Beyond the crisis: increased inorganic growth …
With interest rates at a record low and a volatile stock market, investment options were scarce in 2020 and in the first half of 2021. Add to this a high rise of liquidity in the market, and it becomes obvious why companies with strong treasury capabilities became less risk averse to actively use M&A as part of their business strategy. This is no different today. There is still a general upward trend in consolidation within several industries and a higher volume of acquisitions, with companies willing to pay for increased transaction multiples. Inorganic growth usually leads to synergies, creating even more options to scale and reduce costs, which in turn positively impacts the cashflow.
… but new business models and innovation are attention points
Inorganic growth is one way to reposition your company for the future. Another one is organic growth through the creation of new products and services in combination with pioneering business models and innovation. This requires actively transforming the organisation. The pandemic has accelerated pre-existing trends from digital transformation to changes in consumer behaviour to a growing focus on long-term value. It’s crucial that business leaders respond decisively to new value drivers to seize opportunities, or they risk being left behind. Yet EY’s most recent CEO Imperative Study revealed that although CEOs aim to transform their organisations, they also face key capability and execution gaps. The reasons why vary:
- Incomplete digital transformation efforts
- Actions not meeting intentions when it comes to generating long-term value
- Data and data trust shortfalls threatening transformation objectives and investments
- Culture and organisational structures inhibiting agility
- Underinvestment in ecosystem business partnerships, impacting agility and resilience
DNA of the future enterprise
The DNA for thriving enterprises is built around transformations that break down silos, increase agility, improve innovation and leverage data to become closer to customers. Business leaders need to reorientate their organisations for continuous transformation so that they can generate sustainable growth and deliver long-term value for all stakeholders. This exponential value can be realised through three interconnected value drivers:
- Putting humans first: radical customer centricity in combination with a purposeful, nurturing company culture to create the agility to adapt to the speed of market and customer changes.
- Accelerating technology adoption responsibly: leveraging technologies to advance business models, as well as customer and employee experiences.
- Thoughtfully scaling innovation: acquiring agile innovation competencies, setting up collaborations within continuously evolving ecosystems and moving quickly into new markets.