Growth has become the magic word for both business and government. Taken for granted in the pre-crisis years, the first bite of the credit crunch in 2007 ushered in an age in which growth has proven frustratingly elusive to many, rather than few. While no business is immune to the health of the wider economy or its market, some companies have continued to prosper, even thrive, during the most difficult conditions of recent years. And the difference between these high performers and others is becoming more and more pronounced.
What is it that high performers are doing differently?
What are the lessons that all businesses can learn?
These are the key questions addressed by a series of studies conducted by Ernst & Young since 2008, with a view to providing practical insights to help our clients navigate the harsh economic terrain. Our first study showed how high performers were proactively reacting to the first wave of the credit crunch by seeking out Opportunities in adversity. In 2009, we built on this with a study that analyzed the Lessons from change. In early 2011, we explored how the high performers were Competing for growth by adopting new strategies for new markets and new products, and taking new approaches to managing the talent that is essential to achieving their goals. Later in 2011, we returned to this theme, analyzing how high performers are Growing Beyond, drawing out key lessons on how they were growing beyond their competition by increasing their customer reach, operational agility, cost competitiveness and stakeholder confidence.
One year on and we test the water again. What has changed since our last survey? As we present this latest report in our Growing Beyond program, we would like to thank all the business leaders from around the world and Ernst & Young professionals who have taken the time to share their insights with us.
How high performers continue to grow beyond
Ever since the onset of the global economic crisis, Ernst & Young has surveyed C-suite, board directors and senior managers in large organizations to find out how they run their businesses.
Our objective is to find out what it is that high performers are doing differently and set out the lessons that other businesses must learn if they are to emulate them. The latest survey findings enable us to gain a fresh insight into decision-making in boardrooms across the world and draw some key new conclusions. Ernst & Young has identified four factors that drive competitive success in today’s global economy: customer reach, operational agility, cost competitiveness and stakeholder confidence.
This is how high performers are using these drivers to help them pull away from the competition:
Customer reach
High performers are more outward-looking and focused on the market.
- They seek deep understanding of their customers’ demands anda expectations and are increasing marketing spend to attain this.
- They focus on finding new markets for existing products and services. High performers are nearly three times more likely than low performers to generate sales in new markets.
- They plan more carefully when entering new markets. They identify a clear demand for a current product or service, and assess the scale and growth projections of that market.
- They prioritize innovation. Nearly twice as many high performers as low performers generate more than 10% of their sales from products or services developed in the past three years, focusing on incremental innovation of new products for current customers and current products for new markets.
Operational agility
High performers respond smartly to change but, more importantly, respond speedily.
- They understand that the risks of being first to market are beginning to outweigh the opportunities, but that speed of response is always critical.
- High performers continue to accelerate, while low performers are reaching the limits of their organizational capacity to respond.
- They understand that consistency can have a market cost that noutweighs its management value. It can reduce their ability to respond to an increasingly varied and volatile world.
- They adapt flexibly to fast-changing circumstances, by deploying technology, devolving decision-making and enhancing the skills of their workforce.
Key findings
- High performers are more outward-looking and focused on the market.
- High performers respond smartly to change but, more importantly, respond speedily.
- High performers understand what drives cost and what drives value.
- High performers engage more with stakeholders and unleash their talent.
High performers seek ...
These are just some of the actions that divide higher-performing companies and their lower performing competitors. With the shadow of the economic crisis continuing to cross large parts of the global economy, businesses of all sizes and markets have a duty to constantly evaluate their performance. Examining how they execute against these four key areas — customer reach, operational agility, cost competitiveness and stakeholder confidence — is an important starting point.
Cost competitiveness
High performers understand what drives cost and what drives value.
- They are externally focused on value-creation and opportunity. They place more emphasis on customer segmentation and market analysis. High performers recognize that understanding what customers need, what they expect and what drives them is crucial when determining pricing strategies.
- Because they understand their customers, high performers can be more confident about increasing prices.
- They know the difference between eliminating waste and simply cutting cost. They identify the actual organization-wide costs involved in supplying their service or product.
- High performers focus more on efficiency than on reducing headcount. Just a quarter of high performers have reduced headcount, compared with 43% of low performers.
Find the entire version of the study in pdf format attached to this article
