A recent webinar delivered by Gartner ‘C-Suite Strategies to Drive Growth Amid Economic Uncertainties’ contained some interesting results informing what business leaders are prioritising when trying to grow amid tightening economic conditions.
Generator’s Transformation & Diversification specialist, Maria Pombo, attended the webinar and summarises her key takeaways below:
- As you can see in the graph above, cost management and managing inflation has not been seen as a priority in Q1 of 2023, whereas innovation and digital initiatives have been.
- CEOs are prioritising Growth, Workforce, and Technology investments.
Looking at CEO priorities, it is clear that the majority are focusing on how to build back their businesses stronger while coming out of the economic contraction.
And while this is an admirable goal, a Gartner study of comparative organisations following the 2009-2010 downturn found that 70% of companies did not regain their pre-recession growth level 3 years following a recession, and ONLY 5% of companies consistently achieved profitable growth.
While this time around may not be the same, business leaders have a difficult time ahead. They need to work out how to improve efficiency (i.e., drive cash, productivity, and profitability), but also how to set up for the next leg of growth to differentiate the company’s performance heading into 2024, 2025 and 2026.
3 Key Limitations on the Drive for Growth
Gartner’s study found 3 key factors that will directly limit the drive for growth:
- Higher Interest Rates: With lower RoI, investors will not pay for future growth as their focus is on profit and cash flow. In addition, borrowing constraints makes funding new initiatives even harder.
- War for Talent: In the post-Covid market, employees’ have higher expectations, want hybrid and remote work flexibility, better tools and technology, and a better work-life balance. Employers need to accommodate different needs and a different working styles to compete for the best talent.
- Lagging Digital Transformation: More than 80% of leaders say that their businesses have not made progress toward or achieved their digital business transformation goals including streamlining operations, with 67% of CFOs believing that the last 3 years’ digital spending has not met the enterprise expectations with no payback.
So how can business leaders overcome these limitations?
- Targeting micro bets: Companies can strategically focus on investing in small, manageable initiatives that can generate revenue and productivity capabilities.
- Optimise human capital: Companies need to analyse whether their human capital is deployed in a way that is optimal to what the organisation needs to do.
- Cut wisely, Invest wisely: Businesses need to understand that they can’t cost cut their business to profitable growth; and need to place bets and invest in areas that they think will pay off sooner with the right talent deployed on those initiatives.
- Measure productivity: Business leaders need to clearly define the business values and productivity expectations and have tools, practices, and processes in place to measure productivity data consistently, holistically, and accurately across business units.
- Strategic planning: Spend time planning initiatives, break them down into manageable bite sizes, analyse the existing skill set and get governance right first-time so the right people and skills are in the right place to deliver the expected outcomes for the project.
- Differentiate between short-term and long-term costs: Have a cost differentiation approach to achieve a short-term/long-term balance. Identify which costs are commoditised and which costs are growth enablers. Look at all costs and identify those that are helping the organisation differentiate its products, services, and business value proposition in the market in the long term; and which costs the organisation should look to reduce to zero in the short term because they are commoditised costs that are just part of the ongoing operation of the enterprise.
- Think ahead: Think about what your customers will look like and require in five years’ time. Anticipate how their preferences will change and develop your investments and budgets around those future needs.