A new imperative for business model reinvention

Organisations are entering a new era—one defined by technological disruption, climate change and other forces reshaping business and society. Just consider the challenges facing the insurance industry: Health insurers are reassessing their role as many patients use improved monitoring technology to self-manage their conditions. Vehicle insurers are grappling with thorny questions of liability around self-driving cars. And property insurers are reconsidering coverage entirely in light of floods, wildfires and other climate-related disasters.

The traditional response to business disruption might be to slash costs or tinker with operating models. This new environment, however, demands that companies seriously weigh business model reinvention—the process of fundamentally changing how an organisation creates, delivers and captures value.

In PwC’s 28th Annual Global CEO Survey, 42% of respondents said their company won’t be viable in 10 years if it sticks to its current path. The way leaders tackle the reinvention imperative today will determine their organisation’s future.

“Change is coming fast and furious,” says Matthew Duffey, global reinvention leader at PwC. “Leaders have to take a hard look at their current business model and where they need to take it—or risk getting displaced in their industry.”

Preparing for reinvention means first looking at external catalysts of change: the global megatrends reshaping the terms of competition. These trends are varied, running the gamut from technological advances to geopolitical unrest. By better understanding them, companies can begin to address them productively and spot growth opportunities. 

Technological disruption, and generative AI in particular, is a key source of change. Roughly one-third of leaders in the Global CEO Survey have seen profitability and revenue increases through the use of large language models. According to Duffey, the technology’s growth potential is just beginning. “Think about what you’ll be able to unleash in terms of meeting customer needs: layering GenAI on the customer data you use to inform new product decisions or routes to market.”  

Reinvention can also start with a fundamental shift in how a business engages its customers. Such was the case for one manufacturer that partnered with PwC. Historically, the company had relied largely on distributors. But looking deeper at customer data, the company saw the target customers for one key product were increasingly likely to be influenced by younger, more digitally savvy family members. With this insight, the manufacturer engaged those individuals directly by shifting the product toward the automated and digitised direct-to-consumer sales processes they favoured. As a result, the company gained new customers and grew revenues from the product. 

“Customer demands change rapidly,” Duffey says. “Leaders need to recognise where clients or consumers are going and how they want to be served in the future.” 

Companies should review the organisational capabilities needed for reinvention to understand their potential, starting with resource allocation. Successful innovation requires a concentration of resources, with corporate teams aligned on the capital implications of strategic decisions. According to the Global CEO Survey, higher levels of annual reallocation were associated with both greater levels of reinvention and higher profit margins. 

Yet some companies fail to address corporate inertia or other common obstacles to resource allocation—and reinvention itself. Leaders can help overcome this overreliance on the status quo by ringfencing (or financially separating) new business model pilot efforts so they’re unaffected by the prevailing model. As Duffey explains, they can also take steps to instill their own sense of purpose throughout the organisation. “The CEOs who know they have to pivot will put people in the right roles and give them the time and focus to execute on this,” he says. “It’s about having the conviction to do it right and being willing to sacrifice part of your current business model for the good of the future.” 

Putting the plan into action often requires strategic collaboration. “Once you get that idea of where you want to go, there’s a lot of work required to make it happen. PwC can help clients with this every step of the way, including creating a new operating model, scaling up technology and sustaining the new forms of business that emerge.” 

While business model reinvention can seem daunting, it’s been part of the journey for countless long-lived companies. And emerging trends are making transformation an imperative, not an option. By embracing the process and all its opportunities, companies can increase their odds of long-term viability. 

“If senior executives are being honest about their business, it’s hard to say that in five years they’ll be making money in the exact same way they do today,” Duffey says. “Profit pools are going to shift, and new value chains are going to take shape. Companies need to decide whether they’re going to participate and thrive in the resulting new economies or become spectators.”