Working closely with businesses across the globe we see an ever increasing gap emerging between high and low performers and have identified key approaches the high performers have been taking to achieve sustainable growth. Certain key strategies emerge that are at the heart of business success with four key drivers that remain throughout: customer reach, operational agility, cost competitiveness and stakeholder confidence. You may find these insights helpful when discussing your own strategy for future growth.

1. Growing Beyond
Growing Beyond
How high performers are
accelerating ahead

2. In this report
Executive summary 2
Adjusting to the new reality 4
Customer reach: Getting closer but looking beyond 10
Operational agility: Moving quickly in a customized world 16
Cost competitiveness: Finding the right balance 22
Stakeholder confidence: To inform, to explain, to engage 26
Conclusion 32
Further reading 34
About this report 36
The benchmark findings for this report are drawn from a study undertaken in August
and September 2012 by the Economist Intelligence Unit (EIU), surveying 1,500
C-suite, board directors and senior managers from around the world.
As with our earlier studies, we have factored out the impact of sector and distinguished
between the highest and the lowest quartile of performers — in both revenue and
EBITDA growth — to see if we can identify specific patterns of action that might explain
the difference in performance.
Source for all charts: EIU panel survey, August–September 2012. All charts show
percentage of respondents.

3. How high performers
continue to grow beyond
Growth has become the magic word for both business and government. Taken for granted
in the pre-crisis years, the first bite of the credit crunch in 2007 ushered in an age in
which growth has proven frustratingly elusive to many, rather than few. While no business
is immune to the health of the wider economy or its market, some companies have
continued to prosper, even thrive, during the most difficult conditions of recent years. And
the difference between these high performers and others is becoming more and more
pronounced.
What is it that high performers are doing differently?
What are the lessons that all businesses can learn?
These are the key questions addressed by a series of studies conducted by Ernst & Young
since 2008, with a view to providing practical insights to help our clients navigate the
harsh economic terrain. Our first study showed how high performers were proactively
reacting to the first wave of the credit crunch by seeking out Opportunities in adversity.
In 2009, we built on this with a study that analyzed the Lessons from change. In early
2011, we explored how the high performers were Competing for growth by adopting new
strategies for new markets and new products, and taking new approaches to managing the
talent that is essential to achieving their goals. Later in 2011, we returned to this theme,
analyzing how high performers are Growing Beyond, drawing out key lessons on how they
were growing beyond their competition by increasing their customer reach, operational
agility, cost competitiveness and stakeholder confidence.
One year on and we test the water again.
What has changed since our last survey?
As we present this latest report in our Growing Beyond program, we would like to thank
all the business leaders from around the world and Ernst & Young professionals who have
taken the time to share their insights with us.
Growing Beyond How high performers are accelerating ahead 1

4. Executive summary
Accelerating ahead
of the pack
Ever since the onset of the global economic crisis, Ernst & Young has surveyed C-suite, board
directors and senior managers in large organizations to find out how they run their businesses.
Our objective is to find out what it is that high performers Ernst & Young has identified four factors that drive
are doing differently and set out the lessons that other competitive success in today’s global economy: customer
businesses must learn if they are to emulate them. reach, operational agility, cost competitiveness and
stakeholder confidence.
The latest survey findings enable us to gain a fresh insight
into decision-making in boardrooms across the world and
draw some key new conclusions.
This is how high performers are using these drivers to help them pull away from the competition:
Customer reach Operational agility
High performers are more outward-looking and focused High performers respond smartly to change but,
on the market. more importantly, respond speedily.
• They seek deep understanding of their customers’ demands and • They understand that the risks of being first to market are
expectations and are increasing marketing spend to attain this. beginning to outweigh the opportunities, but that speed of
response is always critical.
• They focus on finding new markets for existing products and
services. High performers are nearly three times more likely • High performers continue to accelerate, while low performers
than low performers to generate sales in new markets. are reaching the limits of their organizational capacity to
respond.
• They plan more carefully when entering new markets. They
identify a clear demand for a current product or service, and • They understand that consistency can have a market cost that
assess the scale and growth projections of that market. outweighs its management value. It can reduce their ability to
respond to an increasingly varied and volatile world.
• They prioritize innovation. Nearly twice as many high performers
as low performers generate more than 10% of their sales from • They adapt flexibly to fast-changing circumstances, by deploying
products or services developed in the past three years, focusing technology, devolving decision-making and enhancing the skills of
on incremental innovation of new products for current customers their workforce.
and current products for new markets.
2 Growing Beyond How high performers are accelerating ahead

5. Key findings
1 High performers are
more outward-looking
and focused on the market.
2 High performers respond
smartly to change but,
more importantly, respond
3 High performers
understand what drives
cost and what drives value.
4 High performers engage
more with stakeholders
and unleash their talent.
speedily.
And the difference between high performers and the rest is becoming more and more pronounced.
Figure 1: High performers are ahead with respect to how they:
Broaden product/ Prioritize
service offer markets
Focus on Reinforce
These are just some of the actions
key segments brand that divide higher-performing
Customer companies and their lower-
reach performing competitors. With the
shadow of the economic crisis
Accelerate Inform continuing to cross large parts of
speed of response pricing process
the global economy, businesses
Create flexible of all sizes and markets have a
Sustain cost
work/delivery
platforms
High reduction duty to constantly evaluate their
Operational Cost
agility performers competitiveness performance.
Master seek ... Pass on
innovation cost pressure
Examining how they execute
Improve Optimize against these four key areas
collaboration capital — customer reach, operational
agility, cost competitiveness and
Stakeholder stakeholder confidence — is an
confidence important starting point.
Identify and Re-engage with
explain risks internal talent
Enhance Anticipate
reporting regulatory compliance
Cost competitiveness Stakeholder confidence
High performers understand what drives cost High performers engage more with stakeholders and
and what drives value. unleash their talent.
• They are externally focused on value-creation and opportunity. • High performers seek to make the value they create visible to
They place more emphasis on customer segmentation and their external stakeholders and have significantly increased
market analysis. High performers recognize that understanding both the scope and frequency of reporting.
what customers need, what they expect and what drives them is
crucial when determining pricing strategies. • They understand that future success is global and value the
ability to lead effectively in a global business environment. They
• Because they understand their customers, high performers can offer their talent opportunities to operate internationally and see
be more confident about increasing prices. access to talent as a reason to enter rapid-growth markets.
• They know the difference between eliminating waste and simply • High performers place a greater focus on the individual. They
cutting cost. They identify the actual organization-wide costs place greater emphasis on linking pay with performance and
involved in supplying their service or product. providing customized development.
• High performers focus more on efficiency than on reducing • High performers unleash their talent onto the market by
headcount. Just a quarter of high performers have reduced devolving decision-making as far as they can and refine roles
headcount, compared with 43% of low performers. and job descriptions to make them more flexible.
Growing Beyond How high performers are accelerating ahead 3

6. Adjusting to
the new reality
44 Growing Beyond How high performers are accelerating ahead

7. We may not yet have seen the
worst
It is now over five years since the start of the
global financial crisis. The shocks of 2007 and
2008 heralded what is already one of the
longest periods of economic retrenchment in
history. While governments, markets and people
long for a period of stability and recovery, all
must face up to a stark possibility:
we may not yet have seen the worst.
At least, that is the main conclusion from our latest study of how
high performers are surviving — and indeed thriving — in the new
economy. Of our 1,500 respondents, 83% predict that their market
will become more competitive over the next two years. Indeed,
this rises to 91% for our high performers, whose success we have
shown to be largely dependent on a deeper understanding of
market trends and customer demands. Looking ahead, these high
performers see difficult times — our study suggests that they too
are beginning to struggle to grow beyond the parameters of the
economic crisis in which the world is engulfed.
They are right to be concerned. The developed world struggles
under a mountain of personal, corporate and sovereign debt that
has reached proportions that can no longer be passed from current
generations to the next. Democratic governments struggle to find
credible solutions that they can persuade their electorates to back.
And the corporate world seems to be increasingly polarized into
those who can’t take action through lack of capital or opportunity
and those who won’t, for fear of what lies ahead.
Even the rapid-growth markets have not escaped the fragility of
the global economy. Economic expansion in 25 leading rapid-
growth countries has slowed sharply since the beginning of this
year, according to Ernst & Young's October 2012 Rapid-Growth
Markets Forecast. Our forecast for 2013 growth has fallen by
about a sixth to 5.3% this year.
Time, it is said, heals all woes, so eventually it is expected that
the global economy will recover and return to health. But is there
something that management should be doing rather than simply
watching the clock?
Growing Beyond How high performers are accelerating ahead 5

8. Adjusting to the new reality
The new normal … year five
Our research and work with clients continues to confirm four key features that characterize
the new economy. They seem to be shaping the market in which we all compete — and driving
increased competitive intensity. These features are market variation, increased volatility,
growing cost pressure and deep uncertainty.
• Market variation • Cost pressure
The new economy is more varied than the old. We are competing As consumers and governments rein back their expenditure,
in a multi-speed world in which variation between countries and and as borrowing to buy becomes harder, there is undoubtedly
sectors has never been greater. Indeed, this variation goes beyond a greater cost consciousness in the wider economy. At the same
countries and sectors to regions and segments. For example, the time, however, the costs of many commodities continue to
gap in economic performance between members of the European rise. Thus margins are squeezed. In developed markets, many
Union is considerable: the ratio between Greece and Germany employees are now enduring a fourth or fifth year of below-
currently stands at 1:1.3. However, the gap in performance inflation pay-rises. This prolongs the downturn through dampening
between the 29 states that comprise India is much greater, with demand. In rapid-growth markets, however, wage inflation is
a ratio closer to 1:5. With growing customization and variable becoming a major issue that threatens their competitive advantage
performance, the fragmentation of markets into myriad niche if passed to end users — and their profit margin, if not.
segments will continue.
• Uncertainty
• Volatility In the past 12 months, any global board looking to manage
Another enduring feature of today’s interconnected market is its strategic risk will have increased the weight it attaches to major
volatility. Stock market indicators of volatility, such as the VIX strategic threats. These threats include the break-up of the
Index, seem to have settled down in recent months compared Eurozone, the debt-default of the US, international conflict in the
with the past five years. But this is more a signal that the market Middle East and a major political or economic incident in one of the
is beginning to make a permanent adjustment to volatility rather BRIC countries. Not surprisingly, perhaps, boards with cash prefer
than heralding a new period of stability. Indeed, some are arguing to preserve their options to choose, rather than choose wrongly.
that as the consumers of the rapid-growth markets play a bigger
role in the global economy, cyclical volatility has inevitably Similarly, within companies, employees remain uncertain about
increased. their economic security or their economic prosperity. Consumer
confidence is low. Employee engagement is strained.
6 Growing Beyond How high performers are accelerating ahead

9. A gap becomes a growing gulf
Five years after the start of the global downturn, many companies continue to struggle — certainly
more than we would have expected at this stage in previous recessions. But a growing number are
demonstrating that they have learnt to master the new economy and are pulling ahead.
Figure 2: Change in the importance of business activities
2008 2012 2008-12
Securing the survival of your 74 65 65 -9
existing business
Protecting your current
business/assets 40 22 22 -18
Improving the performance of
existing business/assets 39 30 30 -9
Restructuring the business to
meet new conditions 37 23 23 -14
Taking advantage of the situation to
pursue new market opportunities 19 26 26 +7
Q: Over the next 12 months, what change do you expect in the importance that your organization attaches to the following activities? (Five-point scale)
When we started this program in 2008, we asked companies to There is some variation across different regions of the world in
say where they were focusing their efforts: from securing their how companies view the market. The US and Asia-Pacific show
very survival, through to taking advantage of the market to the biggest increase in the number of companies who believe they
pursue new opportunities. We can see that, while the number in can pursue opportunities. They also, however, show the biggest
crisis has fallen over the past four years, it continues to be very increase in the number of companies in trouble. This suggests an
significant. The number of companies feeling defensive about their increased polarization of performance. The gap is growing.
current position has declined, but still accounts for one in five
companies. A sizeable group are now actively seeking to either Moreover, this emerging polarization in performance seems to hold
improve performance from their current assets or restructure their true across all major sectors. In none of the 13 sectors that we
operations. But the biggest increase has occurred in the group who have examined was there a material difference, except in mining
now believe they can take advantage of market opportunities. and metals and private equity, where the pattern is comparable.
Figure 3: Change in the importance of business activities (sectors)
% significant increase and increase
80 Total
70 Private equity
Mining and metals
60
Other sectors
50
40
30
20
10
0
Securing Protecting Improving Restructuring Pursuing
Q: Over the next 12 months, what change do you expect in the importance that your organization attaches to the following activities? (Five-point scale)
Growing Beyond How high performers are accelerating ahead 7

10. Adjusting to the new reality
Staying ahead of the pack
We asked respondents to choose up to three factors that would determine their future
competitiveness over the next two years.
In general, the response to our survey on sources of competitive effectiveness. competition — the major area of
suggests an increasing focus on the difference for five sectors. Cost
market, a continued focus on optimizing The facing page maps high performer optimization is seen as important for all
costs and a growing focus on talent and versus low performer responses for 12 the sectors, but is much important for
internal engagement. High performers, sectors. Each sector shows differences in the high performers.
however, focus more on customer reach how high performers see the competitive
issues and human capital, while others challenge compared with their competitors. • Stakeholder confidence is seen as less
focus more internally on optimizing costs important by most sectors, but it is an
and improving organization. These are • Customer reach is an area of major area where the difference between high
only differences in emphasis. Our key difference in 9 of the 12 sectors. In 4 of and low performers is most material —
overall finding is that optimal performance the sectors this is based on seeking especially in the area of talent.
requires a balance across all dimensions. deeper customer relationships. In 7, the
difference is based on innovation and, in • Operational agility is seen as the least
Care always needs to be taken when 8, based on market expansion. important area for focus, with the
aggregating results. In seeking the macro exception of technology. For five sectors
pattern we must not lose the micro insights. • Cost competitiveness is the second this is a key area of high performance
Sectors vary greatly in the weighting placed area of focus, with branding — non-price focus.
Figure 5: Critical factors for competitiveness — all respondents
Customer reach
Customer relationships
Innovation Market expansion
Technology Brand
Operational Agility Cost
agility 40% 50% 60%
competitiveness
Regulatory risk Cost optimization
Stakeholder relationships Sustainability
Talent
High performers
Stakeholder
Low performers
confidence
8 Growing Beyond How high performers are accelerating ahead

11. High performers approach the world differently
Automotive Banking Consumer products
Customer relationships Customer relationships Customer relationships
Innovation Market expansion Innovation Market expansion Innovation Market expansion
Technology Brand Technology Brand Technology Brand
Agility Agility Agility
Regulatory risk Cost optimization Regulatory risk Cost optimization Regulatory risk Cost optimization
Stakeholder relationships Sustainability Stakeholder relationships Sustainability Stakeholder relationships Sustainability
Talent Talent Talent
Insurance Life sciences Media and entertainment
Customer relationships Customer relationships Customer relationships
Innovation Market expansion Innovation Market expansion Innovation Market expansion
Technology Brand Technology Brand Technology Brand
Agility Agility Agility
Regulatory risk Cost optimization Regulatory risk Cost optimization Regulatory risk Cost optimization
Stakeholder relationships Sustainability Stakeholder relationships Sustainability Stakeholder relationships Sustainability
Talent Talent Talent
Mining and metals Oil and gas Private equity
Customer relationships Customer relationships Customer relationships
Innovation Market expansion Innovation Market expansion Innovation Market expansion
Technology Brand Technology Brand Technology Brand
Agility Agility Agility
Regulatory risk Cost optimization Regulatory risk Cost optimization Regulatory risk Cost optimization
Stakeholder relationships Sustainability Stakeholder relationships Sustainability Stakeholder relationships Sustainability
Talent Talent Talent
Power and utilities Real estate Technology
Customer relationships Customer relationships Customer relationships
Innovation Market expansion Innovation Market expansion Innovation Market expansion
Technology Brand Technology Brand Technology Brand
Agility Agility Agility
Regulatory risk Cost optimization Regulatory risk Cost optimization Regulatory risk Cost optimization
Stakeholder relationships Sustainability Stakeholder relationships Sustainability Stakeholder relationships Sustainability
Talent Talent Talent
Growing Beyond How high performers are accelerating ahead 9

12. Customer reach
Getting closer
but looking beyond
When asked what factor was most critical to their
company’s competitiveness in the next two years,
high performers said deepening their relationship
with customers, while low performers said cost
optimization. There, fundamentally, is the crux of two
very different management approaches: one focused
on the market, the other on the operation. Both are
clearly important and necessary within an organization,
but our research suggests that high performance
is fundamentally driven by the predominance of a
markets model.
What we learnt before
High-performing companies have been entering new High-performing companies have been approaching
markets by: product development by:
• Taking care when expanding across borders — they • Carefully selecting customer segments that allow them to
maximize their growth potential at home first and expand create long-lasting competitive advantage.
only after carefully assessing opportunity, cost and risk.
• Recognizing the value of innovation — they are ahead in
• Developing new markets and creating additional value utilizing their planning process to drive innovation.
from current products — new products for new sub-
segments or new opportunities for existing assets. • Listening to their employees — recognizing their
expertise in products and spotting new client needs.
• Adopting increased caution — high performers are less
likely to slow themselves with internal consultation and
more likely to consult external stakeholders.
10 Growing Beyond How high performers are accelerating ahead

13. Meeting a moving target
Targeting and satisfying customer needs The process of understanding and responding to changing market
demands is rising fast up the corporate list of priorities. The need
It’s a simple aim, but it’s easier said than done — particularly to invest more in marketing as a consequence, and to consider
in today’s volatile market. Shifting economic terrain, as well adapting products, services and delivery methods for new markets,
as ongoing macro-trends, such as globalization and sweeping is recognized more by high performers than low performers.
demographic change, mean that customer needs remain in Similarly, the trade-off between growing volume and growing value
a state of flux. Only those organizations that possess a deep shows that high performers are over 50% more likely to increase
understanding of customer demand and expectations will manage price than low performers — and almost 40% less likely to cut price
to match their service or product with demand. The process of to grow or protect volume.
marketing — in which companies seek to shape choice to better
align demand and supply — has risen as a focus area, especially for We have not previously focused on non-organic routes of growing
high performers. revenue, through acquisition or merger. This is because, when they
prove successful, these routes can normally be seen to have driven
Existing clients remain the focus of most companies when they the faster attainment of a strategic goal already covered by the
are seeking new sales. Gaining a deep understanding of customers framework. It is noticeable, however, that from parity in response
and a close relationship with them is well-documented as a fruitful rates, we now see a much greater difference in the response of
area of focus when looking to reduce costs. It is the top success high and low performers. High performers are now 40% more
factor among all categories of respondent. However, while it is still likely to be considering merging with or acquiring competitors to
very important, it has now been supplanted as the top response increase market share. This wave of sector restructuring has been
of high performers. They now list finding new markets for existing anticipated for some time. Interestingly, however, the response
products as being the most important area. These new markets suggests that it covers all sectors, with no particular sector
could be new geographies or new segments in existing geographic standing out as more or less active.
markets.
Figure 6: Actions taken to increase sales
High performers Low performers Gap: high vs. low Total
Develop new geographic markets to sell existing 58 39 +19 48
products/services
Introducing new products and/or services to meet evolving
57 49 +8 53
needs of existing clients or to attract new customer segments
Broadening existing product/service range to develop new 51 39 +12 46
customer segments in existing geographic markets
Increased investment on marketing and sales 42 33 +9 37
Adapting existing product/service offerings for new
38 30 +8 33
geographic markets
Opening new distribution channels/reorganizing 36 35 +1 39
to address markets through multiple channels
Merging with and/or acquiring competitors to 35 25 +10 31
increase market share
Increasing prices 19 12 +7 14
Cutting prices 13 21 -8 15
Q: Which of the following actions is your company taking to increase sales?
Growing Beyond How high performers are accelerating ahead 11

14. Customer reach
Getting closer but looking beyond
Figure 7: Proportion of sales generated in recently
On markets entered markets
High performers Low performers All respondents
Successful pioneers need a plan 39
37
Market expansion is a key feature of high performers’ strategies 28 28
25
and their top priority in developing sales. Essential though the 19
22
rapid-growth markets may be for the future, investing in other 14
developed markets seems to be at least as important. We may be 7
9
6
in the middle of a major rebalancing of the global economy, as 3
4
2 3 3 3
1 2
1 1
rapid-growth markets increase their market share, but today — and 0% 1%–5% 6%–10% 11%–20% 21%–30% 31%–50% Above 50%
indeed for the next decade — developed markets will continue to
account for over 50% of global demand and a significantly higher Q: What proportion of your sales is generated in markets which your organization/
proportion of profit for companies. company has entered in the past three years?
A third of high performers have over 10% of their sales generated
in markets entered in the past three years, compared to 13% of low
Case study: PCH performers. Apart from oil and gas, this is true for all sectors.
Liam Casey is the Ireland-born CEO of PCH International.
When asked to identify the developed countries on which they
The China-based supply chain management company is one
should place their corporate bets, both high- and low-performing
of the world’s leading manufacturers and distributors of
survey respondents opted for the US. This is not surprising,
smartphone and tablet accessories, working with consumer
given the size of that market and its comparative resilience to the
electronics brands to produce devices and ship them to
wider global economy. Europe, however, performs less well, with
customers around the world.
only 4 of the top 10 national markets. The rapid-growth markets
show, as expected, that the BRIC countries dominate, with China
PCH’s base in Shenzhen, China — a city with a population of
increasingly pulling ahead as the major focus. Of note, however, is
more than 10 million people that, only two decades ago, was
the particular focus that high performers are placing on Brazil.
quiet and provincial — has played a crucial role in its growth
story. Casey began his Chinese odyssey in 1995, leaving
But care needs to be taken with simple lists such as these: behind
his home in Cork, Ireland, to follow the example of a friend
the figures lies considerable regional variation, as we have shown
who had been making a good living from importing Chinese
before. Attractiveness is shaped by perspective, which in turn is
hardware into the US. After flying to Taiwan to attend a
often influenced by proximity. High-performing companies in the
trade show, Casey started his own business importing cables
US, for example, are far more likely to see most potential in their
from Shanghai to Cork.
domestic market, followed by other Anglo-Saxon markets, such as
the UK and Canada. Asia-Pacific based companies are more likely
Casey says that PCH’s success as a start-up in China
to favor their own region (including India), while the preferences of
depended on making processes as straightforward and
European companies are the most broadly spread. Ironic perhaps
understandable as possible. “The big challenge was to take
that, through history rather than intent, European companies are
confusion out of business, so we had to keep things simple,”
by some margin the most global in their spread of operations.
he says. Consequently, as Western businesses’ interest in
China grew, PCH was ideally placed to help them find a clear
Certainly, there is little doubt that market opportunities exist
route into the Chinese manufacturing sector.
— even in the current economic environment. Although global
trade collapsed during the financial crisis, it has since rebounded
Source: Exceptional, Ernst & Young, 2012. Article author: Christian Doherty.
strongly, led by trade among emerging markets. By 2020, world
trade in goods will total around US$35t, two-and-a-half times its
12 Growing Beyond How high performers are accelerating ahead

15. Figure 8: Top potential markets over the next five years
Developed markets Rapid-growth markets
High performers Low performers Gap: high vs. low High performers Low performers Gap: high vs. low
US 51 40 +11 China 43 37 +6
UK 34 31 +3 India 32 29 +3
Germany 22 28 -6 Brazil 31 20 +11
Singapore 19 14 +5 Russia 19 21 -2
Australia 16 14 +2 South Africa 11 8 +3
Canada 16 12 +4 Indonesia 11 7 +4
Japan 15 14 +1 United Arab Emirates 10 3 +7
France 11 14 -3 Saudi Arabia 9 11 -2
Hong Kong 10 8 +2 Poland 8 10 -2
Norway 6 4 +2 Singapore 8 9 -1
Q: Which of the following developed/rapid-growth markets holds the greatest potential for your company over the next five years? (Select up to three)
value in 2010, according to Ernst & Young’s 2012 report, Trading
places: the emergence of new patterns of international trade. At Rapid-growth markets are driving
the same time, world trade in services will double to around US$6t.
global growth
As new regional trade agreements are reached, companies will be
assisted by lower trade barriers — as well as falling global transport
Rapid-growth markets are becoming ever more important.
and communications costs. This will enable organizations to market
They have grown on average by 5.8% per year over
their products around the world and coordinate with suppliers in
the last decade, more than three times as fast as the
other countries.
advanced economies combined. But, importantly, their
future potential is only now becoming clear. Continued
Increased fragmentation demands more planning industrialization and urbanization, along with strong
population growth and the emergence of a substantial
High performers seem to have a more developed plan for their
middle-class, will further encourage their expansion.
market-entry strategies than low performers. Their decision to
enter a developed market is based on identifying a clear demand
Although there has been a slower rate of expansion this
for a current product or service, supported by the scale and growth
year, a return to significant growth is likely from 2013.
projections of that economy. For them, quantitative demographics
Soaring domestic demand will offer businesses exciting
and income per capita analysis is not enough. A potential move
new markets for goods and services in the years ahead. For
into new markets also prompts them to consider factors such as
example, in 2011, two-thirds of consumer spending across
purchasing behavior, the power of local brands and changes in
the world came from the advanced economies. But in 25
attitude and consumer behavior.
years’ time, Asia alone will have overtaken them as the
largest source of consumer spending, at almost 40%.
The increased variation in performance has resulted in a more
fragmented market. Take Europe as an example. The ongoing
This level of demand will ensure that rapid-growth markets
problems of the Eurozone should not overshadow Germany, whose
eventually replace the advanced economies as the key
consistently robust economic performance has continued, even in
driver of global growth, and the shift in import demand
recent years. But a closer analysis reveals that some German regions
should also assist in rebalancing the global economy.
— particularly in the west of the country — are vastly outperforming
other regions, mainly in the east. Market segmentation is deepening
For further information, see the latest edition of
and businesses don’t now necessarily want to serve a whole country.
Ernst & Young's Rapid-Growth Markets Forecast.
Instead they prefer to target a specific segment of a country.
Growing Beyond How high performers are accelerating ahead 13

16. Customer reach
Getting closer but looking beyond
On product
Matching customers’ evolving needs opportunities in their environment. While innovation is important
to all companies, it is particularly important to high performers.
Developing or adapting products or services holds the key to They deem it the second most important factor in determining
creating new revenue streams. Over half our respondents say future success. Thirty-eight percent say they generate in excess
that selling new products to existing customers is their primary of 10% of their sales from products or services developed in the
source of increased sales — particularly in banking and technology. past three years, as opposed to only 21% of low performers. But
A further 33% report that they are adapting existing products for getting the balance right is important. The real difference happens
new markets, with life sciences and technology, again, in the lead between 11%–20% of new products — the difference in performance
(see Figure 6, page 11). of companies with over 30% of new products is immaterial.
One of the major drivers of change continues to be the impact of
Figure 9: Global sales generated by product developments
technology. Digital technology now allows for both more focused
communication and consequent customization than ever before.
46
Customers can search more widely for their specific requirements High performers Low performers All respondents
and are much less willing to compromise than before. Market 40
segments are constantly being redefined by the "know it all, want
it all consumer." Moreover, while this started in consumer markets, 29 29
it now affects the way people interact with government and utilities 26
22
and how businesses interact with each other. 20
13
As explored in a recent Ernst & Young study — This time its 12
10 9
personal: from consumer to co-creator — digital technology is 5 6 5
4
5
4 3 3 4 3
driving a revolution in consumer demand. Market segments are
constantly evolving, brand loyalty challenged, communication 0% 1%–5% 6%–10% 11%–20% 21%–30% 31%–50% Above 50%
channels fragmented and consumers more informed and
demanding. To remain relevant to the new consumer, organizations Q: What proportion of global sales are accounted for by products developed in the
past three years?
must undergo a similarly radical transformation. The implications
for businesses are great and include intensifying the dialogue with
customers, making service personal, delivering consistent multi- Our research has found that those companies that embed
channel service and providing an end-to-end brand experience. innovation into every aspect of their organization are the most
successful. Innovation is not a tactic: it is simply what they do.
Companies therefore need to tailor their goods and services to Our recent study, Innovating for growth: innovation 2.0 — a
match such niche requirements. Segmentation of the customer spiral approach to business model innovation, suggests a loosely
base is the foundation for successful innovation, and is the third structured, circular process that allows companies to connect with
most quoted source of increased profitability for high performers. the various points of the spiral in different ways and at different
Successful segmentation requires companies to be both quick to times, ultimately reaching an innovative breakthrough. It sets
exploit new opportunities and highly innovative in their breadth out how, for most innovative companies today, innovation is a
of customer offerings. Yet this doesn’t happen automatically. The continuous cycle with ups and downs, input from different places,
most innovative companies understand how to capitalize on the repetition, failure, and many steps back and forth.
14 Growing Beyond How high performers are accelerating ahead

17. Figure 10: Spiral innovation system
ip mindset and cult
dersh ure
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By adopting this approach, the most innovative companies can:
Pe
Customers o
• Take advantage of changes in the external environment
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• Continually revamp their business models to achieve
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• Innovate to obtain specific business outcomes, such as
So
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increased agility or productivity
Achieve
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Suppliers
Academics
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Competitive
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It is difficult to be innovative in a world where competition comes
u ct
at you from all sides. But the spiral approach is a robust process
od
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for innovation. If followed carefully, it can provide flexibility and io n
at
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of innovat
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structure for companies of all types, regardless of size or sector.
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ncial institutions
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Source: Innovating for growth:
en
t
Exte
rnal collaboration Inf
innovation 2.0 — a spiral approach to Org
anizat nce
business model innovation, ion and governa
Ernst & Young, 2012. Innovation enabler
Lessons from Asia
One region in particular that has seen Figure 11: Which export countries or regions do you expect will hold the
new opportunities ricochet across best growth opportunities for your company over the next three years?
borders is Asia. Its rapid-growth markets
are the fastest-growing economic regions For globally focused companies For regionally focused companies
in the world, with annual growth forecast Mainland China 42 Western Europe 32
at more than 6% p.a. Companies from Middle East and North Africa 28
India 33
these regions are expanding into new
Indonesia 29 Brazil 20
markets for various reasons: growth,
Vietnam 25 Russia 18
diversification, routes to market and
access to resources, skills and technology. Middle East and North Africa 24 Eastern Europe (ex-Russia) 15
Brazil 24 US or Canada 14
Our report Beyond Asia: strategies to Western Europe 23 Mainland China 8
support the quest for growth explores Russia 18 Sub-Saharan Africa 8
the differences among companies in their Singapore 7
US or Canada 18
quest for growth, and contrasts findings
Australia and New Zealand 15 Hong Kong (SAR)* 7
for globally and regionally focused
companies. Asian companies are on a Note: Scores shown = percentage of respondents
very successful expansion path, but are * Special administrative region
meeting challenges and risks that even Asian companies must make to counter For further information, please see
established multi-nationals would find these obstacles are difficult, but essential, Beyond Asia: strategies to support the
hard to overcome. The strategic moves steps toward globalization. quest for growth, Ernst & Young, 2012.
Growing Beyond How high performers are accelerating ahead 15

18. Operational agility
Moving quickly in
a customized world
There will always be a time lag from the point when
an organization sees opportunities (and threats) to
when it executes its plan of response. How successful
a company is in minimizing this elapsed time is
one of the many factors that separate high and low
performers. But the traditional source of speed has
been standardization of both product and process,
neither of which addresses a new, fragmented market
of dynamically evolving customer demand.
What we learnt before
High performing companies have been gaining speed High performing companies have been increasing
by: flexibility by:
• Placing greater emphasis on empowering local-decision • Organizing around the customer, to ensure that they
making, as well as the need to encourage employees to remain at the center of their thinking.
innovate without active management intervention.
• Effectively deploying digital sales tools to manipulate
• Seeking speed from their suppliers and distribution masses of data to customize their response to a specific
partners. They are significantly more likely to be willing to client.
change both, in order to achieve a faster time to market.
• Recognizing that proactive human resource
• Remembering the importance of longer-term strategic programs may be required to get even good employees on
goals. In most cases, lower performers seem to be working side in the quest for speed and flexibility.
to a shorter time-frame.
16 Growing Beyond How high performers are accelerating ahead

19. On speed
Being fast is more important than being first — 49% in this survey compared to 61% in 2011. Indeed, the gap
between the two groups has grown.
Only one person can ever be first to do something and the record
of commercial success for such pioneers is at best mixed. Speed, Three years ago, many companies were in a fight for their very
however, matters for everyone. Speed to market. Speed of change. survival and were under intense pressure to get new products to
Speed of operations. These are often the difference between success market for urgently-required new revenue. Today, with growing
and failure. And in today’s competitive market, organizations deploy awareness that the road to recovery is long and challenging, there
a variety of techniques to improve this aspect of their performance. may be less anxiety to rush a product to potential customers and a
De-layering management to increase the pace of decision-making greater willingness on the part of companies to pace themselves in
is one example. Others include changing supply and distribution a more sustainable fashion.
channels to respond quicker to market changes, and seeking
partnering agreements with key suppliers and distributors. Potentially, however, there is growing uncertainty about the
business environment individual companies face. Recovery is
In our previous studies, we found that high performers were not happening as planned, leaving some more optimistic players
achieving their faster speeds by improving processes, especially by looking exposed. The risks of being first to market are beginning
devolving decision-making closer to the market, as well as seeking to outweigh the opportunities. Being fast to respond to a clear
speed from their supplier and distribution partners. opportunity seems a more efficient approach.
When analyzing the changes in speed to market compared to three Equally some companies — particularly low performers — are
years ago, it appears, however, that while getting faster, the rate reaching the limits of their current organizational response,
of acceleration is no longer as great as it was. Although 74% of having exhausted the incremental performance improvements
high performers believe that their organization is getting faster that can be achieved without major change to their operations.
at developing new products and services, this is 6% lower than in The transformation of organizations typically slows the existing
2011. Low performers are experiencing an even faster deceleration operation down, regardless of the longer-term benefits.
The DNA of the COO: time to claim the spotlight
Why is so little known about the role of the COO, despite its • Where companies have a COO role, it tends to be senior
long history? Ernst & Young's The DNA of the COO: time to — 66% of those polled are a member of the executive
claim the spotlight uncovers a compelling story of a wide- committee or board.
ranging role that still needs to justify its existence, despite • COOs are generally very satisfied with their role, especially
having a clear rationale. their potential for career development and influencing
corporate strategy.
The DNA of the COO explores the expectations and aspirations • Many COOs worry that they may not be sufficiently
of those in the job, along with the skills, capabilities and accepted or respected by other members of the
relationships they need to master in order to succeed. management team, but their peers do not share this
What we find is a breed of executive that combines deep perception and, in fact, hold them in the highest regard.
operational knowledge with broad strategic insight, and who • Motivation and hard work are seen as the attributes that
has what it takes to become the next CEO. Yet we also find a have done most to get COOs where they are today.
role that is fraught with challenges. Successful COOs have to
adapt constantly to a fast-changing corporate and external The DNA of the COO incorporates analysis of two surveys:
environment. They must possess a mastery of change, to a February 2012 pilot study of 200 COOs and an April
help translate strategic vision into action. And they must 2012 survey of another 306 COOs and senior operations
ultimately help the business to innovate and grow. professionals across Africa, America, Asia, Australia, Europe
and the Middle East. In the second survey, a further 43
• The average COO is a 48-year-old male. He has typically respondents from across the C-suite were also polled to give
been in his current role for six years. their perspective on how the COO is perceived by the rest
• Over half (54%) of COOs have a Master’s degree or of the management team. You can download the report at
higher, although there is no particular qualification that ey.com.
dominates, given how sector-specific the role can be.
Growing Beyond How high performers are accelerating ahead 17

20. Operational agility
Moving quickly in a customized world
On flexibility
Consistency is a dangerous word Asia-Pacific show a greater reliance on generating internal
responsiveness and increasing the use of external partnerships.
Consistency remains a favorite mantra for management. This may reflect the stage of company development, but may also
Consistency facilitates efficiencies in operations and the ability to be indicative of management and local culture.
deliver a shared brand promise across service, sector and national
boundaries. But, while such consistency at the level of an individual Comparing actions in pursuit of flexibility shows a stark contrast
client may well be essential, there is also a risk that it reduces between high and low performers. High performers are far ahead
the opportunity to respond in an increasingly varied and volatile in their use of technology, the breadth of their product or service
world. Indeed, the variation in markets and the volatility of recent portfolio, decentralizing decision-making and enhancing the skills
years has demonstrated how vital it is for companies to possess of their workforce to utilize this freedom. There seems to be a
the flexibility to adapt to fast-changing circumstances. New trends, collection of companies who have overcome the internal inertia of
shifting customer demands and an unpredictable, and ongoing, large organizations and empowered their people to leverage the
financial crisis are just a few of the reasons why companies need organization to commercial success
to be ready to move quickly, whenever necessary to respond to
opportunities and threats. Low performers, by contrast, seemed trapped in a hostile
ecosystem — challenging their partners in the supply chain to do
In seeking flexibility, organizations put different emphasis on more and still trying to connect their internal resources to the
different tools, depending on their country of origin. In the US, harsh reality of the competitive challenge the company faces. The
for example, both high and low performers place much greater "control culture" that developed in previous decades, as companies
emphasis on the use and role of technology to achieve this goal. sought to recreate previous success, has become one of the major
By contrast, the Europeans stress breadth of product range and obstacles to competitive success.
decentralization of decision-making, while companies from
Figure 12: Actions taken to increase flexibility
High performers Low performers Gap: high vs. low Total
Increased use of technology 49 37 +12 40
Enlarged the product/service portfolio
45 27 +18 35
to meet different market needs
Made internal support functions 43 41 +2 46
more responsive
Improved and/or broadened 39 30 +9 35
workforce skills
Decentralized decision-making 33 23 +10 30
Made external partnerships
33 36 -3 34
more efficient
Invested in more flexible 28 22 +6 27
manufacturing processes
Q: Which of the following actions has your company taken to increase its flexibility over the past two years?
18 Growing Beyond How high performers are accelerating ahead