transformation a 34% YOY growth (2018). »» T20 finalists are headquartered that would shift it from a across the world pure hardware supplier to an CORE BUSINESS: Schneider 22% energy management provider Electric has introduced close- »» Conclusions via an open IoT platform. to-core offerings like energy Of revenue from IoT- enabled solutions dashboards, electric vehicles »» T20 Methodology STRATEGY: In 2012, Schneider and smart cities. Medium Electric, a leading industrial Voltage contributed $4.8B FINANCIALS: Revenue rose by »» T20 Panel of Judges maker of energy and smart grid (17% of total revenue) despite a 3.3% from 2012 to 2018, and net hardware, placed a big bet on 4% decrease YOY. Low Voltage income grew by 26.9% over the »» About the authors and Innosight software and services as the generated $13B in revenue same period. Profit margins grew company's future direction. In (45% of total revenue) with a from 7.7% in 2012 to 9.4% in 2018. »» Snapshots of the 2016, the company announced the 8.3% YOY growth. Secure Power Revenue CAGR: 1%, 2012-2018. T20 Companies launch of IoT-enabled solutions to contributed 14% of the total rev. Stock CAGR: 8% (vs. 6% for the make its offerings interoperable. and a 4.9% YOY growth in 2018. S&P Global 100 Index), 2012-2018

36 »» Introducing the Nº Transformation 20 CISCO SYSTEMS 15 »» Top-Level Themes from the Transformation 20 INDUSTRY: Networking NEW GROWTH: The non-core »» The Five Behaviors Equipment (applications, security, services of Transformational and other products) business Organizations REVENUE: $49.3B was responsible for roughly 43% of 2018’s revenue. Revenue CEO Chuck Robbins »» Seven Transformations HQ: San Jose, CA from subscriptions was 54% of to Watch Cisco’s software applications TRANSFORMATION STORY: and services revenue in 2018. »» T20 finalists are headquartered Cisco has been transforming across the world its business from selling CORE BUSINESS: Cisco’s 43% networking products and infrastructure platforms segment »» Conclusions services to becoming a digital (networking technologies of Of revenue from non-core businesses and products IT solutions provider while also switching, routing, data center »» T20 Methodology moving into adjacencies. products and wireless) is considered its core business, FINANCIALS: Revenue increased »» T20 Panel of Judges STRATEGY: In 2010, the and the company continues to by 23.2% from 2010 to 2018; strategy expanded from make progress towards shifting net income fell by 98.6% in the »» About the authors and Innosight a focus on core growth to to software, subscriptions and same period. Revenue CAGR: include growth in adjacent cloud solutions. Revenue from 2.6%, 2009-2018. Stock »» Snapshots of the market territories by 2015. core products increased by 2.4%, CAGR: 9%, (vs. 9% for the T20 Companies from $12.3B to $12.6B in 2018. S&P 500 index), 2010-2018

37 »» Introducing the Nº Transformation 20 ECOLAB 16 »» Top-Level Themes from the Transformation 20 INDUSTRY: Chemicals NEW GROWTH: After a $8 billion »» The Five Behaviors merger with Nalco in 2011, Ecolab of Transformational REVENUE: $14.7B has expanded and reinforced Organizations its product offerings to include HQ: Saint Paul, MN water and energy solutions and CEO Douglas Baker Jr. »» Seven Transformations services. Water segment sales to Watch TRANSFORMATION STORY: increased by 7% in 2018. Starting out as a producer of a »» T20 finalists are headquartered carpet cleaning solution, Ecolab CORE BUSINESS: Pre-merger, across the world has evolved to become a market Ecolab was primarily focused on 44% leader for cleaning and food cleaning and food safety products »» Conclusions safety products, as well as a and services. Currently, it is Of revenue from water and energy services provider of custom solutions for focused on integrating digital and »» T20 Methodology water and energy conservation. harnessing data to manage risks and conserve energy and water. FINANCIALS: Revenue rose by »» T20 Panel of Judges STRATEGY: Ecolab’s “Circle the Overall, Ecolab’s Global Industrial 116% from 2011 to 2018 while Customer — Circle the Globe” segment revenue increased by net income surged by 209% »» About the authors and Innosight strategy is focused on providing 7% while Global Institutional over the same period. Adjusted a comprehensive set of cleaning, segment revenue increased profit margins improved from »» Snapshots of the food safety and water treatment by 6% from 2017 to 2018. 6.8% in 2011 to 9.7% in 2018. T20 Companies services to customers globally. Revenue CAGR: 12%, 2011-2018. Stock CAGR: 16% (vs. 9% for S&P 500 since 2011), Ecolab is up 22% vs. S&P 500 13%.

38 »» Introducing the Nº Transformation 20 FUJIFILM HOLDINGS 17 »» Top-Level Themes from the Transformation 20 INDUSTRY: Healthcare NEW GROWTH: In healthcare, »» The Five Behaviors and Electronics Fujifilm launched a series of Transformational of diagnosis X-rays and Organizations REVENUE: $21.6B scanners. The company also developed and marketed CEO Shigetaka Komori »» Seven Transformations HQ: Tokyo, Japan pharmaceutical drugs using to Watch existing chemical compounds TRANSFORMATION and launched a skincare and »» T20 finalists are headquartered STORY: Transformed from makeup line, ASTALIFT. across the world a photography-centric firm 18% to a healthcare products and CORE BUSINESS: Fujifilm’s »» Conclusions medical imaging company core business is around photo Of revenue from healthcare business films. Over the past decade, »» T20 Methodology STRATEGY: In 2010, Fujifilm the company has shifted its succeeded at shifting its core business toward digital FINANCIALS: Revenue increased »» T20 Panel of Judges business model away from cameras and imaging. The photo- by 9.7% from 2010 to 2018 being photo-film-centric. In imaging segment accounted while net income surged by »» About the authors and Innosight addition to improving its core for 15.7% of the company’s 116.3% over the same period. business sales by catching top line and recorded a 12.1% Profit margins improved from »» Snapshots of the up to the digital camera wave, growth from 2017, which was 2.9% in 2010 to 5.7% in 2018. T20 Companies Fujifilm invested in healthcare, driven by a strong increase in Revenue CAGR: 1%, 2010-2018. leveraging existing imaging sales of instant photo systems Stock CAGR:7% (vs. 6% for and chemical technologies. (e.g., instax instant cameras). the TOPIX index), 2010-2018

39 »» Introducing the Nº Transformation 20 AIA GROUP 18 »» Top-Level Themes from the Transformation 20 INDUSTRY: Life and NEW GROWTH: After three »» The Five Behaviors Health Insurance years, AIA Vitality is available in 10 of Transformational countries, with the number of full Organizations REVENUE: $36.3B Vitality members tripling in 2017. In 2018, AIA Vitality’s annualized CEO Ng Keng Hooi »» Seven Transformations HQ: Hong Kong, China net premium grew by 85%. to Watch

TRANSFORMATION STORY: CORE BUSINESS: The »» T20 finalists are headquartered AIA Group transformed from a company’s core business across the world health insurance provider into a continues to grow steadily. 10% collaborator with consumers by In 2017, agency distribution »» Conclusions creating AIA Vitality — a major accounted for approximately 70% Of revenue from AIA Vitality wellness and prevention business. of the group’s total VONB*, with »» T20 Methodology growth of 28% to $2.5B in 2017. STRATEGY: In 2013, AIA On the other hand, partnership FINANCIALS: Revenue increased »» T20 Panel of Judges Group launched AIA Vitality, distribution exceeded $1B for the by 65.5% from 2013 to 2018. the first science-based, first time for the group. (*VONB Net income increased by 13.3% »» About the authors and Innosight comprehensive wellness is the Value of New Business: the from $2.8B in 2013 to $3.2B in program in the Asia-Pacific present value of total premium 2018. Profit margin decreased »» Snapshots of the region. The program provides sales confirmed to be received from 13% to 8.9% during this T20 Companies wellness knowledge, tools and from present to future) period. Revenue CAGR: 11%. motivation to AIA members. Stock CAGR: 15% (vs. 2% for the Hong Kong Index) (2013-2018)

40 »» Introducing the Nº Transformation 20 DELL TECHNOLOGIES 19 »» Top-Level Themes from the Transformation 20 INDUSTRY: Info Tech NEW GROWTH: Dell’s integration »» The Five Behaviors of EMC resulted in two new of Transformational REVENUE: $90.6B revenue segments (ISG and Organizations VMware), which added up to HQ: Round Rock, TX about $48.5B in revenue in 2018 CEO Michael S. Dell »» Seven Transformations (more than 50% of Dell’s top line). to Watch TRANSFORMATION STORY: During its time as a private CORE BUSINESS: Client »» T20 finalists are headquartered company, Dell shifted from being Solutions Group (CSG) is the across the world a hardware company to being company’s core, including 51% a cloud business integrating branded hardware (desktops, »» Conclusions EMC’s storage management, workstations and notebooks) Of revenue from ISG and VMWare tripling its value from 2013. and peripherals. CSG generated »» T20 Methodology ~$43.2B in revenue (~50% STRATEGY: Dell has the ability to of total 2018 revenue) and is FINANCIALS: Revenue increased »» T20 Panel of Judges offer secure, integrated solutions mainly driven by PC sales. Dell by 59.2% from 2012 to 2018; that extend from edge to core considered CSG to be a significant net income fell by -197.4% in »» About the authors and Innosight to cloud and is at the forefront part of its transformation as it the same period. Revenue of the software-defined and absorbs overhead and allows CAGR: 7%, 2012-2018. Stock »» Snapshots of the cloud native infrastructure era. for scaled procurement. CAGR: 26%, (vs. 11% for the T20 Companies S&P 500 index), 2013-2018

41 »» Introducing the Nº Transformation 20 PHILIPS 20 »» Top-Level Themes from the Transformation 20 INDUSTRY: Health Tech segments, namely, Personal »» The Five Behaviors Health, Diagnosis and of Transformational REVENUE: $20.8B Treatment, and Connected Organizations Care & Health Informatics. HQ: Amsterdam, Netherlands CEO Frans van Houten »» Seven Transformations CORE BUSINESS: Philips has to Watch TRANSFORMATION STORY: established two stand-alone Split its lighting core from its entities in health tech and »» T20 finalists are headquartered healthcare growth businesses, lighting through a decade- across the world transforming itself into a long transformation. Philips 65% healthcare technology company only owned 16.5% of Signify »» Conclusions (formerly Philips Lighting) as of Of revenue from Healthcare, after accounting for STRATEGY: In September 2018. Even though Philips still separation of Lightning »» T20 Methodology 2014, Philips announced its recorded $636M in 2018 sales plan to sharpen its strategic (compared to $462M in 2017) »» T20 Panel of Judges focus by establishing two stand- from Signify, Philips planned margins improved from 1.9% in alone companies focused to completely divest from 2014 to 6% in 2018. Revenue »» About the authors and Innosight on health tech and lighting Signify in the next few years. CAGR: -4%, 2014-2018. Stock solutions opportunities. CAGR: 6% (vs. 7% for the »» Snapshots of the FINANCIALS: Revenue fell by S&P 500 Index), 2014-2018 T20 Companies NEW GROWTH: In the 15.3% from 2014 to 2018 while area of health technology, net income surged by 165.2% Philips has focused on three over the same period. Profit

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