New Monitor Deloitte Report: An Exponential Enterprise Framework to Help Companies Double Their Valuations Even During Continuous Disruption and Change

To help business leaders adapt to an increasingly dynamic and disruptive operating environment, Deloitte today unveiled a new report, “The Exponential Enterprise: Fortifying the Ability to Win Through the Capacity for Change,” that examines the characteristics of an always-on transformation strategy and provides leaders with the tools to measure the value it delivers. Created by Monitor Deloitte, the strategy practice of Deloitte Consulting LLP, the report’s quantitative analysis shows that “exponential enterprises” benefit from higher and more stable shareholder valuations and more consistent financial performance, allowing them to attract more capital and talent by signaling an ability to create durable competitive advantage.

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The report found that most enterprises believe disruption is here to stay, but face significant barriers to adapting their long-term strategic planning and decision-making to this new reality.

• Sixty percent (60%) of global CXOs believe that disruptions like those seen in 2020 will continue in the future.
• Seventy percent (70%) of CXOs are not confident in their organizations’ ability to pivot and adapt to disruptive events.
• Twenty-five percent (25%) of CEOs believe their biggest mistake during the pandemic was not acting fast enough.

“Faced with an ever-changing operating environment, leaders are finding it more difficult to create and sustain competitive advantage. Traditional transformation initiatives alone simply can’t keep up,” said Rich Nanda, principal, Deloitte Consulting LLP, U.S. Monitor Deloitte practice leader. “Organizations that retool their approach — to become exponential enterprises — demonstrate an ability and willingness to transform continuously and advantageously in the face of change and disruption.”

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Defining an Exponential Enterprise
Monitor Deloitte’s report provides a framework to help leaders retool their approach to enterprise strategy, operations and leadership, and redesign their firms to make it easier to adapt to future change. The report found that enterprises that embrace change and succeed in the face of disruption orient their businesses around two different dimensions:

• An ability to win, representing the few and only things the business wants to protect from change: a long-term strategic vision and goals supported by distinctive assets and capabilities that retain value in various future scenarios.
• A capacity for change, comprising the operating model, capabilities and leadership that allow the business to rapidly and flexibly adapt how it positions, delivers and monetizes its ability to win.

Characteristics of Exponential Enterprises
To quantitatively measure a company’s ability to win and capacity for change, Monitor Deloitte developed the Deloitte Exponential Enterprise Indices, which enable an enterprise to measure its ability to win and capacity for change and compare both to industry competitors. The analysis found that exponential enterprises achieve and sustain superior performance and valuations over time — especially during periods of adverse and disruptive market conditions.

• Companies with the highest improvement in capacity for change between 2015 and 2020 gained, on average, 94% on their forward PE ratio.
• Top firms earn valuation premiums that are 176% greater and 30% less volatile than the worst performers in their industry.
• During the COVID-19 Pandemic, 94% of exponential enterprises retained their ability to win and capacity for change advantages over industry peers.

Exponential Enterprise Index methodology
To quantitatively measure a company’s ability to win and capacity for change, Monitor Deloitte developed the Deloitte Exponential Enterprise Index, which evaluates 500 large-cap U.S companies across industries against leading and lagging indicators of ability to win and capacity for change. The index spans the years 2015 to 2020 and evaluates companies on a rolling two-year basis. For each two-year period, companies receive composite index scores of 1 to 100 for both the ability to win and capacity for change.

Monitor Deloitte, the strategy practice of Deloitte Consulting LLP, has a 30-year history of helping businesses shape and operationalize business change. As trusted collaborators, Monitor Deloitte strategy consultants work closely with clients through the entire process, from idea to execution, to help drive end-to-end transformation, continuously optimize business models, and create lasting business value.