Results suggest companies aren’t meeting growth targets due to a lack of focus; chasing too many opportunities at once, squandering energy and resources
New York, NY, July 28, 2015 – Growth is a priority at nearly every company today. But most executives don’t have a clear view of how their companies will meet growth targets.
That’s according to a new survey by PwC’s Strategy& of more than 500 executives from around the world whose companies have annual revenues between $100 million and more than $10 billion.
“There’s a fundamental problem here. Everyone is targeting big growth — everyone knows they need it for long-term success. But most executives do not believe they will deliver against their aspirations,” said Paul Leinwand, senior leader at Strategy&, PwC’s strategy consulting practice.
“Companies often fail to build a real engine for growth — one designed around what they do best. Instead, they simply chase growth wherever it presents itself,” added Gerald Adolph, also a senior leader at Strategy&.
Confidence in achieving growth — and in company leadership to make it happen — is low
Because of the heavy emphasis on growth — 94% of executives say growth is a company priority, and a full 30% say it’s more important than anything else — companies often set very ambitious targets for long-term success. However, executives are unclear about how to reach those targets.
- 85% of executives say their companies’ growth targets are in line with or above their industries’ growth rates.
- Only 38% of executives are highly confident their companies will realize their growth targets.
- 61% of respondents think realizing their companies’ growth targets will take significant extra effort — what they’re doing now is just not enough.
- 51% admit their companies aren’t fully clear about how to realize the growth targets.
- 78% of executives say they do not think their leaders are “excellent” at driving growth.
Executives paint picture of how difficult growth is — and feels
- Although 74% of executives agree more growth opportunities exist now compared to 10 years ago, 70% say it’s more difficult now to generate profitable growth, and 66% say knowing which growth avenue to pursue is harder than it was a decade ago.
- Only 39% of executives say they “thrive on” their companies’ emphasis on growth; most (53%) say they just “handle it.”
“The competitive environment is more intense than ever. Globalization, deregulation, and digitization 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,” says Adolph.
The growth imperative often spreads companies and executives thin — unproductively and unnecessarily
“In the search for growth, a company often launches a broad set of initiatives. But this spreads resources too thin, leaves potentially viable growth paths under-resourced, and prevents the company from building the type of advantage that leads to long-term growth. The result? Companies may experience a temporary revenue boost, but the gains are almost never sustainable,” says Leinwand.
Based on the survey results, this lack of focus is palpable within companies and leads to frustration.
- More than a third (34%) of executives admit to being frustrated because they have to pursue many growth opportunities in parallel, none of them significant enough to make a difference.
- A third (33%) say they’re frustrated because their companies continue to pursue growth initiatives that have proven not to work.
- 39% say they’re concerned that the pursuit of growth is spreading the company too thin, and 37% are concerned that it may erode the positives of the company culture.
The way to grow and create competitive advantage is to focus on what differentiates the company – its key capabilities
Says Leinwand: “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.”
Adds Adolph: “The best growth strategies match the company’s real advantage with deep market insight and could well take you outside the old ways of defining the industry you serve. Just consider how Apple has leveraged its growth engine around design, innovation, and customer experience to build from PCs to music devices, to phones and now watches.”
Strategy& conducted a Web-based survey that contained 19 questions on the topic of growth. There were 503 respondents from 11 countries. Respondents included company founders, presidents, CEOs, and other C-Suite executives, senior vice presidents, vice presidents, and managers. Annual revenues at responding companies ranged from $100 million to over $10 billion. Strategy& fielded the survey in spring 2015.