RESEARCH REPORT
Reinventing for resilience: A CEO's guide
5 Minute Read
April 27, 2023
In brief
- Recent Accenture analysis found that less than a fifth of companies were able to sustain profitable growth before, during and after disruptive events.
- We analyzed data from 1,615 global companies across three performance dimensions to identify why those companies were more resilient.
- We found that those "long-term profitable growth" companies tended to demonstrate a uniquely balanced strength of capabilities across all dimensions.
- Further, companies that exhibited high scores in both technology and talent increase their probability of stronger resilience by a factor of four.
Success in an uncertain world
CEOs today are tasked with navigating an extraordinarily complex business environment. The level of disruption they must contend with is at an all-time high—up 200% over the past five years.1 The vast majority (93%) are dealing with 10 or more global challenges to their business.2 Future shocks and new disruptions are certainly coming. The need for resilience has never been more urgent.
Resilience by the numbers
Figure 1: Segmenting companies based on revenue growth and profitability (2017 - 2022) reveals five performance groups.
Our recent analysis of 1,615 global companies shows that less than a fifth of companies exhibit a notable capacity to withstand disruption; only 15% of companies demonstrated resilience over the course of the pandemic (see Figure 1). These long-term profitable growth companies have achieved higher growth and profitability than their industry peers.
More impressive, long-term profitable growth companies achieve even higher levels of performance once the disruption has ebbed (see Figure 2). These companies exhibit long-term profitable growth in good times and in bad. They evolve, succeed and prosper through uncertainty. They continually "adapt their ability to adapt."
Accenture Resilience index
Average company percentile position of group, relative to industry historical median.
Figure 2: Long-term profitable growth companies consistently outperform their peers in all measures of resilience over time—and emerge from crises stronger.
Long-term profitable growth: Lessons from the leaders
To better understand how these companies deliver profitable growth continuously, we used the Accenture Resilience Index to analyze their strengths across three performance dimensions—financial discipline, business capabilities and technology maturity—from the start of 2018 through the third quarter of 2022. The top performers in our analysis stand out in three important ways:
They exhibit strong capabilities across all performance dimensions of the Resilience Index. Nearly half of long-term profitable growth companies achieve higher-than average scores across financial, business and technology dimensions. They also outpace their low-performing peers across all capability areas within each dimension. Every performance dimension—and every capability—is crucial to building resilience.
They are more resilient amid disruption. Long-term profitable growth companies recover faster and emerge stronger after disruption or crisis. We witnessed this before, during and after the pandemic. While long-term profitable growth companies exhibit consistently higher resilience, they actually extended their lead and widened the performance gap during and after that period. Their scores across all dimensions of the Resilience Index also increased. This stands in stark contrast to companies that exhibit low growth and low profitability; these companies saw their performance scores decline in each dimension.
Their strong digital core enables their competitive advantage. Companies achieving long-term profitable growth outscore their low-growth/low-profitability peers by a significant margin when it comes to technology. Their strong digital core—embedded across the enterprise—is a unifying element of superior long-term performance.
An industry perspective
Long-term profitable growth companies display a better balance of strength across the dimensions of the Resilience Index than their low-profitability/low-growth peers. This holds true across all industries. However, this does not mean that the path to long-term profitable growth is uniform. Even the best-performing industries display relative weaknesses across one or more capability areas of the Resilience Index.
For example, software and platform companies that achieve long-term high performance exhibit lower scores in the areas of talent and sustainability. For long-term profitable growth companies in the aerospace and defense sector, customer capabilities are lacking. And for life sciences companies, supply chain and operational issues tend to hold them back. Overcoming those weaknesses can help companies achieve even higher levels of performance and resilience.
Even more important than industry comparisons are performance comparisons among peers within an industry. Using odds analysis and machine learning, we are able to calculate the likelihood of a company achieving long-term profitable growth. We find that a company has a 70% higher chance of being a long-term profitable growth company if it performs well against its peers than if it does against other industries.
Recommendations for CEOs
CEOs looking to achieve the resilience that ensures long-term profitable growth should take three actions now:
Leverage the power of cloud, data and AI—including disruptive advancements like Generative AI—to drive agility, innovation and transformative change at scale. To effectively build resilience in these dimensions, take a human-centric approach—integrating with and enhancing your talent strategy and focused on diverse teams who are skilled to address today’s challenges and seize future opportunities.
Maintain a strong balance sheet, allocating capital with consideration of short-term gain and long-term performance. Establish a robust set of checks and balances to manage cost structures, minimize financial risk and invest in transformation without over-extending. Companies that develop through-cycle financial discipline are more resilient and have a better chance of becoming consistent long-term leaders among their peers.
Multiply the competitive advantage of both a strong digital core and financial discipline by simultaneously investing in key business capabilities that drive resilience. Advance a strong ESG agenda to attract the right talent and enhance consumer perception. Develop a customer-centric commercial operation to increase loyalty and enhance experiences for new and existing customers. And continue strengthening the supply chain and operational capabilities to cope with current and future distress and shocks.
Sources
1 Accenture, "Total Enterprise Reinvention," January 17, 2023.
2 Accenture and United Nations Global Compact, "Unlocking Global Pathways to Resilience, Growth, and Sustainability for 2030," February 1, 2023.