Markets are expected to see major swings in growth, and both the volume and depth of change is expected to increase.
When crisis hits, there is a natural and practical tendency toward tunnel vision, focusing only on the problem at hand. But management needs to take a look around and ensure that the company is still headed in the right direction, or if not, make the necessary adjustments.
Business forecast for the next three years
Our Planning for growth report forms a forecast for business over the next three years. We asked our respondents four key questions:
- Are the changes in the global market temporary or permanent?
- What trends do companies anticipate over the next three years?
- How are companies adapting their business functions – now and over the coming three years?
- What is the impact on companies’ internal measurement system and key performance indicators?
Coming back from the brink
For a significant proportion of global businesses, there is no doubt that the recent financial crisis has changed their outlook, their operations and their prospects in a permanent way. Some are still coming to terms with the severity of the downturn, while others have consolidated and reduced their cost base so they are now well-prepared for future growth. The economic situation has spread around the world, but as this report shows, responses to the crisis – by geography, sector and business function – have been extremely varied. There are, however, certain reactions to the crisis that most companies share:
- The normal changes that businesses make in the course of their commercial life have accelerated. As a result, companies will have to think and act more quickly, and make efforts to identify trends and anticipate future changes.
- Companies have to be more flexible in their approach to change, which means being quicker to implement and incorporate the changes that they identify as necessary.
- To achieve such speed and flexibility, companies must concentrate on building a solid foundation – the most advantageous IT systems, a responsive and dynamic HR function and a robust and consistent finance function – to create a flexible and efficient value chain: they also need to put in place more qualitative KPIs.
- Importantly, they must support all of this with strong and decisive management.
Survey responses summarized
Respondents to our survey are looking forward to a positive rebound – albeit one in which growth will be slow. Optimistic about the future, participants expect 2012 to be significantly better than 2010.
- Although the recovery is a global phenomenon, the expected growth will not be felt worldwide. Variations will remain by country and by sector.
- One should not expect the conditions that existed before the economic crisis to return. Almost one in three companies responded that they do not expect business to “return to normal” for them.
- While it is true that the “emerging markets” expect a stronger performance than developed economies, this is not a global movement. Russia, in particular, is expecting slow growth.
- Interestingly, respondents from the US agree with many European countries in their expectation of significant change.
- In the emerging markets, many of the most positive responses are from those companies that have built rapid change into their “business as usual” model.
- The rise of new economic giants like China and India, as well as additional regulation, increased taxes and the potential return of inflation, are seen as factors that will make businesses less profitable unless they are effectively addressed.
- A consistent theme that runs across our findings is the expectation of increased volatility and complexity. Markets are expected to see major swings in growth, and both the volume and depth of change are expected to increase.
Agility above all else
Companies have already started to revisit their business model – or plan to do so. Two factors emerge as critical to future corporate success:
- The speed with which a business can respond to both opportunities and threats
- The built-in flexibility that allows for quick responses
While the top five performance indicators are expected to remain the same, there is a significant increase in the use of others. We see a major move from quantitative to qualitative measures as performance indicators. After economic downturns, companies tend to concentrate on their core business. In addition, to ensure that they respond to customers in a quick and flexible way, we see companies moving from a centralized to a more decentralized organization. In a world where change is more prevalent and rapid, global innovation management will be the key to success – particularly for companies in mature markets. Future market leaders will be entrepreneurial, agile companies. The need to make and execute decisions quickly has never been greater.
Planning for growth – issues to consider
- How far has your company accepted that "business as usual" is no longer an option?
- How are you dealing with the shift of power to new economic giants such as China?
- Are you prepared for increasing regulation in your sector?
- Do you have a strategy for national or international growth through acquisition?
- What are your plans to reduce costs and increase efficiency?
- Is risk management playing a more important role in your corporate strategy?
- How do you balance customer satisfaction against corporate profitability during an economic downturn?