We’re seeing yet another challenge emerge from the pandemic. But this time, it’s something that most executives aren’t aware of yet.

Many organizations appear to be making a promising recovery after a tough couple of years. But trouble is brewing. Our new Beyond 2021 research studied almost 1,400 companies in Asia Pacific, Latin America, the Middle East and South Africa. We found that while many organizations kept growing their market capitalization throughout the pandemic, revenue growth has lagged behind.

In fact, between 2019 and 2021, market capitalization* grew by a staggering 23.7%, while revenues rose by just 6.4%. In other words, market capitalization has grown nearly four times faster than revenues. It’s extremely unusual to see such a large gap. Even in recent times of market volatility, this disparity continues to persist albeit at a relatively smaller multiple.

*Market capitalization is calculated based on actuals as of March 31 of every year”

 

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Between 2019 and 2021, market capitalization grew by a staggering 23.7%, while revenues rose by just 6.4%

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This has created a growth-speed challenge, whereby companies are thriving on investor confidence instead of revenues. It’s a widespread problem affecting 10 out of the 15 industries we studied. The longer it persists, the less chance that businesses will be able to catch up before investors start questioning their ability to do more than survive in the coming years.

 

What are leading organizations doing differently?

Some companies have managed to avoid this challenge. In our research, we did a deep-dive analysis involving 27 organizations whose revenue growth has kept up with their market capitalizations. These leaders span a range of industries, and they’re bouncing forward ahead of their competitors. To discover the secret to their success, we took a closer look at their change activities.

At first glance, some of what they’re doing looks familiar. Broadly speaking, they’re tightening their cost structures, exploring new ways of operating, focusing on market opportunities, and innovating to break new ground.

These sorts of interventions have served companies well in the past – including after the 2008 global financial crisis. But this is far from being the whole story. These companies are also doing something unique. They’re prioritizing change interventions that are:

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Responsible

Fostering a positive impact on society and/or the environment

Intelligent

Fueling innovation across business operations

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Customized 

Creating more connected and meaningful experiences

Expandable

Laying modern foundations that foster new business creation.

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We call these the “R I C E” priorities. By following them, leaders are targeting the increased revenues that shareholders want, but also looking at what other stakeholders need.

The R I C E priorities suggest a key learning: when organizations focus on changes that prioritize environmental and social impact, employee empowerment, customers’ wellbeing and new business foundations, they’re more likely to achieve superior performance. In fact, our analysis suggests that leaders achieved revenue growth of 18.1% in 2021, compared to only 3.6% for bottom performers.

 

A game-changing opportunity for Operations leaders

The “I” in R I C E is particularly important. Because when companies incorporate intelligence into every aspect of their business operations, they can drive continuous innovation.

For example, they can enable a specialized workforce to make faster and smarter decisions. They can use advanced technologies (eg virtual and augmented reality) to accelerate innovation and speed-to-market. And they can combine high-quality, diverse data with analytics and AI to gain unprecedented insights (eg identifying faulty products before they reach the market).

These kinds of change interventions add up. They’re enabling Operations leaders to adjust rapidly to fluctuating conditions, power innovation and drive performance gains. In other words, they’re helping companies become future-ready.

And that really matters. Our Fast-track to future-ready research found that future-ready organizations are more agile, have better resiliency, and outperform their competitors in terms of operational efficiency, profitability and shareholder experiences.

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Operations leaders are adjusting rapidly to fluctuating conditions, powering innovation and helping companies become future-ready.

 

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What needs to change

Most companies are a long way off being future-ready. Our study revealed that the majority are making slow, incremental changes to their operations, instead of pursuing broader transformation initiatives. They aren’t acting – or scaling – fast enough. And they haven’t embraced new, agile ways of working.

In our research, we identified four levels of operational maturity: stable, efficient, predictive and future-ready. The top 7% of companies in our survey – the “future-ready” organizations – are streets ahead of the pack.

They’re applying technology-driven operational intelligence across the organization and taking the fast-track to maturity. They’re finding tech-savvy ways to fulfil orders, accelerate customer acquisition and discover new revenue streams. And they’re adding intelligence to the journey by transforming their businesses and operating models. This is speeding up their race to the top.

Future-ready organizations’ efforts are paying off. They’re achieving almost twice the efficiency and three times the profitability of their peers. And they’re gaining agility and resilience – both of which drive greater overall business value.

What’s at the heart of the future-ready state? We call it transformational value. It’s about companies radically rethinking their operations and embedding intelligence. It’s the secret sauce that empowers future-ready organizations to capture performance gains and deliver exceptional customer and employee experiences.

 

Assess your company’s operational maturity

Make a meaningful start now. Complete our maturity assessment to see if your business is future-ready to handle growth-speed challenges. You’ll learn where you stand today, and how you can improve. It’s the first step on the journey to intelligent operations.

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Jenny Li

Lead – Operations, Asia Pacific, Africa & Middle East 

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