PwC:Business model change leads to productivity growth

PwC research: pressure to adapt business model increasing

There is a connection between business model change and productivity growth. This is evident from a study by PwC based on the data of around 18,000 companies.

This means that if a company changes the way it makes money, serves customers, or provides new products or services, it is more likely to achieve productivity growth.

.

Exclusive Luxury Experience For Luxury-loving Businessmen, Bosses, CEOs, Executives And Entrepreneurs… – Click Here

.

The 18,000 companies in the sample are located all over the world and come from all sectors. The data refers to 2009-2023.  The research ‘Reinvention as a resilience strategy’ shows that companies that are at the forefront of changing their business model can realize a productivity gain of 1.5 to 8.5 per cent compared to companies that lag.

Pressure on companies to change their business models is high

‘The results indicate that changes in the business model contribute significantly to productivity growth. Companies that change their business models are better than companies that do not’, explains PwC chief economist Barbara Baarsma.

”Our analysis shows that this effect is even stronger in the period between 2019 and 2023 than in previous years. This is evident from the fact that the pressure on companies to innovate and adapt their business models is increasing.” 

From transforming to reinvention

This pressure on companies was also evident in the results of PwC’s CEO Survey, in which CEOs’ doubts about the sustainability of their business model clearly emerged. 45 per cent indicated that they expect to no longer exist in ten years if they continued the same path.  Veronique Roos, member of the Board of Directors of PwC Netherlands and an expert in the field of transformations, says that she only sees this pressure increasing in practice. 

.

.

”Trends such as technological changes, climate change and changing consumer preferences and new regulation force CEOs to change their business model. The changes that companies must deal with are rigorous, which means that companies must rigorously adapt to these changes. In many cases, fine-tuning or optimizing current business models will no longer be enough. That is why the focus must shift from transforming to reinventing.” 

”The great thing about this approach is that it shows quantitative evidence that business model change does indeed pay off. Evidence for this is often qualitative and anecdotal.” – Barbara BaarsmaChief economist, PwC Netherlands

Quantitative evidence for the benefit of business model changes

PwC’s chief economist office followed the approach of previous scientific research, using changes in the ratio between assets and turnover of companies (the so-called Net Asset Turnover ratio) as an indicator for changes in business models. This ratio reflects changes in business operations, asset management and sales of services or products, i.e. on matters that directly relate to business model change. 

Barbara Baarsma: ‘It is a fairly technical and at the same time intuitive approach. The idea is that a large change in sales or in assets can only be caused by a change in business model. The great thing about this approach is that it shows quantitative evidence that business model change does indeed pay off. Evidence for this is often qualitative and anecdotal. This research establishes a link between business model change and productivity, offering valuable insights for companies seeking to achieve sustainable growth. 

Veronique Roos: ‘These results of this research should be an encouragement for companies to think carefully about the viability of their current business model.’

.

WORLD FAMOUS LEONARDO DA VINCI AND LEONARDO DA VINCI MINDSET – Course – Unleash Your Inner Genius – CLICK HERE

.

Takeaways

The findings from our study underscore an undeniable and perhaps inconvenient truth: in today’s fast- paced and ever-evolving market landscape, the willingness and ability to reinvent one’s business model are advantageous.

Companies that fail to adapt will inevitably find themselves at a competitive disadvantage, as more agile and forward-thinking rivals seize the opportunities that come with strategic reinvention.

Embracing Business Model Reinvention is no longer optional; it is a critical factor in ensuring long-term success and resilience.

To leverage the full potential of Business Model Reinvention, we urge companies to proactively evaluate and refine their strategic approaches.

This involves not only recognizing the value of continuous adaptation but also fostering a culture that encourages experimentation and agility.

Leaders must prioritise these initiatives, equipping their teams with the resources and support necessary to drive meaningful change.

By doing so, firms can unlock new levels of productivity and profitability, securing their position at the forefront of their industries in the years to come.

Download the report

Reinvention as a resilience strategy

Source – PwC