Last week, on Supply Excellence, we shared key findings from a Saugatuck-BusinessWeek study of more than 400 C-level executives pointing toward economic recovery in the coming year. The study, Shifting C-Level Business Priorities as the Recovery Take Hold, found that top execs surveyed have traded in their recent cost-cutting myopia for a focus on increasing sales and revenues, penetrating new markets, and capturing market share.
Yet, businesses will take a more measured approach toward profitable growth. The study unveiled four key strategies and investments top execs (CEOs, CFOs, COOs, CIOs, CMOs) have planned for the coming year:
- Target projects that can improve visibility into cash flow and improve working capital management. With credit still hard to come by, CEOs and CFOs are looking to “finance growth through internally generated cash flow” and alternative financing options rather than more traditional 3rd-party financing. Some examples of ways to improve cash flow in today’s tight credit environment: e-invoicing, discount management, and supply chain or receivables financing.
- Focus on low-cost, high-impact mini-projects. This jibes with my own conversations with a CPO from the hospitality industry just last week who said, “we’re only looking at investments with quick payback; typically within months.” Some quick-hit suggestions include cutting supply chain costs through improved strategic sourcing and online bidding as well as revenue acceleration through improved contract management.
- Consider variable or operational IT investments. The study found that more businesses are looking to shift more IT investments from a CAPEX to more variable, subscription models in order to speed projects and maintain more agility in the business. A CIO at a professional services firm indicated: “My internal customers want quick and measurable results, with long deployment or capital expenses…we’re getting more involved in SaaS and Cloud solutions.”
- Be careful not to cut to the bone. A renewed focus on business agility means not only protecting against a double-dip recession but being able to ramp up quickly in advance of growing demand. Researchers advise not to cut too deep into staff or infrastructure. Union Pacific Railway is one company that learned this the hard way during the last recession. This go around, UP put many workers on a paid furlough, using the downturn to retrain and enhance skills — all so it could ramp up quickly when freight demand picked up. Other companies have augmented internal skills and expertise with those of external consultancies and solution providers who could help them achieve short-term goals and expand capacity without taking on fixed costs.
The Saugatuck-BusinessWeek study is a clear sign that businesses are confident we are entering a period of economic growth — albeit slow growth. It also signals that chief execs are taking more calculated approaches toward growth; thanks in large part to still-tight credit markets and uncertainty about Europe’s rebound. Focus in the near-term will remain on measured and profitable growth and a laser focus on cash flow and working capital management.
For more insights in the research findings, get a complimentary copy of the study here.
Related Post: Chief Executives Refocus on Growth; New Priorities