![]() We studied four different approaches to organic growth and found that business building was the most effective among them. Moreover, organic growth often creates greater excess returns to shareholders than dealmaking does, even during more normal times. And while M&A remains an essential part of the growth playbook, P/E multiples remain high, and acquisitions can be expensive. Replacing lost revenues, of course, requires finding new forms of growth. In many industries, the pandemic has rewritten rules and upended assumptions, all while diminishing-or threatening to diminish-existing revenue streams. The COVID-19 crisis has accelerated and intensified that trend. ![]() The new priority for organic growthĮven before the pandemic, our own experience indicated that business building had become more important for incumbent companies looking to use innovative business models, products, and services to meet the threats and opportunities of a digitizing world. That would boost organic growth and improve the prospects of companies looking to jump into the top tier of performance. As more companies adopt these successful practices, a new wave of innovation could arise from not just entrepreneurial efforts but also intrapreneurial ones. The experience of these companies clarifies the winning approach to launching and scaling new businesses. 2 As a proxy for the success rates of high-potential start-ups, we considered the share of start-ups admitted to a leading incubator that went on to reach a Series C investment round or beyond. We also found that a small set of companies enjoy success rates two times higher than those of high-potential start-ups (24 percent versus 8, respectively). The survey revealed that an impressive 52 percent of executives consider business building a top-three (or higher) priority for growth. So far as we know, this was the first at-scale research to explore corporate business building. To shed light on the differences between outperformers and also-rans, our survey included more than 800 company executives across a range of industries, sectors, and geographies. ![]() But not all companies succeed: only 24 percent of new businesses launched in the past ten years are viable large-scale enterprises today. The findings suggest that companies that prioritize business building tend to grow faster than their peers, respond with greater resilience to volatility and economic shocks, and, as they gain experience building businesses, see more success from it. 1 For the purposes of this research, we define business building as the creation of new products or services for which a company does not have an existing footprint, or the building of completely new business models. Business building is the top priority for organic growth at companies during the COVID-19 pandemic, and incumbents are launching new businesses with ever greater frequency, according to our new global survey.
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