Bain: Unlocking ‘hidden assets’ is key to avoiding business extinction

A 10-year study by Bain & Co. finds that 75% of Fortune 500 companies “face the threat of extinction within a decade” unless they tap their “hidden assets … to redefine themselves.” What sort of hidden assets? Bain’s “Unstoppable Growth Study” study says:

  • hidden customer assets: customer segments and data that can prompt new products and businesses
  • hidden growth platforms: platforms that can be expanded or created for new product lines and business units
  • hidden capabilities: technologies, processes and expertise that can lead to a breakthrough product or service

“These hidden assets were central to 90% of the cases where companies successfully redefined their core businesses and their growth formulas. The assets were not themselves hidden, but their full potential had not been recognized by management,” Bain says.

Typical strategies that usually don’t work:

  • leaping to new hot markets
  • pursuing “big bang” transforming mergers
  • launching broad-based innovation programs

So where does the dreaded threat of “extinction” come from? The following megatrends:

  • Faster movement of information
  • Speed of capital formation
  • Emergence of China and India, and their disruptive impact
  • Reduced capital intensity among the most profitable new industries
  • Increasingly rapid movement of executives among companies
  • The rise and impact of private equity firms
  • Speed of overall technology cycles

Success stories — companies that stepped back from the brink by unlocking their hidden assets — include Apple (think: iPod) and Marvel Entertainment (think: “Spiderman” blockbuster movies). “Companies that seek growth solutions based on hidden assets are four to six times more likely to survive,” the study says.

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About the study:
Tracked the 500 largest U.S. public companies from 1995 through 2004 and assessed their financial performance and rate of change. More extensive 10-year before-and-after profiles were then developed for 50% of the remaining companies that didn’t go bankrupt or get acquired during that period. Also surveyed 240 global executives and developed case studies on 25 successful business redefinitions.

Related:
The book: Unstoppable: Finding Hidden Assets to Renew the Core and Fuel Profitable Growth, by Chris Zook (Harvard Business School Press, 2007).

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