The COVID-19 pandemic has reshaped the global business world in ways we never could have anticipated. As we move beyond the crisis, companies need to start building resiliency into their corporate strategy to better weather the next major business disruption, according to a global C-suite survey recently conducted by EY.
The EY Realizing Strategy survey, which EY is touting as one of the most comprehensive of its kind in the last decade, polled 1,000 C-suite executives from companies with more than $1 billion in annual revenue. Its aim was in part to get a pulse of how executives are coping with a rapidly changing business environment, including factors like a more connected global economy, accelerated disruption, and greater exposure to macro events, EY says.
"The rules of yesterday don't apply to today or tomorrow. Companies have to proactively incorporate disruption into strategy formation or watch their organizations falter," said Jeff Wray, EY Americas EY-Parthenon Strategy Leader.
Renewed Importance of Anticipating External Threats
With the number of potential external threats on the rise, including new direct and indirect competitors in adjacent industries, building a resiliency strategy is becoming a more important part of companies' overall business strategy.
According to the survey, 93% of respondents from companies that underperformed their peers said unexpected entrants have directly impacted their business. Meanwhile, 64% of organizations that have performed better than their peers said they were able to anticipate the arrival of market newcomers, which helped them shore up their company against disruption.
Competition isn't always a bad thing, however, and many companies are finding the best way to defend against new market entrants is to partner up. The survey revealed an eye-popping 97% of those C-suite executives said one way they're addressing the threat of new market competitors is by partnering with them. The executives say this tactic allows them to better assess their strategic priorities and combat challengers from outside their competitive space, according to EY.
Further, 56% of organizations said they're most likely to partner with a competitor to overcome traditional market barriers while 43% said they'd actively partner with a competitor to enter new markets.
Revamping the Strategy Process
These days, overcoming new business challenges requires broadening consensus by bringing in more ideas from more sources. Firm leaders now better understand the multiplying effect of including a wider range of experts to solve new challenges and enable more effective business transformation.
More than half of EY survey respondents said their company's strategy process is now being influenced by people in relatively newly created positions such as chief growth officers, chief transformation officers, and chief sustainability officers.
A Need for Greater Flexibility
As the pace of disruption has increased, so, too does the need for companies to be nimble and innovative. Nearly all (99%) of outperforming businesses say they actively plan for new competition by stress-testing their existing strategic processes, while 63% of respondents say their companies allocate capital for innovative ideas while also adopting more flexible approaches to keep up with the pace of disruption.
"There's no doubt that, since the 2008 Global Financial Crisis, smart organizations have learned that sitting tight and doing nothing in an economic downturn is not an option, and a creative and evolved strategy is required to be an organization of the future," explained EY Strategy and Transactions Principal Juan Uro. "This study demonstrates not only the resilience which strategy provides in protecting businesses but also providing companies with the backbone needed to thrive in the eventual recovery."
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