When Your Business Needs a Second Growth Engine
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Strategy
by
James Allen
and
Chris Zook
by
James Allen
and
Chris Zook
From the Magazine (May–June 2022)
· Long read
Benedict Redgrove
Summary.
Traditionally, the most reliable way for a firm to find its next wave of growth was to apply the capabilities of its core business in an adjacent market. But recently a new pattern has begun to emerge. More firms are learning the art of building large second cores—what Bain’s Zook and Allen call engine twos. Given that in the past five years, 60% of big public companies have seen their growth stall out or stagnate—often because of technological disruption—finding an engine two has become increasingly imperative. What does it entail? Successful engine twos have four factors in common: They target markets where the profit pool is sizable and growing or shifting, as Amazon’s cloud computing business did. They have a differentiated competitive advantage, which is often built up through acquisitions, as happened at Disney+. They adopt entrepreneurial approaches, like Bradesco’s digital unit, Next, and leverage the scale and assets of the original core, as the industrial cleaning company Ecolab’s new water-purification business did. In combination these four elements magnify one another’s effects, often creating businesses that have much greater potential than firms’ original cores.
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Idea in Brief
The Opportunity
While new technologies continue to upend industries and shorten the lives of corporations, there has never been a better time for companies to search for new growth engines.
How to Tap It
Half of successful “engine two” businesses are found by entering a fast-growing adjacency, as Ecolab, a provider of industrial cleaning products and services, did when it moved into the industrial water purification business. About a third are next-generation versions of the core business—like Netflix’s move from DVD rentals to streaming. The rest involve building or buying a business totally separate from the core.
Keys to Success
Companies need to identify markets with expanding profit pools, ensure that their offerings are differentiated, and instill an entrepreneurial mindset in the new business while harnessing the skills and assets of the original engine of growth.
In a series of forums we held recently with chief executives of large companies around the world, we uncovered a preoccupation with obsolescence and renewal. When we surveyed them, 65% of the CEOs predicted that in five to seven years their firms’ main competitors would be different from their main competitors today, and 63% said that new competitors with new business models would pose a major threat to their firms’ core business. The CEOs projected that in the next decade 40% of the value their companies created would come from entering new markets and launching new business models. Clearly, the business landscape feels highly unstable to them—which is understandable, given that new technologies continue to upend industries and wipe out businesses at a remarkable rate.
May–June 2022
Read more on Strategy or related topics Growth strategy , Emerging markets , Competitive strategy , Entrepreneurship , Entrepreneurial business strategy and Business plans
JA James Allen is a partner in Bain & Company’s London office and a member of the firm’s global strategy practice. He is a co-author of a number of bestselling books including Profit from the Core and The Founder’s Mentality: How to Overcome the Predictable Crises of Growth (Harvard Business Review Press, June 2016).
CZ Chris Zook is a partner in Bain & Company’s Boston office and has been a co-head of the firm’s global strategy practice for twenty years. He is a co-author of a number of bestselling books including Profit from the Core and The Founder’s Mentality: How to Overcome the Predictable Crises of Growth (Harvard Business Review Press, June 2016).
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Read more on Strategy or related topics Growth strategy , Emerging markets , Competitive strategy , Entrepreneurship , Entrepreneurial business strategy and Business plans
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Navigation Menu. Subscribe. Sign In. Account Menu Account Menu Hi,  Guest. Search Menu. Close menu. CLEAR. SUGGESTED TOPICS. Explore HBR. Latest. The Magazine. Ascend. Podcasts. Video. Store. Webinars. Newsletters. Popular Topics. Managing Yourself. Leadership. Strategy. Managing Teams. Gender. Innovation. Work-life Balance. All Topics. For Subscribers. The Big Idea. Data & Visuals. Reading Lists. Case Selections. HBR Learning. Subscribe. My Account. My Library. Topic Feeds. Orders. Account Settings. Email Preferences. Log Out. Sign In. Subscribe. Latest. Podcasts. Video. The Magazine. Ascend. Store. Webinars. Newsletters. All Topics. The Big Idea. Data & Visuals. Reading Lists. Case Selections. HBR Learning. My Library. Account Settings. Log Out. Sign In. Your Cart. Visit Our Store. My Library. Topic Feeds. Orders. Account Settings. Email Preferences. Log Out. Reading Lists. 1 free. s. last free article. Subscribe. Create an account. Strategy. by. James Allen. and. Chris Zook. by. James Allen. and. Chris Zook. From the Magazine (May–June 2022) · Long read. Benedict Redgrove. Summary. Traditionally, the most reliable way for a firm to find its next wave of growth was to apply the capabilities of its core business in an adjacent market. But recently a new pattern has begun to emerge. More firms are learning the art of building large second cores—what Bain’s Zook and Allen call engine twos. Given that in the past five years, 60% of big public companies have seen their growth stall out or stagnate—often because of technological disruption—finding an engine two has become increasingly imperative. What does it entail? Successful engine twos have four factors in common: They target markets where the profit pool is sizable and growing or shifting, as Amazon’s cloud computing business did. They have a differentiated competitive advantage, which is often built up through acquisitions, as happened at Disney+. They adopt entrepreneurial approaches, like Bradesco’s digital unit, Next, and leverage the scale and assets of the original core, as the industrial cleaning company Ecolab’s new water-purification business did. In combination these four elements magnify one another’s effects, often creating businesses that have much greater potential than firms’ original cores. Tweet. Post. Share. Annotate. Save. Get PDF. Buy Copies. Print. Idea in Brief. The Opportunity. While new technologies continue to upend industries and shorten the lives of corporations, there has never been a better time for companies to search for new growth engines. How to Tap It. Half of successful “engine two” businesses are found by entering a fast-growing adjacency, as Ecolab, a provider of industrial cleaning products and services, did when it moved into the industrial water purification business. About a third are next-generation versions of the core business—like Netflix’s move from DVD rentals to streaming. The rest involve building or buying a business totally separate from the core. Keys to Success. Companies need to identify markets with expanding profit pools, ensure that their offerings are differentiated, and instill an entrepreneurial mindset in the new business while harnessing the skills and assets of the original engine of growth. In a series of forums we held recently with chief executives of large companies around the world, we uncovered a preoccupation with obsolescence and renewal. When we surveyed them, 65% of the CEOs predicted that in five to seven years their firms’ main competitors would be different from their main competitors today, and 63% said that new competitors with new business models would pose a major threat to their firms’ core business. The CEOs projected that in the next decade 40% of the value their companies created would come from entering new markets and launching new business models. Clearly, the business landscape feels highly unstable to them—which is understandable, given that new technologies continue to upend industries and wipe out businesses at a remarkable rate. May–June 2022. Read more on Strategy or related topics Growth strategy , Emerging markets , Competitive strategy , Entrepreneurship , Entrepreneurial business strategy and Business plans. JA James Allen is a partner in Bain & Company’s London office and a member of the firm’s global strategy practice. He is a co-author of a number of bestselling books including Profit from the Core and The Founder’s Mentality: How to Overcome the Predictable Crises of Growth (Harvard Business Review Press, June 2016). CZ Chris Zook is a partner in Bain & Company’s Boston office and has been a co-head of the firm’s global strategy practice for twenty years. He is a co-author of a number of bestselling books including Profit from the Core and The Founder’s Mentality: How to Overcome the Predictable Crises of Growth (Harvard Business Review Press, June 2016). Tweet. Post. Share. Annotate. Save. Get PDF. Buy Copies. Print. New! HBR Learning. Start Course. Learn More & See All Courses. Read more on Strategy or related topics Growth strategy , Emerging markets , Competitive strategy , Entrepreneurship , Entrepreneurial business strategy and Business plans. Partner Center. Latest. Magazine. Ascend. Topics. Podcasts. Video. Store. The Big Idea. Data & Visuals. Case Selections. HBR Learning. Subscribe. Explore HBR. The Latest. All Topics. Magazine Archive. The Big Idea. Reading Lists. Case Selections. Video. Podcasts. Webinars. Data & Visuals. My Library. Newsletters. HBR Press. HBR Ascend. HBR Store. Article Reprints. Books. Cases. Collections. Magazine Issues. HBR Guide Series. HBR 20-Minute Managers. HBR Emotional Intelligence Series. 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