Most businesspeople recognize the value of planning and implementing long-term growth strategies.
So it may be a surprise to learn that only a minority of companies are actually doing anything extensive along those lines.
That’s what the results from a January 2014 survey of ~825 senior executives seem to be saying. The research was carried out by business strategy consulting firm Innosight, and included respondents active in 20 industry segments ranging from manufacturing and consumer goods to financial, healthcare and telecommunications firms.
There is near-unanimous agreement among the execs in the survey that their organizations need to be continually chang their core offerings, or their business models, in response to rapidly changing market dynamics.
As to whether those changes are actually happening — well, that’s another matter.
In fact, only ~42% of the respondents expressed confidence that their companies are setting the table for any sort of “transformation” at all within a 5- or 10-year horizon.
And here’s an interesting twist the research revealed. One would typically think that the smaller the company, the less confident those execs would be about sufficient planning for future growth.
But the Innosight survey found exactly the opposite finding. The confidence level is actually lower among those respondents who work at the largest companies in the research sample: Only about one-third of respondents with $1-billion revenue companies expressed confidence.
The problem is that many companies are changing at a slower pace than the markets in which they operate.
Or at least that’s the perception. About 40% of the survey respondents feel that their organizations are changing at a rate that’s slower than the market’s evolution. (It’s the case with roughly half of the large company respondents.)
Tied to this concern is another finding that the Innosight research uncovered: Only about one in ten of the respondents reported that their companies have formal growth strategies covering at least a 5-year horizon.
The rest have either no formal growth strategy at all, or one that’s extremely short-term and mainly tactical in character.
The reason for this lack of growth planning is the sense that markets are way too unpredictable in today’s business environment. Long-term strategizing in such an environment seems more like a theoretical exercise and less of a practical use of time to many of the execs in the survey.
On top of that, pressing issues that crop up on a daily basis are prone to suck most of the planning oxygen out of the room.
As part of its report, Innosight managing partner Scott D. Anthony pointed out that despite its shortcomings, transformational innovation has an important role to play, even though it takes time to pay off — sometimes as long as five or ten years.
“Companies that invest in planning methods that help align senior leaders on long-term growth strategies are probably at a real advantage to develop new business models and open new growth markets,” Anthony contends.
“If you have a long-term strategy, you don’t have many competitors — a good thing — because most companies want a return on investment within three years. In other words, a switch in timeline can e a real competitive advantage.”
By contrast, companies that are always working in the “here and now,” are usually facing multiple market players and a much more competitive environment.
You can review further survey findings in an executive summary of the Innosight report here.
3 thoughts on “Are Company Growth Strategies Behind the Curve?”
Over a decade ago, Amir Bhidé (A professor at Columbia University at the time) extensively studied and interviewed successful entrepreneurs at Inc. 500 firms. One of the questions he asked them during his interviews was how important planning was in their organizations.
It turns out that a majority (as I recall) had no business plans at all. Most attributed their success — at least in part — to an ability to spot new trends and turn on a dime. Because the pace of innovation had reached warp speed, it was simply impossible to plan several years out and therefore an imprudent use of company resources.
It would be interesting to know how many of these entrepreneurs are still around — and how many of them even planned to be around. I suspect a fair number wanted to make a splash and cash out.
In fact, in today’s environment, you can make an argument that for many young businesses, planning to be around for, say, five years is like planning to spend all night in a casino at the roulette wheel.
I used to work for a company whose CEO’s idea of long-term planning was, “What’s for lunch?” Or so at least one of the company’ employees told me at the time.
The company, once a recognized leader in its space, went out of business 15 years ago. Sadly, the CEO passed away last year.
I think companies that attain any measure of success, often also acquire hubris that proves fatal sooner rather than later. Perhaps this explains why larger companies appear more reluctant than smaller ones to embrace longer-term planning.
That “What’s for lunch?” mentality is probably one that many other employees have witnessed in their own companies, unfortunately …