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How does a fossil fuel company become the world’s largest developer of offshore wind? How does a software company written off for missing the mobile revolution become one of the world’s most valuable companies in the age of AI? Ørsted and Microsoft have faced a puzzle familiar to many leaders: When technological, regulatory, and societal shifts redraw the basis of competition, reinvention is no longer optional, but the path forward is far from obvious.
Reinvention has been a key concern in business strategy. Stories of startups disrupting markets are compelling and often romanticized. But established companies do not have the benefit of a clean slate. Existing frameworks illuminate different parts of the problem: Disruptive innovation explains why incumbents get trapped, value shows how companies create new markets, and work on renewal and reinvention highlights the organizational barriers that make change so difficult.1
Leaders are faced with a dilemma in strategizing their way forward. Some companies double down on their known strengths: They keep innovating around the core and extend existing products, technologies, or business models into adjacent spaces. Kodak’s unwavering attachment to film demonstrates the risks of sticking to the legacy formula. Starting from a clean slate with a pivot to an entirely new business may seem the better option. But in doing so, a company risks discarding capabilities, relationships, and resources that could offer comparable advantage in new markets while also alienating internal and external stakeholders.
Consider Ørsted. In 2009, the oil and gas company, then known as DONG Energy, was also Denmark’s largest utility and biggest CO₂ emitter, with 85% of its power coming from fossil fuels. But its business was under pressure from multiple directions, including exposure to volatile swings in fossil fuel prices, and public opposition to building new coal-fired power plants.2 At the same time, the global energy transition created new opportunities. To DONG’s leadership, it was clear that the existing business would not be viable long term, environmentally or financially, and that renewables were the path forward.
The question was no longer whether to transform but how. DONG’s leadership looked inward. The company’s portfolio included the world’s first offshore wind farm. More importantly, decades of extracting petroleum in the North Sea had enabled it to build something harder to replicate: deep capabilities in large-scale infrastructure engineering, complex project development, and the logistics of operating in harsh marine environments. This became the foundation for renamed Ørsted’s 85/15 Black-to-Green strategy for inverting its portfolio mix to 85% renewables and 15% fossil fuels, scaling its offshore wind business, and achieving a 30-year target in only a decade.
Ørsted’s remarkable transformation exemplifies a recurring pattern that we observed in our research on corporate reinvention stories. Microsoft’s trajectory tells a similar one. After failing to respond to the mobile shift and then making an ill-fated $7.2 billion acquisition of Nokia’s devices and services business, Microsoft emerged from what many have called a lost decade to become a leader in enterprise cloud computing. Like Ørsted’s, this reinvention was anchored around something deep, durable, and transferable: Microsoft had the trust of enterprise CTOs, and its products were in almost every Fortune 500 company. Its enterprise business competencies, combined with its nascent cloud computing business, became the foundation for a growth story that resulted in a tenfold increase in the company’s valuation under CEO Satya Nadella.
This is the pattern we have observed among successful corporate reinventions. Companies that navigate structural disruption do not typically build from scratch, nor do they simply protect the core. They uncover a deep, embedded capability that already exists inside the organization, often built for one context but carrying latent value that can be directed toward a fundamentally new strategic purpose. These capabilities, which we call kernels of reinvention, are powerful anchors around which new businesses can be built.
Finding a Kernel of Reinvention
Evolutionary biology has a name for the process Ørsted, Microsoft, and similar companies have undergone: neofunctionalization, where a gene that evolved for one function acquires a novel function. In evolution, new functions do not always arise from entirely new structures. Organisms facing shifts in their environment can benefit from repurposing existing genetic material for new advantage under environmental pressure. For example, millions of years ago, as the Southern Ocean cooled, Antarctic zoarcid fish evolved an antifreeze protein gene through the neofunctionalization of another gene, allowing the fish to survive in waters where other creatures would have frozen.3
Sometimes the kernel of reinvention is technical or scientific: Fujifilm’s future did not lie in film itself but in the chemistry, materials science, and precision capabilities involved. BYD’s kernel was a deep competence in battery electrochemistry and power electronics that became central to electric vehicles and broader energy applications. Kernels can also be commercial and relational, such as Microsoft’s enterprise business capabilities and trusted relationships with enterprise customers.
Four characteristics distinguish a genuine kernel from wishful thinking about legacy assets:
Deep. The kernel is not what the company sells, builds, or is known for but something that sits beneath it — underlying capabilities or resources that make today’s business possible. It can be genuinely hard to see because companies need to look beyond their strategic position, through their products and architectures. In photography, the kernel was not film but the chemistry and precision-coating science beneath it. For example, the same science that kept film stable and protected from ultraviolet light could also be used to keep skin moisturized and protected from UV damage. Fujifilm harnessed it to move into new markets, such as cosmetics.
Generative. Kernels enable a company to pursue new value and competitive positions. In e-commerce, Walmart’s capabilities in grocery retailing, including perishables logistics, and a dense retail network that used its stores as last-mile fulfillment nodes, became a launchpad for online grocery sales — a segment that pure-play digital players had yet to crack at scale. Walmart integrated this kernel with new e-commerce capabilities to transform it into an omnichannel model that served as a wedge. Later, it borrowed from the Amazon playbook by layering on a third-party marketplace and advertising business.
Defensible. Kernels need to give a company something that rivals in the new market will struggle to build quickly. Microsoft’s enterprise advantage in cloud and AI rests on trust and operational dependency built over decades with Fortune 500 customers, the security integrations embedded in its procurement and compliance processes, and the developer ecosystem that compounds with every new product. New cloud entrants could match the underlying compute, but they could not come to market with a web of institutional relationships and embedded dependencies similar to what it had taken Micro
