In our annual CEO survey (paywall), we always ask “what are your top business priorities?” for the coming two years. Respondents provide answers in their own words, which we then categorize. ‘Growth’ has been the top priority category for several years. This is no surprise at all – it’s the primary purpose of a CEO. When a company is growing everything is better – investment, hiring, profits. But where should a CEO seek that growth?
Since the millennium, international company CEOs have often sought that growth in emerging markets and particularly in China. The idea is to find a marketplace that is growing – then take your products and services there, and expect to get your share of that growth rate. Some of the best business logic is the simplest – and it works. Companies in all sectors, based all over the world have often been rewarded handsomely, simply by inserting themselves into China’s rapidly growing economy. However, now it is slowing – considerably.
China’s growth rate has slowed from over 12% at the start of 2010 to 6.9% in late 2015 (source). So if the company has a projected growth plan predicated on a higher Chinese GDP rate, the spreadsheet model that drives the bottom line is displaying future years figures in red. Underperformance lies ahead. So what to do? Business leaders must hunt for new growth territories as a partial substitute – and that’s where digital comes in.
Digital isn’t a place of course and it isn’t a market in the same direct way. However, it has some similar characteristics when applied appropriately. There might be more customers online; within that there might be particular rapid growth rate segments – such as tablet-using customers. Then there is digital product and service opportunity. Connected products, with additional revenue creating services can be very attractive to customers and when such new ideas take off they often grow at non-linear rates. It’s no surprise then that our CEO survey found they expect the digitally attributable revenue of firms to rise from 22% of total revenue at the end of 2014 to 41% in 2019.
Are you still too focused on a conventional 20th century geographic market strategy, in a BRICS slowdown world? It might be time to recognize that cyberspace is a market space – and one that often contains some fast growth opportunities. Accessing that new kind of market effectively will require changes in the the way your company operates and the capabilities it needs. You will need to take digital thinking right into the heart of your business. That’s why we wrote “Digital to the Core” – our book to help you think through that journey and how to lead it.
