While the phenomenon of turbulence is not new, its nature and degree have changed over time. In recent years, we have seen new and powerful drivers—digitization, connectivity, trade liberalization, global competition, and business model innovation—increase turbulence and make it more persistent.
Since the mid-1980s, this perfect storm of forces has been creating a “new normal” of chronic turbulence that can undermine incumbent positions and business models with unprecedented speed. Indeed volatility in revenue growth, in revenue ranking, and in operating margins have more than doubled since the 1960s. Executives must now master the art of what we call adaptive advantage.
In this report, we explore a powerful new measure of that art: the BCG Adaptive Advantage Index. We have developed the index to measure how well a company adapts to turbulence in its environment. We calculated index scores for 2,500 public companies in the U.S. over a 30-year period. We found through our analysis that adaptiveness creates value over both the short (6-year horizon) and long (30-year horizon) term. The BCG Adaptive Advantage Index not only serves as a metric of past performance but also has predictive power—the most adaptive companies, as ranked by the index, are more likely than unadaptive companies to outperform in the future.