5 minute read 18 Jun 2018
engineers examining robotics

Why fortune favors the fast

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US Americas

Multidisciplinary professional services organization

5 minute read 18 Jun 2018

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The middle market is the engine for global growth, for high impact entrepreneurship and for innovation.

The past few years have been challenging for business. Markets have been volatile and difficult to predict, and geopolitical developments have continued to feed uncertainty. Growth has remained resolutely low.

It is encouraging, however, to finally see some light at the end of the tunnel. According to the 2018 EY Growth Barometer, middle-market companies across the globe are more optimistic about business conditions and opportunities than they were a year ago – a sentiment echoed by the International Monetary Fund, which has forecast growth of 3.9% over the next twelve months. This year not one of the 2,766 executives surveyed is expecting negative growth, compared to 5% in 2017. Leaders are instead demonstrating more ambition, with almost two thirds (60%) targeting high single-digit growth, and a further 28% aiming for double digit growth.

Growing confidence

There are several factors behind this boost in confidence, perhaps the most universal being the fact that all major economies are performing well – an unusual feat of global synchronization. But this bullish attitude can also be attributed to the wealth of opportunities available to companies that are dynamic and resourceful enough to adapt quickly to changing environments and are therefore able to leverage a first-mover advantage.

The speed at which companies are embracing new technologies and regulation is increasing every day. Those who respond quickest will find themselves in the strongest position. This is now more critical than ever given the issues posed by industry convergence. Almost a quarter (23%) of leaders view industry convergence as the most significant impact on business. While it may be an intimidating prospect for many, companies that can adjust their model and offering to align with rapidly evolving consumer expectations are in the best position to survive and thrive in this new environment.

CEOs have opened their eyes to the impact that intelligent automation and machine learning technologies can have on their businesses and are racing to capitalize on this. The speed at which attitudes towards artificial intelligence (AI) has shifted is remarkable. Just twelve months ago, almost three quarters (74%) of CEOs stated that they would never adopt robotic process automation. Yet today, virtually the same number (73%) have made a 180-degree shift and are already adopting or planning to adopt AI within the next two years.

While it is encouraging to see eagerness to adopt new technologies, business leaders are in danger of underestimating cyber threats. As their digital footprint increases, so must their focus on cyber security. Only 6% of CEOs consider cyber threats to be a challenge for growth, which underscores a much greater need for education around the devastating impact cyber-attacks can have on a business.

The emergence of sophisticated technologies is not a surprising stimulus for growth.  However, the broader effects of regulation are. Whereas leaders once resented the increasingly complex and burdensome regulatory requirements imposed on their businesses, many (especially those outside North America) now consider regulation to be a key driver of innovation. Consider for example that government regulations on reducing carbon emissions from diesel engines have accelerated innovations in electric vehicles (EVs). This represents another major shift in opinion from previous years and once again implies that as the global economy rebounds and growth prospects improve, leaders’ attitudes and approaches are changing. 

While leaders are more alert to the benefits of adopting new processes and technologies, they are not doing so at the expense of their workforce. In fact, attracting talent with the right skills tops the list of growth accelerators, and businesses are investing more into their employees in 2018 than in previous years. Skilled talent continues to be a valuable but scarce commodity, as a skills shortage is a high concern for leaders. Over a third (39%) of companies plan to hire more full-time talent, up from just 13% in 2017, and ensuring that they have a diverse workforce is the number one hiring priority for 41% of executives.

Challenges to growth

In 2018, the greatest cause for concern across businesses is insufficient cash flow, as over one-third (35%) of leaders view this as the most significant challenge, trumping both risks of technological disruption and a shortage of skilled talent. The concern is particularly felt by female CEOs who have more difficulty accessing funds than their male counterparts. Strikingly, more than half of women-led companies (52%) have no external funding at all, compared with 30% of male-led companies. Moreover, one in five women CEOs (20%) have no plans for raising capital, compared with just 3% of male CEOs.

This funding gap matters because companies with high growth potential that fail to secure early investment can have a harder time scaling up. Women CEOs are all too aware that limited funding opportunities are holding their companies back. Almost three times as many women as men say funding is the most significant factor in building their company’s agility (17% versus 6%), while 17% believe the cost and availability of equity finance is the greatest barrier to growth, compared with 11% of male peers.

What remains clear is that we live in a period of foundational and unrelenting change – from both a societal and business perspective. Fortune will favor the fast, so companies that are prepared and able to act quickly and decisively to monopolize on the massive growth opportunities presented will have a key competitive advantage.

Between 13-17 June, the EY World Entrepreneur Of The Year 2018™ Forum will convene the world's leading entrepreneurs and businesses under the theme of "Does industry collision shatter or shape our future thinking?" Join the conversation by following #WEOY#BetterQuestions#GrowthBarometer

Summary

Opportunities for growth are vast. Companies that act fast will have a competitive advantage.

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US Americas

Multidisciplinary professional services organization