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A recent Booz & Company survey of more than 2,350 global executives reveals significant concerns about, and lack of confidence in, their own companies’ growth and strategy efforts.
NEW YORK CITY (June 7, 2011) – A recent Booz & Company survey of more than 2,350 global executives reveals significant concerns about, and lack of confidence in, their own companies’ growth and strategy efforts. Among the findings:
“These are troubling symptoms. It’s clear to us that this low ‘company confidence’ is a result of companies’ tendencies to chase too many unrelated growth initiatives,” says Booz & Company Partner Paul Leinwand, co-author of The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Harvard Business Review Press) (www.theessentialadvantage.com). “Instead of asking the question ‘what are we great at and how can that help us grow’, companies often look for markets that seem ‘adjacent’ or in a similar sector but where they may not have the capabilities to succeed.”
And co-author and Booz & Company Managing Director Cesare Mainardi: “Though it may seem easier to chase new avenues of growth, these are often highly risky and take attention away from the core business that usually has significant ‘headroom for growth’.”
Data Insight: Focusing and Narrowing Growth Priorities Translates to More Revenue Growth
The survey data (see Booz & Company’s Coherence Profiler at www.booz.com/coherence-profiler) bear out the conclusion that too many unrelated growth initiatives lead to failure and frustration. Indeed, executives who say their company has the fewest firm-wide strategic priorities (one to three) are the most likely to report above-industry average revenue growth (as compared to those having more priorities or no list of priorities at all).
“Based on the survey results, we believe that the key question leaders and top executives should ask is, ‘How can we get focused on the right initiatives – the ones that are best for our company?’” says Leinwand. “To get to the answer, executives need to explore a set of more fundamental questions: ‘What is the company great at doing? What are the few crucial capabilities the company can bring to bear more effectively than anyone else?’”
Double Down on Capabilities and Make Them Drive Strategy
The survey findings support the benefits of this “capabilities-driven” approach to developing strategy: Those executives who say their company’s differentiating capabilities fully support the company’s strategy are almost twice as likely to report above-average revenue growth for their company as all the others in the survey.
“The real challenge for leaders and top executives is selecting the opportunities that are best for the company and turning down many that are alluring but do not offer a real chance to win,” says Mainardi.
Booz & Company conducted a survey of more than 2,350 executives (including more than 600 C-suite respondents) from companies of various sizes and from around the globe and from a full range of industries. The online survey asked 21 questions on the topics of strategy development, decision making and priority setting, capabilities, growth, and cost cutting. Respondents were asked to rank their company’s profitability and revenue growth relative to their industry, which was used to establish a link between reported performance (profitability and revenue growth) and attributes of and drivers of coherence. The survey can be found at www.booz.com/coherence-profiler.
To learn more about The Essential Advantage: How to Win with a Capabilities-Driven Strategy, its authors and Capabilities-Driven Strategy, please visit www.theessentialadvantage.com and www.booz.com/cds.