Corporations that invest 20% of their growth capital in creating greenfield companies achieve two percentage point revenue growth.
By Summa Magazine
According to McKinsey & Company global survey “How CEOs Are Turning Corporate Business Creation into Outsized Growth”demonstrates surprising resilience in prioritizing new business creation, despite the unprecedented disruption of the COVID-19 pandemic and rapidly tightening capital conditions. In the future, it is expected that more and more companies will seek growth and diversification through the creation of new companies,
Hard data from this global survey shows that the types of startups receiving the most startup interest from CEOs vary by industry, with 60% of respondents showing interest in starting generative AI-powered companies in the next five years.
The study indicates that “new business creation” refers to the creation of new revenue through new products, services or businesses that require new capabilities and complete creation from scratch.
The survey results suggest that companies that invest around 20% of their growth capital in the creation of greenfield companies achieve a revenue increase two percentage points higher than companies that do not invest in new developments.
Business creation can come in many different forms, including a new delivery model for an existing business, such as a financial services company moving into a direct-to-consumer channel through an e-commerce platform; new product lines for existing customers, such as a smartphone maker that offers audio accessories; new products for new customers, such as a textile producer starting a clothing brand; and the acquisition and expansion of a business with a novel proposition, such as an automotive company that purchases technology or assets to build an electric vehicle brand.
Among the recommendations that stand out the most from the world’s great CEOs is that organizations benefit when they take advantage of their distinctive advantages and turn them into new growth opportunities. To create companies, it is necessary to recognize these advantages and stay true to them.
For example, respondents who work in advanced industries such as automotive, aerospace, semiconductors, and pharmaceuticals and medical products most often see opportunities in physical products. On the other hand, those who work in consumer goods and retail often hope to develop digital retail ventures. In sectors such as technology, media, telecommunications, travel, transportation and logistics, business leaders often point to data, analytics and artificial intelligence platforms as areas to create new ventures.
This year’s survey results reinforce what companies have implicitly demonstrated for years: Organizations that have developed the capabilities to create new companies in a programmed manner are the ones that achieve the most success per business.
Therefore, one of the most important conclusions of this global survey is that as companies mature in their practices of creating new ventures, the probability of success of their new businesses improves drastically, that is, the consistency in Innovation is the path to success.
