No business survives over the long term without reinventing itself. But knowing when to undertake strategic transformation-when to change a company's core products or business model because of impending industry disruption-may be the hardest decision a leader faces. Five interrelated "fault lines" can indicate that the ground beneath a company is unstable and that it's time for radical change. The authors' fault line framework addresses basic issues: whether the business serves the right customers, uses the right performance metrics, is positioned properly in its industry, deploys the correct business model, and has employees and partners who possess the capabilities required for future success. The framework can help executives build a case for change and persuade stakeholders to support the decision. And by identifying gaps between an organization's current state and where it needs to be to continue to thrive, it can inform the vision of how the company must transform. Diagnostic questions and an in-depth look at the health care company Aetna-an organization in the midst of an ambitious transformation effort, where one of the authors (Mark Bertolini) is CEO-illuminate how to detect the fault lines while there's still ample time to respond.

Companies spend more than $2 trillion on acquisitions every year, yet the M&A failure rate is between 70% and 90%. Executives can dramatically increase their odds of success, the authors argue, if they understand how to select targets, how much to pay for them, and whether and how to integrate them. The most common reasons for making an acquisition include holding on to a premium position or cutting costs. But to realize those benefits, the acquirer needs to achieve economies of scale by absorbing the target's resources into its operations. CEOs, who are often unrealistic about the performance boost from such acquisitions, must be sure not to pay too much for them. A less-familiar reason for making an acquisition is to fundamentally change a company's growth trajectory. In those deals, the acquirer uses the target's business model as a platform for growth. Because the business models with the most transformative potential are often disruptive, they can be difficult to evaluate, and CEOs often believe that such acquisitions are overpriced. In fact, however, those are the ones that can pay off spectacularly.