CEO's Choice for Growth: Building New Businesses
Executive Summary
The latest McKinsey Global Survey on new-business building highlights the continued emphasis on creating new revenue streams as a strategic priority among CEOs. Despite ongoing economic uncertainty, organizations are investing in new businesses, driven by factors such as the capital advantages of incumbents and anticipated acquisition opportunities. The report underscores that investments in new businesses are yielding tangible benefits, with a notable increase in revenues attributed to new businesses over the past five years.
Key Findings:
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Priority Shift: A larger percentage of CEOs now prioritize the creation of new revenue streams, marking a significant shift in strategic focus.
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Economic Opportunity: Business leaders view the current climate as particularly conducive to new-business building, emphasizing the competitive edge and potential for growth.
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CFO Perspective: CFOs consider new-business building as the most likely strategic action their organizations will undertake in the next 12 months, surpassing other strategies like restructuring and capital structure changes.
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Generative AI’s Role: There is heightened expectation regarding the impact of generative AI on enhancing new-business efforts.
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Success Factors: The report identifies three key factors that contribute to the success of new business ventures.
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Investor Insights: Public-equity investors and analysts also recognize the benefits of increased investment in new-business building, offering guidance on maximizing value.
Benefits Highlighted by Investors:
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Increased Investment Potential: Nearly two-thirds of surveyed investors see advantages in increasing investment in new-business building over the next year.
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Valuation Increase: A majority of investors see business building as a method to increase an organization's valuation.
Implications:
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Portfolio Approach: Executives are adopting a more diversified strategy, recognizing the importance of launching multiple businesses to mitigate risk and increase success probabilities.
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Market Dynamics: The report suggests a dynamic market where established companies leverage their resources to compete against startups, benefiting from existing capital and potential acquisitions.
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Generative AI Integration: There is a growing anticipation for how advancements in generative AI can further enhance new-business initiatives, suggesting a future where technology plays a pivotal role in innovation and growth.
Conclusion:
The findings underscore the resilience and adaptability of businesses in navigating economic uncertainty by prioritizing new-business building. With a focus on leveraging generative AI and strategic portfolio management, organizations are positioning themselves for sustainable growth and competitive advantage. Investors' endorsement of increased investment in new-business building signals a favorable outlook for these ventures, highlighting the potential for significant returns and value creation.
