Bangkok--31 Mar--PwC Thailand
Leaders of private companies must adapt and make investments needed to innovate and keep pace with disruptive changes around the globe, a PwC study says.
While risks to revenue growth are growing, an abundance of opportunities has private company leaders feeling optimistic about their prospects in the year ahead, according to A Private Company View: Private Companies – Anything but business as usual.
Some 58% of private company CEOs say they face more threats to revenue growth than they did three years ago, mostly from greater competition and a fast-changing business environment. Even so, 61% believe there are now more growth opportunities coming from collaboration, digital technology and talent than before.
The key finding from interviews with more than 700 CEOs in 77 countries showed that doing business as usual would put private companies at a disadvantage to their peers. This includes underinvesting in digital technology, maintaining an outdated organisational structure and mismanaging employees.
Private companies referred to in the report – family-run firms, private-equity backed companies, private partnerships, owner-managed and other privately-owned companies – must take the necessary actions to realign strategies, build innovative capabilities and put in place measures to weather shocks that could derail long-term growth.
Sira Intarakumthornchai, CEO of PwC Thailand, said that private company CEOs who are prepared for disruption will be in a better position to deal with unprecedented changes.
“More rewards are waiting for private company leaders who are ready to take advantage of the changes reshaping business,” Sira said.
“CEOs need to move beyond their comfort zones and build resilience to tackle business uncertainty, especially when the risks are high and unpredictable.”
For instance, leaders must adapt faster and innovate even sooner in a world where global megatrends offer as many opportunities as risks. Transformative trends include demographic changes, technological breakthroughs, global economic power shifts, urbanisation and climate change and resource scarcity.
Embedding risk in business growth strategies to build resilience is crucial, together with agile business models and being open to new concepts and ideas.
Recognising competition
More than half (54%) of private company CEOs expect organisations to increasingly compete in new sectors over the next three years, with nearly a third (31%) of respondents having already entered a new industry in the past three years.
The CEOs highlighted a number of considerations to encourage greater innovation this year, including restructuring, collaboration, digital technology, talent diversity and inclusiveness.
Family-run firms, for instance, are diversifying at a faster rate than many of their peers, with 38% having entered a new industry in the past few years. This compares with 25% of businesses owned private equity and owner-managed firms.
The ownership structure of family-owned businesses allows them to make more risky moves than publicly-traded or private equity owned firms, Sira said.
Unlike conventional public companies, private companies have no shareholders pressing for immediate returns or financial quarterly result updates. They have the freedom to make investment decisions with longer-term pay-offs while building stronger and longer lasting relationships with clients, employees and suppliers – the so-called ‘patient capital’ advantage.
All roads lead to digital
The majority of private company CEOs said investments in digital technologies have created value for their firms. Around 80% adopted mobile technologies and data analytics as key components of their business strategies.
Digital technologies have created value for business, especially in the areas of operational efficiency, data analytics, the customer experience and collaboration, the report found.
“More private companies could benefit from having the right talent diversity and inclusiveness strategy, which will eventually help their ability to harness technology driven by a younger workforce.”
Sira concluded that CEOs will be more likely to succeed if they anticipate change and are willing to be disrupters themselves. Those who view risk management as a core business enabler would be able to mitigate threats and turn them into opportunities.
“Private company CEOs globally, including in Thailand, are seeing a whole range of threats that are beyond their control,” he said.
“For businesses to continue to grow and prosper in the digital economy, leaders need to identify opportunities and fully exploit them to their advantage in order to gain new customers, new channels of distribution and new ways of doing business.”