The Multiple Paths to Successful Portfolio Transformation
Large-scale portfolio transformation is a common and usually successful bet: about a fifth of big companies attempt one and 55% improve industry-adjusted ROA, with weak performers faring best. No single design wins; direction, magnitude and speed must fit the starting point and industry.
Summary
BCG and the University of Göttingen studied 1,088 large US and European companies from 2001 to 2011 and found 200 major portfolio transformations, each restructuring at least 20% of the portfolio. Two-thirds refocused rather than diversified, and 55% improved industry-adjusted ROA; 68% of weak starters succeeded against 40% of strong ones. Success depends on matching direction, magnitude and speed to circumstances, for example fast refocusing for a diversified firm in a declining, volatile industry.
Editor's opinion
Superseded by the more detailed, more recent 'Reshaping a Business Portfolio Is Hard' piece already in the tracker on the same topic.
Key concepts
Portfolio transformation · Refocus versus diversify · Industry-adjusted ROA · Transformation design (direction, magnitude, speed)