By Charles Vaslet, Senior Partner & CRO, Emerald
Your company may need a decade to reinvent itself. You probably have half that time.
Two numbers should trouble every newly appointed CEO.
In 2025, 45% of departing S&P 500 CEOs left before reaching their fifth anniversary. At the same time, 42% of CEOs surveyed by PwC said their companies would no longer be viable within ten years if they continued on their current path.
It is hard to imagine a clearer strategic mismatch. The company may need a decade to reinvent itself. The person responsible for that reinvention may have five years (or less) to demonstrate that it is working.
This does not mean CEOs should start spraying capital at new ventures. It means they need to build a credible system for finding future growth before the core business admits that it needs one.
Having worked both inside large energy companies and alongside venture-backed founders, I have seen this problem on both sides. The failure is rarely a shortage of technology or ideas; it is the absence of a corporate mechanism to enable risk taking that would give start-ups technology a chance to demonstrate what’s possible from emerging innovation.
That mechanism cannot be delegated entirely to an innovation department.
The CEO is not the chief innovator
McKinsey’s recent article, The CEO’s critical role in building new businesses, is right that the CEO must play a central role. But the CEO’s job is not to invent the ideas, select individual new ventures, start-ups or chair every investment committee.
It is to make three decisions that nobody else in the organization can make:
1. Where must the company create new profit pools?
2. How much cannibalization, uncertainty and short-term dilution is acceptable?
3. And which people and resources will be moved from established businesses to opportunities that do not yet have political power?
Everything else follows from those choices.
Corporate culture is often discussed as if it were something created through internal communication. In reality, employees watch where the CEO allocates capital, talent and attention. If every difficult quarter causes growth projects to be cut while the core remains untouched, the organization learns the real strategy very quickly.
McKinsey found that, in companies where CEOs personally prioritize venture building, new businesses can contribute nearly 20% of enterprise revenue within five years. Companies pursuing three or more ventures at once can achieve up to 30% higher revenue growth than those placing a single bet.
The important phrase is “a portfolio of bets”. The CEO does not need to predict the future perfectly. The CEO needs to ensure the company is exposed to enough credible versions of it.
The real enemy is corporate time
Start-ups are not necessarily smarter than large corporations. They are simply structured to learn more quickly.
They can speak to customers, test a proposition, change direction and redeploy their small but focused pool of capital before a corporate team has completed procurement. This creates what I would call the corporate time deficit: by the time an incumbent has reached internal agreement, the market has moved.
External innovation can close that deficit. It gives a company access to technologies, founders, business models and market evidence that already exist outside its walls. The objective is not to outsource strategy. It is to avoid rebuilding every insight from zero.
But this requires more than a database of start-ups. Someone must continuously map emerging technologies, understand where competitors are placing bets, what existing customers and supply chain partners are planning, and translate business-unit problems into investment theses, conduct serious diligence and help successful technologies cross the gap from pilot to deployment.
The last part is usually the hardest. Large corporations are full of promising pilots that never found a budget owner, a route through procurement or an executive prepared to scale them.
The board needs evidence, not theatre
BCG found that only 3% of companies were genuinely ready to convert innovation ambition into results. It also found no discernible correlation between R&D spending and shareholder returns.
Spending more is not the answer. Better governance is.
The CEO and board should agree in advance how future businesses will be judged. In the discovery phase, the relevant evidence may be customer pain, technical feasibility and the speed of learning. Later, it becomes commercial adoption, repeatability and unit economics. Only when the business begins to scale should it be expected to carry metrics resembling those of the core.
Capital should move in stages as that evidence develops. Weak propositions should be closed without embarrassment. Promising ones should receive disproportionate support. Ventures stranded between these two categories must be repaired, sold or wound down.
What will the company be known for next?
PwC found that only 7% of corporate revenue over the previous five years came from fundamentally new businesses. That is remarkably little reinvention in a period that included generative AI, an energy crisis, supply-chain disruption and major shifts in industrial policy.
The board does not expect a CEO to make every venture succeed. It should expect a credible answer to a more important question: where will the company’s next meaningful source of growth come from?
Producing that answer requires an outside view of technological change, an investor’s approach to uncertainty and a corporation’s ability to scale. Few companies possess all three capabilities internally. Even fewer can build them quickly enough.
So to summarize, the roadmap for new CEOs looks roughly like this:
1. First 100 days: choose where the company must grow (and earn) next
2. Year 1: build the portfolio & determine what evidence will prove success (or failure)
3. Year 2-3: Use learnings to take smart next steps (where do we put the next $ and the next smart person)
4. Year 3-5: Build the validated options, kill the rest
The chief executive’s legacy will not be determined solely by how efficiently the inherited business was managed. It will be determined by whether the company still has somewhere to grow when the assumptions behind that business expire.
Ticktock. The five-year clock is running.
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