Optimism is good (if tethered to reality)
Eighty-one percent of business leaders are confident they will achieve their 2020 projected growth rates. Even more—85 percent—believe their organizations will grow revenue by 5 percent or more. The optimism is admirable. But it is not realistic. After all, GDP growth for advanced economies barely exceeds 2 percent.
By our estimates, half of our survey respondents are in for a rude awakening. On the positive side, that means half are on course to achieve the revenue growth they have envisioned.
Infographic: Revenue growth data at a glance
When business leaders were asked if they are confident they will achieve their 2020 projected growth rates, 25% said extremely confident, 56% said confident, 18% said somewhat confident, and 1% said not confident.
View the infographic
Ignorance is bliss. Until it’s not.
One of the main reasons executives are so bullish on their growth prospects is that they are largely blind to the threats that could potentially undermine their business and operating models.
- Only 9 percent of business leaders believe their organizations’ growth strategies are at a high risk for disruption.
- 42 percent believe they are at no risk at all.
In reality, almost all companies are vulnerable to some disruptive threats. It’s hard to imagine company leaders unconcerned about emerging competitors, operational complexity or evolving customer behaviors.
The good news is that more than half (56 percent) of leaders admit they are at risk, even if they perceive that risk to be low. To address the threats they face, a number of leaders are fighting fire with fire. They are using the growth disruptors that pose the greatest threats—such as advances in mobility and technology or changing regulations—to their advantage by investing in them to stage a bit of disruption of their own. This is a wise move. But here, too, there’s a problem. Half of our respondents admitted they weren’t investing enough.
Our survey revealed notable differences between leaders who are preparing for disruption and growth, and those who are not. Their vulnerability to threats and their identified sources of future growth further distinguished our survey respondents. Their beliefs and actions allowed us to align companies to one of three archetypes.
- Do not believe they will be disrupted—and are less concerned with disruption, in general
- Do not believe in their abilities to achieve growth
- Do not refine their growth strategies (many don’t even have one)
- Believe growth will come from expanding existing products and services
- See risk of disruption all around them
- Are optimistic about their growth prospects
- Have no clear idea of how to pursue growth—although most are focusing on expanding existing product lines
- Have not identified the disruptors that pose the greatest challenge or offer the greatest opportunity for competitive advantage
- Are aware of risks (and confident they can overcome them)
- Are more realistic in their growth ambitions
- Take offensive and defensive actions to overcome challenges
- See revenue growth coming from new products in new markets
- Are more likely to invest adequately in disruptors to grow their businesses
Every archetype can take steps to unlock additional revenue in the years ahead. Wayward Pessimists arguably have the heaviest lift. But even the Preparing Pragmatists, whom we believe are most on track to achieve their growth objectives, have work to do to shore up their competitive advantage.
Return to reason — and revenue
While all companies would benefit from tempering their optimism, different archetypes will need to focus on different things to achieve the growth they envision.
- Wayward Pessimists should be more realistic about what they can accomplish ...
A deep understanding of growth drivers is critical for business success. Wayward Pessimists will never be able to pursue the right growth opportunities unless they identify them first.
… And more paranoid about what can stop them in their tracks.
Wayward Pessimists must be more fearful than they are. A self-assessment of the disruptive risks they face can help them not only understand their biggest threats, but also inform their decisions about where to invest and what to disrupt.
- Struggling Realists should transform the core, while pivoting to the new.
When it comes to revenue growth, wishful thinking and silver bullets are not the answers. Rather than flying blind, Realists need to optimize core capabilities, while pursuing new sources for growth. Capitalizing on changing customer preferences and new trends, business models, markets and products are strategies worth considering.
- Preparing Pragmatists keep pace with disruption. Now they need to get AHEAD of it.
While many executives opt to hide from disruption, Preparing Pragmatists run toward it. Now, they need to run past it by understanding where their business and operating models are likely to be most vulnerable—and then taking decisive pre-emptive action. Above all, they need to keep investing in the things that scare them. That’s what will make them so well prepared.