Although the COVID-19 pandemic has been highly disruptive to industrial enterprises (IEs), projections for many industries indicate that things are beginning to turn around, which could set the stage for IEs to start shifting gears from rebounding from the pandemic to accelerating their growth.
Of course, accelerating growth isn’t easy. It requires a deep understanding of emerging technologies and new customer requirements; a clear understanding of when to partner, when to invest, and when to acquire; and a focus on employee demands, as well as access to the right talent.
To gain insight into how IEs can accelerate their growth agendas, Accenture surveyed 1,150 industry executives globally—60% from IEs and 40% from non-IE companies—about their perspectives on and approaches to growth, exploring the attributes and behaviors of companies in several growth-related areas. Using these insights and lessons learned from IEs that are leading in growth, we developed a framework that companies can use to assess their own growth efforts—and build accelerated growth into the DNA of the business.
Specifically, we explored IEs’ activities in six groups of activities that Accenture has identified as being critical to accelerating growth:
• Focusing. How well companies address significant challenges and opportunities in areas where they have the best chance to successfully compete consistently over the long term.
• Steering. How well companies balance and adjust their portfolio of projects to maximize the impact of staged funding and accelerate growth in three key activities: growing the core business via a shift to services; digitally transforming the core business to lift up efficiency gains; and reinvesting those gains to build new business.
• Doing. How well companies execute to launch new software-driven and intelligent products and services that provide value-driven experiences.
• Leading. How well companies set a clear ambition, use persuasive storytelling, and “walk the walk” to accelerate growth.
• Enabling. How well companies manage talent, technology and ecosystems to increase the pace of implementation for their growth visions.
• Being. How well companies foster a culture that fuels growth through supportive mindsets, behaviors, and ways of working.
These six practices are based on the process of creating “360-degree value”—i.e., not just profitable revenue growth, but progress in areas such as sustainability, diversity and inclusion, employee skills, and employee and customer experiences. All of these factors are becoming more critical to driving and sustaining growth. Ultimately, working across all six practices helps embed a deep focus on growth into a company’s culture.
We assessed IEs’ behavior and success in each of those six practices, placing companies into one of four groups: Leaders, Aspirers, Mainstream, and Laggards. We found that, in general, IEs are focused on growth, but their growth targets measured along the six growth practices are not yet ambitious enough to shift gears and significantly accelerate their current plans.
Our research found that by improving their focus on these practices, IEs could, on average, increase annual revenue growth by 0.6 percentage points and increase their EBIT margins by 1.5 percentage points for each of the six practices—i.e., increasing overall revenue growth by more than 3.5 percentage points and overall EBIT margins by up to 9 percentage points.
Perhaps most important, the analysis proved that focusing on these six practices is efficient, as IE Leaders have performed better than other IEs, with revenue CAGR (compound annual growth rate) and EBIT margins in the last five years 13% and 68% higher, respectively, than those of Laggards.
A focus on growth needs to be instilled throughout the company and supported by a culture that favors calculated risk-taking, a 360-degree view of growth that explores new offerings and partnerships, and the discipline to identify high-potential growth opportunities and re-invest profits in them. Growth needs to become a central tenet.
Taking the first steps
Looking across the six practice areas, the actions associated with growth provide some valuable guideposts for IEs. An analysis of Leaders’ behaviors shows a number of success factors for accelerating growth.
Leaders’ experience also underscores the fact that the six practices should be seen not as a set of standalone categories, but as an integrated, interwoven suite of activities that support one another. Working across all the practices will ultimately be key to embedding accelerated growth into the DNA of the company.
Unlocking accelerated growth will take time and actions on multiple fronts. To get started, however, IEs should focus on four activities:
• Setting a holistic growth ambition. Define and communicate a clear ambition for accelerated growth and what it is expected to deliver.
• Assessing the company’s growth potential. The six-practices model described here provide a framework for assessing a company’s growth potential, understanding its strengths and weaknesses in the activities that drive growth, and finding the areas that will have the greatest impact on growth.
• Finding efficiencies to fuel growth and reinvest the gains. This should include automation and digital technology-driven improvements in the back office and shop floor; efforts to make employees more efficient; and the active sharing of knowledge and learning across the company.
• Incubating the new approaches to growth. IEs can start small and nurture efforts across the six practices, constantly iterating based on progress and market feedback, and eventually scale the new approach across the enterprise. This requires taking an integrated approach that fosters cross-entity collaboration and a diverse culture.