New business building – growth and innovation in a volatile era

In volatile times, many organizations constrict, cut and generally hunker down to make it through unpredictable economic periods. Given the past three years of continuous economic and social disruption, we may have entered a new business era dictated by radical changes and systemic challenges. In this new environment, efficiency measures alone won’t help businesses survive or grow.

Those that succeed in a consistently tumultuous environment will be those that boldly move into – and create – new growth opportunities and new businesses. The winners will be those who have heard the saying “what got you here won’t get you there” (thank you, Marshall Goldsmith) and will leverage and change their organizations to actually get there. Established companies that create successful new ventures have the chance to leapfrog their competitors – and reshape their future.

The benefits of a bold approach can be high, particularly for large incumbents, where revenue-at-stake expected from new business building may be as much as $30 trillion by 2027 and those that prioritize this type of entrepreneurship are nearly three times more likely to experience growth of more than 10% above market rates.

Resilient organizations emphasize agility, speed and innovation in the face of disruption. After several years of unexpected challenges, the widening gap in corporate performance continues to grow.

To gain ground, some global business leaders report building 50% more new businesses per year than they did two to five years ago. This rise in frequency is matched by the great acceleration of market launches of new digital products and services since the start of the COVID-19 pandemic.

The more new businesses an organization builds, the better they get at it. McKinsey research shows serial business builders can be twice as likely to generate higher returns (five times or more from their investments). It’s not surprising that in 2022, eight in 10 surveyed CEOs report new-business building as a top priority.

In addition, revenue expectations from new business building are higher than ever to offset the losses from more fickle and fast-changing markets. To meet higher demand, organizations will need to more than double their current rate of business building.

We estimate that in 2021 more than $800 billion was invested in new businesses by large incumbents and that figure is trending up, with 63% of surveyed business leaders looking to increase investment in new business building.

How and where CEOs decide to invest during volatile times and what support models they put in place, will determine their organization’s chance of success.

We identify five areas of focus for business-building CEOs:

Recent social and economic difficulties have caused many organizations to stumble and even fail. If we are indeed entering a new era in business, where steady state becomes obsolete and is replaced by a constant marshalling for competitive advantage, resilient companies will hold a strong lead.

Those fuelled by innovation and backed by insights will likely make faster, bolder, and more frequent moves in new business building and, in turn, realize more value from it. Every sector is ripe for new businesses. Now is the time to build.