Running down the list of recommendations in the food and drink section of my Sunday newspaper, it was noticeable just how many of the listed wines were sold by discount grocery stores. They are not new to the market here in the UK; it’s just that pressure on wages and uncertainty about jobs have left consumers feeling particularly vulnerable so they have become considerably frugal in their spending. According to McKinsey, consumer morale remains stubbornly low in America too with an increasing number of shoppers channel shifting to dollar and club stores, where many report being pleasantly surprised by the experience.
As the biggest slice of the US GDP depends on consumer spending, it is perhaps no surprise that Deloitte’s recent Business Confidence Report for 2014, summarized in the infographic below, shows that both C-suite executives and those waiting for promotion to C-level positions are undecided about the future. You have to ask yourself why they continue to feel so uncertain when the US economy has rebounded faster than that of any other western economy in recent years.
From now on growth is the only option
It seems to me that much of this lack of confidence is down to the collective realization that there are no further cost savings to be reaped and that from now on the only way to increase profits is by growing top line revenue. That is not going to be easy at a time when cautious consumer spending looks to be the new normal. So it is hardly surprising that those surveyed by Deloitte are divided 50/50 about their ability to address barriers to growth. It is not going to be easily won.
Ultimately, business leaders themselves are responsible for a number of barriers to growth explored in the research such as the skills deficit of direct reports and the indecision about how best to drive the innovation needed to fuel growth. Since the downturn, many organizations have cut back on developing talent and R&D spending, and need to address both issues before they constrain the ability to execute. The good news is that the most recent OECD Science, Technology and Industry Outlook 2014 shows business investment in R&D is growing steadily at 3%. However, R&D spending remains well below the levels prior to 2008 with the US falling behind countries such as China and South Korea. So perhaps the 66% of CXO’s who say they are very confident that their organizations can outperform their competitors need to widen their horizons.
Make growth repeatable
Many boards will look for acquisitions as a quicker and faster way to grow. But as the example of the changes in grocery retailing at the start of this piece shows, even markets that are suffering have opportunities for growth. It might just be in a particular geography, product category, or customer segment; it might require developing new routes to market or digital channels. But it’s there and if the business can synthesize all of the quantitative and qualitative information they have about their various markets, CXO’s will soon be able to focus resources to successfully exploit these growth opportunities. And by the time a few quick wins have kick-started growth, business confidence should be on the rebound and direct reports possess the skills needed to replicate initiatives across the enterprise.