All business organizations face two fundamental demands. They must execute their current business activities well enough to win competitive success in today’s marketplace while at the same time adapting their strategies, activities, and business model to meet tomorrow’s competitive challenges. History tells us that few companies excel at adapting to changing market and competitive conditions over the long term. In a major study published in 2005, Robert Wiggins and Tim Ruefli demonstrate that while many companies can achieve high performance in the short term, only a few can sustain above-average performance in the longer run. These authors divided a sample of 6,772 companies over 23 years into superior, average, and inferior performers in their industries. Only 5 percent of these companies remained in the superior grouping for 10 years or more.

The very capabilities that make companies successful when competition is relatively stable become liabilities when those companies face the need to make major changes.

The need for adaptation can be driven by several factors. For example, a company may need to adapt its strategies and operating activities in order to defend itself against competition from new technologies or new products and services or from new competitors with different cost structures and business models. Companies can also find it necessary to change in order to take full advantage of emerging growth opportunities.