How leading companies drive growth in challenging times: PwC

Growing your business can be a constant challenge, and today’s volatile economic environment doesn’t help. Yet new PwC research has found that some companies are generating significant growth and winning investor confidence that they’ll continue to do so. Understanding how these growth leaders thrive in challenging times can help your business create more value across different economic cycles.

A small slice of companies outpaced competitors

PwC analyzed revenue and valuation data from 2020 through 2022 for roughly 2,700 US public companies with annual revenues of more than $200 million from nearly a dozen industries and more than 40 subsectors. We reviewed financial and analyst reports, exploring such factors as how companies anticipate and respond to market trends, their innovation efforts, communication with investors, investments in capabilities and technology, and how they get differentiated solutions into the hands of their customers.

Of the companies we looked at, 425 of them, or about 15%, surpassed competitors by driving sustainable growth and being recognized by the market in their valuation. The technology industry had the most leaders while arts, entertainment and recreation had the fewest. We also found that there are leading companies in fast-growing subindustries — such as medical technology and media services — that have high aggregate median enterprise value to revenue multiples, which can indicate future growth. And there are others in relatively stagnant subindustries — such as casinos and personal services — with lower multiples and lower growth expectations.

How have they done it?

Companies that have achieved sustainable growth and increased their enterprise value — defined as market capitalization plus total debt minus cash — can show how to navigate an unsteady economic and business environment. This is particularly the case with four trends that could affect demand in many sectors in the coming years.

Connected and on-demand lifestyles
Supply chain resilience in a volatile world
The nexus of health and wealth
The customer is king

Connected and on-demand lifestyles

The pandemic changed how we spend time and interact in many places. These shifts in lifestyles are impacting a range of industries, and growth leaders are investing in new technologies to make digital and physical connections frictionless.

Seamless connectivity: Some companies have grown by helping others connect remote work teams and seamlessly transition to virtual collaboration, including tracking work activities and project status and providing monitoring and security for cloud applications. Many businesses are also investing in technologies like extended reality (XR) to more easily interact and transact across physical and virtual environments. Consider one consumer company that now allows customers to virtually try on eyeglasses at home.
Anything, anywhere, anytime delivery: Even as people return to the office, changes in online shopping, delivery and returns are likely to endure across retail segments. Some businesses have formed partnerships with major retailers and improved aggregation and logistics capabilities to serve high-demand segments such as supermarkets and pet supply stores.
Morphing entertainment and gaming: Nearly two-thirds of executives are actively engaged in how the metaverse will integrate with their business, according to PwC research. Some tech companies have increased investment — in-house or through acquisitions — with an eye toward applications in the consumer, recreation and professional services industries. Meanwhile, some semiconductor and equipment companies have focused on how they can support the architecture for high-growth gaming sectors, including gaming consoles, PCs and data centers.

Supply chain resilience in a volatile world

The pandemic, geopolitical conflict and other socioeconomic factors have changed the availability and pricing of many products and services including microchips, automobiles, home furnishings and consumer electronics to a great extent. In an unpredictable environment, some leading companies have concentrated on resilience.

Reinforcing supply chains: Some industrial companies have found success moving sourcing to vendors with more stable jurisdictions or consolidating facilities to reduce risk and increase local sourcing. In other cases, we’ve seen such shifts as one biotech company moving away from petroleum and instead reengineering organisms by programming biological cells to customize diverse products at scale, including therapeutics, food ingredients and chemicals.
Taking action on ESG: Forward-looking energy companies are ramping up wind power to help reduce Scope 2 emissions while also working with suppliers that meet environmental, social and governance (ESG) benchmarking criteria across human rights, governance standards and sustainable procurement methods. Meanwhile, one consumer products company diverted most of its waste from landfills, and an acquisition by a financial services firm has enabled the firm to provide reliable data for clients who want to invest in ESG-compliant companies.
Regionalization and nearshoring: Legislation has encouraged some US companies to invest more domestically, and some tech companies are planning substantial growth in chip production in the coming years. With multiple investments of several billion dollars, the US share of the worldwide chip market could grow by several percentage points while creating thousands of jobs.

The nexus of health and wealth

Aging populations are stretching incomes, financial assets and available healthcare, creating demand for new solutions. Helping solve complex consumer and business problems has driven growth at many companies.

Improving access to affordable healthcare: From expanding virtual care to using predictive modeling to forming partnerships with insurance providers, healthcare businesses are trying to meet increased patient demand and better treat aging populations. Besides improving patient access, robotics, AI and other technologies have helped make practitioners more productive, helped patients find less costly healthcare and increased transparency and personalization. Online health insurance marketplaces are growing by using tech platforms and data analytics to match customers with plans based on health and expense criteria.
Empowering through information: Growth leaders in financial services and insurance are providing ways for more people to access capital, build financial literacy and attain assets to sustain longer lifespans. Better tracking of finances and credit monitoring as well as simplified tax reporting have helped customers with financial decisions, while other companies are using machine learning algorithms to customize financial guidance and match customers to the right financial products, which companies monetize through affiliate marketing agreements.
Enhancing well-being: In addition to nutrition and physical activity, consumers are increasingly focused on mental and social well-being. Some businesses have been successful advancing online relationship services to niche audiences. That narrower focus extends to food choices, leisure activities and events, with increased specialization resonating with many consumers and boosting the bottom line for some businesses.

The customer is king

Customer expectations may have evolved, but good experiences remain critical for retention and growth in many sectors. Many industry leading companies expand their ability to customize products, services and solutions at scale to provide personalized solutions to smaller segments of customers and integrate e-commerce with other channels.

Extreme personalization: Companies that have become “category creators” can achieve growth even in declining sectors. One example in personal services involves a beauty company that developed a platform connecting professionals, providers and consumers to create customized solutions and market insights. It also has expanded personal care into higher growth sectors like medical technology to connect previously fragmented market segments.
Integrated omnichannel experience: A smooth customer experience can resonate strongly with consumers, and many retailers are seeing gains that drive growth. Efforts include expanding fulfillment center footprints and warehouse automation to deliver faster product returns, forming partnerships with businesses that have sophisticated distribution networks, expanding wholesale channels to a more diverse network of brick-and-mortar stores and distributors, and improving auto-ship programs.
Platform players: Both B2B and B2C businesses have fueled growth through platform models. There’s a card-issuing platform that offers digital and physical cards tailored to customers’ needs, allowing them to rapidly create and adjust payment solutions. Even lower-growth sectors like travel include companies that have used platform models to outperform peers by adapting to restrictions, introducing new product offerings and better detecting fraud.

Where you go from here

Consider these actions as you seek to accelerate and maintain topline growth that’s valued by investors and the market.

Prudently pursue market adjacencies. What’s your sense for value migration? Are there growing subindustries where you have a shared customer base and that you can better capture with foresight? Consider where you can make purposeful, small investments to test the waters for new solutions with your customers before others do.
Explore a new way to play. What platform models could provide easier access to a broader set of products, services or solutions? Look at how you can change the dynamic from basic transactions to having customers engage repeatedly and satisfying them with each purchase. Consider where you can leverage AI, robotics, blockchain and other technologies in your product, service and solution strategies.
Scale physical and digital customization. How can you create production processes, supply chains and omnichannel distribution models to meet customers where, when and how they want to be engaged? Assess what you need to better enable you to customize products and services just for your customers.
Broaden your distribution model. What unique or leading products or services can accelerate growth through broader channels? Determine where you can expand distribution by combining branded and private-label strategies that are enabled by win-win partnerships and ecosystems.

Methodology

Using Capital IQ data, PwC evaluated more than 2,700 public companies that reported a minimum of $200 million in annual revenues, comparing their revenue growth in the three-year period from January 1, 2020, through December 31, 2022, with their enterprise value (EV) at the end of 2022. (Enterprise value is defined as market capitalization plus total debt minus cash.) We also researched company financial reports and industry analyst reports to study commonalities across companies by industries and business models. Companies that are generating significant growth and winning investor confidence were defined as those achieving greater than the 66th percentile for three-year revenue growth and the 66th percentile for EV/revenue.