Businesses today are navigating volatility and uncertainty on multiple fronts: persistently high inflation, geopolitical unrest, supply chain disruptions, worker shortages, technological changes and the lingering pandemic. We believe that when companies are faced with such challenges, those that are clear-headed and focused in deploying resources and think more boldly on growth can outperform their peers.
This view is based on PwC’s analysis of the performance of 5,700 companies over the past three years—a period of rapid change. Among those companies, we identified a set of “focused investors” who achieved exceptional returns. These focused investors delivered an average of 10% higher enterprise value to revenue multiple (the ratio of a company's total value, including market capitalization, cash and debt, to the revenue it generates in a certain period) and an 18% higher EBITDA margin compared to their industry peers.
As waves of disruption currently confront all sectors of the economy, focused investors can create tremendous value through the ways they deploy every dollar to work their strategy and growth agenda. Here are five things such companies do well that could help others navigate the future with more confidence.
A global pharmaceutical company deployed a value-based planning approach to reallocate all of its costs and investments. Tying operational, financial and strategic data together, it created new analytical lenses to measure the productivity of the internal, organizational and external spend. The analytics were a catalyst to challenge the norm, and the company wasn’t afraid to move away from historical approaches. While freeing up capacity and dollars for reinvestment, the pharma company also built lasting value by upskilling people and enhancing processes and technology to embed the philosophy of measuring value on total spend. They used a non-traditional, bottom-up approach toward cost management: empowering budget owners to control and tier their spend, applying value judgment and creating flexibility in budgets for agile investment planning. The effort created 15-20% additional flexibility in existing budgets globally.
A global food and beverage company used artificial intelligence (AI), natural language processing, intelligent process automation and machine learning—on top of its large legacy technology and data platforms—to help deliver outcomes faster, resulting in more than $100 million dollar increase in value in efficiencies and revenue growth. Instead of creating small pilot projects or making large investments in big tech platforms, the company applied new digital capabilities to underlying fragmented data and systems of records to transform the way it works and improve the outcomes. And the company achieved results much sooner, with sprints of 12 to 16 weeks—as opposed to the typical six to 12 months—that reimagined how to achieve the critical outcomes it needed now, instead of aiming for the perfect solution in the future.
A global technology company unlocked up to 25% productivity gains by rethinking its constraints on where people within their core operations were located. It set up technology hubs in a few countries that offer talent with the necessary skills at lower costs who could help strengthen the organization’s resiliency. Physical offices are located in major hub cities, but employees can be located anywhere in the country, giving the company access to the talent with lower overhead. The company is helping its people work in these new ways by providing training and technologies that have unlocked innovation.
As economic pressure mounts, it’s vital for companies to have a balanced growth portfolio that drives near-term performance without sacrificing business model innovations for future growth. One global logistics leader is investing billions in a short-term growth portfolio that involves building solutions for the health industry to transport and track new drugs that have specific storage and temperature requirements. It’s also investing in AI to reduce the number of manual touches of a package, increasing productivity and speed to market. To secure its business for the future, the company is exploring asset-light business models that may allow it to double revenue growth and reduce the need to invest in additional physical assets.
Today’s uncertain world has escalated the need for executives to unify their companies with a compelling purpose-based vision and strategy. One example is a large financial services company that evaluated adjacencies to its core business in the trillion-dollar US mortgage ecosystem and crafted a strategy with new ways to deliver on its environmental, social and governance (ESG) goal of increasing affordable housing. This strategy includes opportunities to leverage the company’s ecosystem positioning to increase the availability of green housing by aligning consumer, agent, lender, construction and capital markets incentives. The company is also extending its reach to educate consumers on the economic benefits of home ownership, while also providing them with tools to help build and maintain their financial readiness.