Greater potential for digital investments to support growth strategies
NEW YORK; Jan 15, 2014 – Business executives are optimistic about business and economic prospects in 2014, according to new research by Accenture (NYSE: ACN) and the Economist Intelligence Unit (EIU). Although most plan to drive growth by prioritizing exports and new products and services, the research reveals that companies have greater potential to focus their digital investments on driving growth and reaching new customers.
Of the 1041 C level executives surveyed by the EIU in twenty countries for the report, “CEO Briefing 2014 – The Global Agenda: Competing in a Digital World,” 76 percent are optimistic for their own organizations’ prospects in 2014, significantly higher than the 55 percent who were positive in the EIU’s 2009 research. Respondents in China, Brazil, Canada and Switzerland were most optimistic about their companies’ prospects. Those in Japan and France were least positive but, even here, more than 60 percent were optimistic for their companies’ prospects.
Business leaders are less positive about the 2014 outlook for the economies where they are based, according to the findings. On average 61 percent are optimistic, with respondents in China, the U.S., Canada and Spain most positive. Less than half (48 percent and 47 percent) of Japanese and Korean executives are optimistic about their economies in the coming year. Only 52 percent of French and 51 percent of Italian respondents are positive about the prospects of their economies in 2014. Optimism for the global economy as a whole is more modest, at 44 percent, but the proportion of pessimists has fallen dramatically from 71 percent in 2009 to 15 percent today.
Confidence extends to 2014 business performance. More than three quarters (76 percent) of respondents forecast revenue growth in 2014, while 71 percent forecast higher profits. The manufacturing, energy and pharmaceutical sectors are expected to see the strongest revenue growth, according to respondents, with aerospace/defence, agriculture and professional services least likely to.
Extending to New Markets, New Products & Services
Business leaders are increasingly looking to export markets for that growth, according to the research. Fifty eight percent of the respondents say their business intends to prioritize investment outside their home market, versus 42 percent who will focus on the domestic market. Italy, Canada, China and Japan will have the greatest domestic focus, while Germany, the UK, Spain and South Korea are most likely to focus on exports.
Companies seem highly ambitious in terms of their intention to expand into new markets and product areas. Sixty eight percent of responding businesses intend to drive growth in their domestic market in the next three years by focusing on selling new products and services versus 32 percent who will prioritize selling existing ones. In export markets, 70 percent intend to focus on selling new rather than existing products and services. In both cases, a majority intends to prioritize selling to new rather than current customers.
“Business leaders are remarkably bullish about 2014, particularly with regard to ambitions for selling new products to new customers in new markets. We would caution against such high hopes,” said Brian Gardner, Senior Editor with the EIU. “These sentiments may reflect a need to find growth through such routes rather than an ability to do so. New market entrants, falling consumer demand and industry consolidation were cited as the top three risks companies are facing.”
Unfulfilled Digital Potential
Digital technologies are seen as important to future prospects. Yet, although the overwhelming majority of C-level business leaders see digital technologies as causing significant change in their industry over the next 12 months, less than one third (31 percent) of respondents claim their company primarily uses these technologies to drive growth or to find new ways of reaching customers. Fifty nine percent use digital technologies to improve process efficiencies and reduce costs.
“The next waves of growth will be increasingly dependent on using digital to break into new markets, create new customer experiences and deliver entirely new products and services. But the evidence is that companies are misdirecting their digital investments,” said Bruno Berthon, Managing Director, Accenture Strategy. “If companies are to successfully reach new markets with new products and services, they will have to shift the balance of their digital investments from improving internal efficiencies to seizing market opportunities.”
Confidence in the economic outlook is also spilling over into investment in people. Sixty five percent of respondents expect their workforces to grow this year. Three quarters (75 percent) will increase their human capital investment in 2014, far greater than those increasing investment in physical and intangible assets. The commitment to human capital is supported by the finding that investment in education and training tops the list of factors that respondents believe will improve the competitiveness of their country.
When looking at the regional macro-economic picture, confidence is returning to the EU. Those who think the EU economy will improve and intend to shift investment to the EU outnumber the pessimists by 55 percent to 45 percent. EU respondents are more optimistic than outsiders. Sixty eight percent of UK, 75 percent of German and 78 percent of Italian respondents intend to shift investment to the EU in the next 12 months.
Surprisingly, the global sample is less positive about the U.S. economy, contradicting EIU forecasts. More are pessimistic and intend to shift investments away from the U.S. by a ratio of 57 percent to 43 percent who say the opposite. Only 37 percent of European respondents intend to shift investments to the U.S. in the next 12 months versus 64 percent of North American respondents, again demonstrating that executives are more bullish about their own economies than those overseas.
Despite talk of a slowdown in emerging markets, 57 percent of respondents expect strong or stable growth there. When asked if mature economies’ monetary policy (for instance, withdrawal of quantitative easing by the U.S.) may negatively impact emerging markets, 65 percent disagree. At the same time, businesses are spreading their interest more evenly, with 60 percent expecting to shift investment away from the BRICs (Brazil, Russia, India and China) towards other more rapidly growing markets.
“Despite the optimism, we must remember that, just as there were pockets of growth during the downturn, there are specific areas facing difficulties amid the positive outlook,” said Bruno Berthon. “As Detroit goes bankrupt, New York thrives. As Greece suffers, Germany and the UK enjoy strong growth. This report sends two clear signals: get granular about which markets you are targeting, and aggressively embrace digital business models to decouple your company’s fortunes from the mixed macro-economic landscape.”
To read the report, please visit: http://www.accenture.com/ceobriefing
About the survey
The EIU conducted a survey of 1,041 C-suite executives drawn from 20 countries around the world. Representing a wide range of industries, all respondents are board members or C-level executives. The largest group (36%) of respondents are based in Europe, with 28% based in Asia-Pacific, 15% in North America and the remainder in the Middle East and Africa, Latin American and Eastern Europe. Fully 85% of the firms represented in the survey generate more than US$500mn in annual revenue. To complement the survey findings, the EIU conducted interviews with a range of business and thought leaders, including a range of CEOs.
Accenture is a global management consulting, technology services and outsourcing company, with approximately 281,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com.
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