A recent Deloitte report stated that, in spite of disruption rewriting traditional business operations, private-business leaders remain steadfast in their optimism about the year ahead, despite market concerns around wage stagnation, the property downturn and looming economic storm clouds.
In its second annual survey entitled ‘Global perspectives for private companies: Agility in changing markets’, Deloitte Private tracked the plans, priorities, and expectations of 2,550 private-company leaders in 30 countries.
The report details that 77% of private companies in Australia – a key driver of the nation’s economy – are ‘very confident’ or ‘extremely confident’ in the success of their company over the next 24 months, despite market challenges. This optimism is shared by private companies globally, reflecting current levels of global interconnectivity. A quarter of Australian private companies also expect revenue growth to exceed 50% in next 12 months.
“Even in an environment of ongoing uncertainty and expanding competition, it’s clear that Australian companies are confident of future success, and they’re expecting increases in revenue, productivity, capital investments and full-time employees – as are many counterparts around the world,” said Deloitte Private Managing Partner, Andrew Culley. “However, local market challenges are forcing private-company leaders to balance the long-term perspective that has historically guided their plans and investments with an acute awareness of near-term developments that could disrupt their long-standing business models.”
Balancing confidence and risk
On the risk landscape, 34%of companies cite the cost of raw materials and other inputs as a potential hindrance to growth – likely foreign exchange rates and companies’ reliance on imported materials. Disruption by a non-traditional competitor (24%) also sits relatively high as a risk, which speaks to the impact of globalisation and the spread of strategic innovation. The biggest leap, however, is in respondents’ perception of the risk of cyber-attacks (31%) – ranked as the second-greatest risk by Australian companies.
“This view is understandable, as the ever greater reliance on technology means that people are also focused on the risks that come with it,” continued Culley. “The potential impact of a cyber-attack on a company’s operations, its trusted reputation and its bottom line can be serious and even fatal. Appropriate and effective cyber-security measures remain a challenge for many private companies. Even for those with sufficient resources and the right strategic footing, constant vigilance is the only way forward – it’s part of the cost of doing business in today’s world.”
Moving from disrupted to disruptor
While technology has brought business closer to its customers, it has also upended business models. It has driven efficiencies, but also fostered uncertainties. So private-business leaders are looking to proactively prepare for anticipated, competitive disruption as they see the opportunity that comes with the changing nature of business.
26% are considering and 34% are implementing new business-models to navigate disruption; 40% are exploring opportunities to take advantage of disruption; and 29% have dedicated teams focused on disruption.
“Companies are sure of their ability to navigate change, and learn to live by an attitude of ‘disrupt or be disrupted’. Australia’s private companies are very much in tune with their counterparts around the world,” said Deloitte Private Commercial Advisory Leader, Mark Allsop.
Along with exploring new business models, companies are also looking for ways to improve growth and build their competitive advantage. In Australia, the top-three strategies for firms are increased productivity (32%), growing existing markets (27%), and new product/service development (20%).
M&A ‘top of mind’ over next year
Regardless of business size or industry, technology has blurred borders and provides every company with the ability to be global. The survey found that many private-business executives expect to conduct an aggressive merger and acquisition (M&A) strategy, with 44% believing it’s likely or very likely they will participate in an acquisition in that timeframe.
41% cited the increased availability of capital as the top driver of M&A activity; followed by increased risk-appetite among investors (35%); a desire to expand/diversify client-base (34%); and the opportunity to enter new global markets (30%).
Alsop added: “Many private businesses are taking advantage of the favourable market conditions – stable economy with strong long-term performance, abundant available capital, and many successful businesses. These large-scale transactions can open new frontiers – global expansion, new market offerings, new leadership dynamics for owners, and more.”
While 23% of global respondents view trade barriers as a significant risk to growth, it’s not at the expense of private business’ optimism; 14% of respondents cite entry into foreign markets as their company’s main growth strategy over the next 12 months.
Despite technology advances, private companies are using employee investment as an asset in standing out from competition, with 38% increasing number of full-time employees, 37% investing in leadership development, but only 27% devoting assets to training programs.
To attract and retain employees, private businesses are planning to reimagine learning and development programs using experiential formats, develop strategies to build an inclusive workforce, and increase their focus on flexibility and well-being programs.
Social purpose fuels profit
With the influence of social media and the rise of employee activism, 81% of private businesses recognise that having a strong company culture is strategically important to their success.
Private-company leaders recognise that culture encompasses much more than just activity within a business. Specifically, the concept of social responsibility is resonating with private firms in Australia – 59% believe this is a high priority for their organisation and is reflected in their corporate strategy and employee/customer branding.
To make the most of these initiatives, organisations are focusing on corporate strategy as well as employee and customer branding to separate themselves further from competition.
“Companies need to recognise the importance of pursuing diversity and inclusivity, having clear values and engaging with communities,” concluded Allsop. “These actions have tangible bottom-line benefits and attract a young talent-pool drawn to companies with a clear purpose and impact.”