Opportunity choice is complicating growth strategies
Growth remains the number one priority for most medium to large global businesses. Companies are meeting difficulties growing however and respondents note that it has become more difficult than ten years to achieve growth. On the bright side, the majority of business leaders believe that with sufficient effort they will be able to meet their growth ambitions.
In its report titled ‘2015 Strategy& Growth Survey’, Strategy&, the strategy consulting practice of PwC, explores where a range of companies across the globe are in terms of their search for growth, as well as how successful they expect to be in their future achievement of growth. The web-based survey involved 500 companies among which, from the US (125), Germany (62), China (48), Brazil (42), and the UK (40). The responsibility of respondents was from managerial level up to President. The annual revenue of respondent companies started at $100 million (77), between $500 million and $1 billion (114), between $1 billion and $10 billion (201), and above $10 billion (111).
Aiming for growth
Of companies surveyed, 94% say growth is a priority, with 30% saying it is the most important strategic goal. For most companies, being level with or better than their competitors is important and 85% of companies are targeting at or above-industry growth rates over the coming five years.
The kind of growth targeted by companies varies however. Revenue growth is the most commonly selected target metric at 70%, followed by bottom line growth at 60%. Market share growth follows closely behind at 58%, while shareholder return is of least interest to companies surveyed at 40%. Most companies have multiple growth targets, only 8% use no targets at all, while 25% are seeing one growth target, 20% seek two, 25% seek three and 22% seek all four.
Growth difficulties
According to 70% of respondents, it is somewhat more or much more difficult now than ten years ago to generate profitable growth, while generating consistent growth is even more of an issue, say 72% of respondents. Although it is more difficult to grow, three quarters (74%) somewhat or strongly agree that there are now more avenues to grow than ten years ago. This increased number of opportunities and choice, however, is paralysing many organisations. 27% strongly agree that knowing which growth avenue to peruse remains more difficult than ten years, while 39% are somewhat in agreement about the continued difficulty.
Opportunities for growth
The survey highlights a number of different avenues for growth available to companies, asking respondents whether those avenues present them with an opportunity for growth. Digitisation is the most promising for companies, 77% see it as an opportunity for growth while 8% cite it as a risk. Globalisation follows, with 72% saying it is an opportunity while 12% cite it as a risk. Changes in the needs and tastes of customers is seen by 62% as an opportunity and 22% as a risk. The biggest risk for companies comes from financial uncertainty, cited by 61% as a threat and 24% as an opportunity.
“The competitive environment is more intense than ever. Globalisation, deregulation, and digitisation bring new players to the scene and increase market transparency. On the one hand, these trends bring along many new growth opportunities for companies, but they also make it easier to be disrupted by new entrants who can bring exactly the right capabilities required to win,” explains Gerald Adolph, a senior leader at Strategy&.
Working towards growth
To meet their growth ambitions, the companies cite a number of inhibiting factors. These include losing focus (31%) and the weakening of their company’s capabilities (27%). The biggest concern however is spreading the company’s spending too thin (39%) and losing the positives of their company culture (37%).
Getting there in the end
Many companies continue to seek growth but find it difficult to oversee the opportunities to create a strategy that will get them there. However, most companies are confident that they will get there in the end. 39% of respondents say that they are highly confident and 47% says that they are somewhat confident, only 11% say that they are not confident at all.
Getting there will not be an easy feat however. One in ten (11%) says it will take a Herculean effort, 50% feel it will take significant effort and 32% say it will take little effort. Only 5% say that it will be a relative breeze.
“We’ve found that consistent growth is the result of building a growth engine — a handful of capabilities that provide real differentiation in the market, like IKEA’s combination of price-conscious and stylish product design, highly efficient operations, and customer-focused retail design. From there, growth becomes the result of leveraging that advantage again and again, rather than seeking out a growth opportunity first and then struggling to find a path to succeed with it,” concludes Paul Leinwand, senior leader at Strategy&.
