Why is it that some enterprises seem to be able to successfully bypass conventional norms when it comes to making bold business moves, while others encounter significant resistance from their stakeholders and find it more difficult to gain a foothold in a new area? How are these organizations able to branch out into other sectors, industries, or entirely new business models, winning the support—and even encouragement—of their stakeholders? And what can executives, who may find themselves on the wrong side of this equation, do about it?
Our research (see “Methodology”) indicates many executives see bold change as a one-time “big bang” move that launches a business in completely new directions and can only be successfully accomplished by a few well-known brands. On the contrary, our research also suggests that bold change is typically not one herculean initiative, but rather an outcome driven by decisions, actions, and initiatives taken methodically over time. What seems like a sudden, significant shift from the outside is generally a series of moves—some bold in their own right, as in the case of CVS dropping tobacco from its shelves (a case study we’ll examine later in this article), and some smaller—that enable a tipping point often years in the making. Along the way, these moves can help prime stakeholders to accept change by incrementally shifting perceptions of the enterprise.
But what builds this change momentum? At its core, many organizations that successfully enact ambitious change over time often put relationships and connection at the heart of their change process. That is, they elevate the importance of consistent leadership, both in terms of people and vision; they invest in the underlying capabilities that foster a culture that can successfully scale ideas; and they know funding change is as much about sharing a compelling story with engaged stakeholders as it is about financing an investment decision.
This article, the first of a series, examines factors that could help leaders to cultivate relationships that can enable and drive bold change. Given the complex market conditions executives are navigating, a refocus on stakeholder relationships across stakeholders, from the C-suite to the workforce to shareholders and customers, can enable enterprises to shape and own the narrative on their transformations, build change momentum, and prepare stakeholders’ expectations for evolving over a longer-term horizon. Through analysis of executive interviews at large global organizations, quantitative data across multiple surveys, and case studies, we will explore the intricacies of bold change and the considerations that could help enable organizations and their leadership teams to gain permission to rewrite the rules.
A working definition of “bold change” is any move that represents a significant departure from an organization’s typical way of operating or competing.1 Bold change may or may not be a brand new (or novel) idea that’s never been seen before, but it should be a major strategic change for the organization, requiring a variety of internal and external mindset and operational shifts. Attempting to enter a new market, for example, or appealing to a new customer segment; moving from B2C to B2B; or attempting to compete with a new business model could all be considered bold change. This kind of change may not necessarily make headlines, and it can impact stakeholders differently depending on its scope.
Regardless of the type of change, however, one thing all bold changes have in common is that they permeate the organization’s structure and operations, impacting nearly every facet of the enterprise across multiple decision points. Organizations that make bold change may experience transformation, implementing processes to adapt to changes in the business environment as a result of disruption.2 Many different organizational dimensions for change can be affected, including areas like corporate strategy, organizational design, and customer experiences, among others.3
Interestingly, while many executives perceive external bold changes in the market as “big bang” events, they take a more long-term view of bold change when discussing their own initiatives. In fact, the majority of executives we interviewed across different sectors cite a minimum of three to five years to execute a bold change. In essence, while it may seem like others uncovered a quick path to change from the outside, these leaders recognize—at least in their own organizations—that much work happens beneath the surface (and over a long-term horizon) to bring changes to life.
Bold change also is not limited to certain sectors. Yet we noticed during our executive interviews the tendency for leaders to cite the same set of companies, mostly falling into the tech and consumer business sectors. This highlights that organizations may be limiting their imaginations regarding what is possible, and who has permission to change. To challenge these presumptions, we looked for instances where different industries are driving change at levels comparable to the usual suspects. See the sidebar “The full spectrum of bold change” to learn how we distinguish—and highlight—cases of bold change.
To help illustrate the varying ways bold change can manifest, we highlight three cases where organizations took years—or even decades—to fully realize the benefits of their change initiatives.
However, before we dive into each of these cases, it’s worth asking: what qualifies as bold change?
A transformation: Sometimes. An organizational transformation almost always necessitates bold change. However, the same is not always true in reverse. Some types of bold change may not be transformative. For example, consider a shoe company that makes a bold change entering a new geographic market in Asia. The shift is a major move for the company, but it may not be transformational in the sense that the company still maintains its identity with stakeholders as a shoe company.
A conglomerate: No. For conglomerates, acquisitions into new business lines does not necessarily equate to bold change. Rather, such moves are often core to their business and may not be considered bold in this context.
A spinoff: Maybe. Spinning off a business such that the identity of the core company is now significantly different could be considered a bold change. But the key here is context.
Given these parameters, we illustrate throughout this article the journeys of three organizations, including: Ørsted, a B2B energy company that moved from fossil fuels to green energy; CVS, the retail chain that pivoted to providing more holistic health services, and Amazon’s journey of redeploying its web services experience and infrastructure into an entirely new B2B business unit, Amazon Web Services (AWS).
Bold change is a multistep process that can take years to fully realize. But while the potential benefits of successful change remain significant, the window of time organizations have to capitalize on big shifts or implement long-term strategies may be shrinking and growing more challenging due to multiple external factors.
In 2009, DONG Energy, a Denmark-based energy company, was like many conventional energy companies, generating more than 80% of its power via fossil fuels. However, when the company failed to gain approval for a new coal power plant in Germany due to stakeholder concerns, leaders reevaluated DONG’s strategy.9 Later that year, the company announced a new strategy to generate 85% of its energy from renewable sources by 2040.
To facilitate its new strategy and achieve the speed and scale needed to operate as a green energy provider, the company executed multiple acquisitions and partnerships to supply 500 wind turbines. To meet the high capital requirements to now supply wind farms, it deployed a new financing model called “farm-down.” Under this model, the company sold an equity stake in its wind farm prior to construction to reduce its own capital requirements. This financing approach helped the company expand operations efficiently over time.10
Just as importantly, the company simultaneously divested conventional fossil-based power generation assets. In 2017, DONG Energy changed its name to Ørsted, reflecting the values of Danish scientist, Hans Christian Ørsted, who was known for “a curiosity, dedication and interest in nature.”11 As of 2022, Ørsted has exceeded its original goal with 91% of the energy produced through renewable sources.
Our executive interviews surfaced three areas where leaders can consider investing in relationships and organizational connections that can help drive change, as well as some less obvious but, in some ways, more important demands that leaders should consider when implementing a large-scale plan.
Underlying each of these lessons is a critical assumption: driving bold change is a team sport. A superhero CEO may not be the solution here. Often, it can only happen through strong leadership teams and the relationships they cultivate throughout the organization. The need for collaboration at all levels of the organization and across the business ecosystem has likely never been greater, and each of the following three themes is driven by this spirit of executive teaming and relationship.
The average tenure of a CEO in a Fortune 500 company is roughly seven years and shrinking.12 But many changes take even longer. Ørsted’s transformation from an oil and gas company to a sustainable energy company took 10 years. CVS’s big shift from a drugstore into a comprehensive health care company, described below, took even longer.
That doesn’t leave much time for the average executive to deliver change within their tenure, unless they also prioritize finding and preparing the next group of leaders who understand the vision and are willing to continue seeing it through. This is where persistence is important. Longer-term trends tend to demand longer-term plans and processes. It’s important for leadership to come together and agree on a vision that transcends their tenure. This means thinking about leadership succession plans across the C-suite, not just for the CEO or select roles.
In fact, while the vision of the CEO plays a key role in strategy formulation, and the leadership team can be equally critical in developing and driving it, it’s also important that existing leaders think of developing new leaders, who may not yet reside in the C-suite, to carry the vision forward and implement it. Additionally, by developing these future leaders, the CEO could increase the likelihood of a longer tenure as the entire leadership team shares a congruent vision for the future of the organization.
At the same time, CEOs can think not just about a vision that extends beyond them, but about the longevity of their own tenure in the role to see changes through. For instance, CVS has had just three CEOs over the last 30 years. Each leader played a key role in the ongoing narrative of the company’s growth, emphasizing the point that bold change cannot be led by one person alone—but each had time to see longer-term changes through.
This can feel at odds with current market pressures. Given market expectations to deliver immediate quarterly results, leaders can become conservative and shy away from embarking on changes that could require a long-term investment. However, each step along the way to a bold evolution can still fuel growth over a near-term horizon. For instance, in 2005, after CVS announced a partnership with MinuteClinic to integrate health clinics within their stores, revenue increased 18% over the following year;13 similarly, after ceasing the sale of tobacco products in 2014, the company still exceeded revenue and market expectations despite forgoing $2 billion in tobacco revenue.14
Executives can consider the following to help ensure a congruent vision is shared by both the current and future leadership teams of the organization:
Founded in 1963 as a local pharmacy in New England, CVS is now a multibillion-dollar health solutions company with nearly 10,000 retail stores.17 With a focus on mergers and acquisitions to drive change, including large-scale acquisitions of pharmacy benefit manager Caremark Rx and health plan Aetna, the company has transitioned from a local retail pharmacy to national retailer to health services provider.
CVS acquired and divested businesses that didn’t align with its strategic vision and purpose as a health care company. For example, the company made more than 40 acquisitions, across five different industries, since 1997.18 In addition, CVS became the first pharmacy chain to stop selling tobacco products in 2014 recognizing that its product line needed to align with the company’s health care vision and purpose.19 Rebranded as CVS Health in 2014, the company completed a strategic partnership focused on digital health and personalized care with Microsoft in 2021.20
Culture is a term that has grown to encompass everything, and thus may often not mean anything. “Culture” is often used as a catch-all for a wide array of things a CEO should consider whenever making any big transformation. It’s a vague action point at the end of countless articles. But what does it actually mean to work to have the right culture?
Typically, culture speaks to employees and how work is done. Good can fall flat if employees aren’t incentivized to try new approaches and promote change with customers and other stakeholders. Consider employees at a retail store who don’t buy into the company’s new line of products. What will happen when customers seek employee assistance or advice? Do employees at all levels of the organization have an entrepreneurial mindset? Are incentives aligned to support new initiatives?
It might be more accurate—and useful—to think about culture as the machinery within the enterprise that allows leaders to scale ideas from small thoughts to broader accomplishments. This engine has many components: sophisticated business analytics to forecast market trends, a wealth of data and information to mine for insight, an ecosystem of external partners, a slate of experienced leaders, and other tools. That is, underpinning culture is a set of capabilities and systems that make it easier to share, execute, and scale ideas. For instance, leaders may be more likely to gain buy-in from employees if they can demonstrate which insights informed the idea for change, what investments (for example, partners or technology) ensure the organization possesses the ability to undertake the change and develop the right leaders to better manage their teams through change.
But each of those components should be focused in the right direction for bold change to hit its mark. For example, if leaders aren’t getting relevant market information, are focused on the wrong competitors or regions, or don’t have the appropriate mechanisms to open their perspective, they may miss out on seemingly unrelated opportunities. To help ensure the right mechanisms are in place to foster a culture that is able to create and scale ideas, organizations can consider the following:
Amazon’s growth story is reflective of the company’s ongoing effort to capitalize on its core capabilities over time. In the early 2000s, Amazon.com was a growing e-commerce platform. Around that time, the company launched Merchant.com, realizing that its e-commerce platform could support retail merchants who needed to move their business online.24 In 2003, company leaders also recognized an opportunity to build a centralized development platform to support common infrastructure services across Amazon and avoid information technology development redundancies.
As the company began developing new skills, building and running reliable, scalable, cost-effective data centers, Amazon leaders realized that such infrastructure could be valuable to other organizations as well. This led to the genesis of AWS and in 2006, Amazon launched AWS as an on-demand cloud services provider.
Though Amazon.com and AWS may be serving different types of customers, the core of both these organizations remains the same according to founder Jeff Bezos.25
Convincing stakeholders across the ecosystem to sign on to, fund, and support a long-term, significant change is not an easy prospect. Many people are loss-averse and resist change. But by investing in these stakeholder relationships—and bringing them along the change journey—this challenge can be overcome, instead of serving as a ready excuse to abandon bold change.
Just as the CEO should not be the sole arbiter of bold change, there is no one magic entity or constituent that should determine whether a change can happen. If large shifts emerge from a series of smaller moves over time, each one may necessitate buy-in from a different group or affect each constituency differently. Across the ecosystem, different stakeholders—the board, consumers, investors, regulators, employees, or others—can spell either success or failure.
Bold change is as much about developing a strong marketing strategy to get stakeholder buy-in as it is about the dollar amounts funding the change. And leadership can play a significant role in telling a strong story about why change needs to happen and tailoring that message to resonate with each stakeholder group. It takes a village for change to occur, so leaders should talk to each of these constituencies regularly and understand and address their concerns.
Leaders can bring stakeholders along in the process by considering the following when developing a more tailored communication plan for change:
Some leaders express frustration at their company’s inability to execute change, presuming that industry dynamics are the root cause of their challenges. However, our research suggests there’s often more to the story, and this should offer optimism for leaders. Large-scale change is challenging but feasible for companies across industries. As your organization ramps up for its next move, consider these three questions to help jump-start your journey:
The good news is that bold change can be built incrementally: small wins lead to bigger ones. As one executive we interviewed noted, “As you accumulate success in making smaller moves that get bigger and bigger and bigger, then you gain credibility in your ability to execute new things. And then you'll be able to have a little bit more license from stakeholders to take big moves.” Given the increasingly complex nature of business competition today, the urgency for leaders to adopt a journey-focused view of bold change has likely never been greater.
To begin exploring the concept of bold change, Deloitte interviewed fifteen senior strategy executives from Fortune 500 companies and venture capital funds in June 2022. We sought to understand the factors that impact a company’s ability to drive significant change and what this change entails. In addition to conducting these interviews, we analyzed financial data and M&A activity across a variety of sectors to further assess who is driving bold change and what role industry economics play. We also examined academic literature to better understand established and emerging management theories that seek to explain decision making, planned behavior, and systems thinking. This research article marks the beginning of a deep exploration of these questions over time.