Boston Consulting Group found that 26% of corporate transformations outperformed industry peers on total shareholder return at both one and five years, showing how few sustained relative gains across both periods.
The consultancy’s April 2024 report measured total shareholder return (TSR) against industry peers, with the two evaluation points following a previous downturn. Its research covered nearly 2,000 public companies worldwide from 2001 to 2022. Companies qualified if they had at least $10 billion in revenue in 2022 or a market capitalization of at least $10 billion at year-end. Depending on available data, BCG analyzed between 1,000 and 2,000 transformations.
To identify transformations, BCG combined companies’ returns relative to their peers with a predictive model that drew on corporate announcements and restructuring-spending data. The results are measured at the company level. They do not establish whether a particular project caused the returns or measure project-level adoption, budget performance or cash savings.
BCG attributed more than two-thirds of first-year TSR outperformance to investor expectations and 13% to efficiency improvements. For the five-year period, it attributed 43% to revenue growth, 32% to cost reductions and 25% to investor expectations.
In a Nov. 6 opinion column for BusinessDay, Akin Monehin, managing partner of Praxis Execution Advisory, argued that breaking a business case into programs, workstreams and milestones can lead leaders to manage activity instead of outcomes. He said transformations also consume capital, management attention and organizational energy. “Completion tells you what the transformation has done. Value tells you what the business has become,” Monehin wrote.
BCG said its 2024 report broadened earlier research published in MIT Sloan Management Review by examining companies globally through 2022. A separate BCG Weekly Brief from May 2024 put the success rate at 25% among companies it said needed to change, defining success as above-industry-average TSR in both periods. It did not explain the difference from the full report’s 26% figure.
