Winners don’t play dead Doing more with less in an uncertain future An Economist Intelligence Unit research programme Sponsored by AlixPartners Winners don’t play dead Doing more with less in an uncertain future Contents Preface Interviewees Introduction The motive and the means to invest for growth Investing in innovation Barriers to investment 16 Keeping focus and growing smartly 18 Next steps: What is needed? 19 Conclusion 21 Appendix: survey results 22 © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future Preface Winners don’t play dead: Doing more with less in an uncertain future explores how companies are reshaping their business to succeed in the challenging environment that has emerged from the great recession It also looks at the factors holding back companies from making major capital investments What is hindering them and what are they doing to help remove the constraints? The Economist Intelligence Unit conducted the survey and analysis and wrote the report The findings and views expressed in this report not necessarily reflect the views of the sponsor The author was Shawn Young Michael Singer edited the report and Mike Kenny was responsible for layout Additional interviews were conducted by Andrew Cartwright and James Rubin We would like to thank all of the executives who participated in the survey and interviews for their valuable time and insight January 2012 © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future Interviewees Chris Boyle, managing director, Black Diamond Capital Management Ravi Pandit, chairman and group chief executive officer, KPIT Cummins David Burns, general manager, IBM Global Technology Services John Pearson, chief executive officer Europe, DHL Express Sabri Challah, vice-chairman and senior partner, Human Capital, Deloitte Charlie Peters, senior executive vice-president, Emerson Electric Pete Cittadini, president and chief executive officer, Actuate Gil Priver, executive vice-president, Retalix Harris Diamond, chief executive officer, Constituency Management Group, Weber Shandwick, Interpublic Group Stuart Fenton, president, EMEA & APAC, Insight Enterprises Ian Foottit, partner in financial services, Deloitte Vikram Gulati, chief executive officer, Happiest Minds Buddy Gumina, senior partner and co-head of healthcare group, Apax Partners Chris Morgan, senior vice-president, graphics solutions business imaging & printing division, Hewlett-Packard Doug Shaw, chief executive officer, Monotype Imaging Holdings Mahmut Sinoplu, managing director, Sabanci Group Eivind Slaaen, senior vice-president, Hilti Patrick Spence, vice-president and manager of global sales & regional marketing, Research In Motion (RIM) B.G Srinivas, senior vice-president and member of the board of directors, Infosys Thomas Waechter, president and chief executive, JDS Uniphase Corp Matt Williams, partner and group planning director, The Martin Agency Krishnakumar Natarajan, chief executive officer, MindTree © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future Executive summary A s developed economies shudder in response to Europe’s debt crisis, political unrest in the Middle East, a languishing US economy and an apparent dearth of effective economic leadership, corporate decision makers in the Organisation for Economic Co-Operation and Development (OECD) are braced for the possibility of a double-dip recession In September 2011, the Economist Intelligence Unit conducted a global survey of 536 senior executives, sponsored by AlixPartners More than 60% of respondents view default within the euro zone and a renewed global recession as likely or very likely The respondents generally view a deflationary cycle in developed markets as a real possibility, but this does not mean they are giving up on growth The principal findings of the survey and a series of interviews with senior experts are as follows: l Despite considerable gloom in parts of the global economy, corporate leaders are guardedly optimistic A large proportion of respondents in OECD countries say they are confident that they can strike the delicate balance between cutting back in response to short-term setbacks and investing for long-term growth They believe in their products and services, and many took steps and learned lessons during the recession that have left them, in some ways, stronger now than they were three years ago They cut where they had to, but focused on their top priorities and most promising initiatives, often investing in one area while enduring painful cuts in another Who took the survey The survey that underlies this report is based on answers from respondents, of which 49% were C-level executives The head offices of their organisations are based in around 70 different nations Around 33% of them have company headquarters in North America; 27% in Western Europe; 17% in the Asia-Pacific region; 11% in the Middle East; 6% in Latin America; 4% in Africa; and 2% in Eastern Europe Companies with annual revenue of US$500m or less compose 46% of the respondents and 19% of the responses came from companies with annual revenue of US$10bn or more The financial services industry is the most strongly represented, with 16% saying it is their organisation’s “primary industry” The survey also covers nearly all other industries, including professional services (15%), manufacturing (9%) and information technology (IT) and communications (8%) Many of the organisations in the survey are multinational Of the 83% of respondents that say they not have a head office in the Asia-Pacific region, around 60% have “significant operations” in that region © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future l Many firms have amassed vast amounts of cash Despite their fears for the global economy, companies with annual revenue in excess of US$500m say they expect generating revenue growth to become more important than retrenchment over the next few years While it is expected that a certain amount of reserves will be set aside for short-term and emergency funding, many companies are setting priorities for spending l Organisations outside of Western Europe are making it a priority to diversify their products and services Investing in new technology, expanding into new markets and making acquisitions are also on the “To-Do” list, although there is a meaningful minority of 20%-25% of respondents that are determined to hold onto their cash for the time being Those willing to spend are likely to invest in Internet-based software and services, business-process-management tools, mobile communications, data analytics and cloud computing l When it comes to new markets, the Asia-Pacific region is the future, but other markets are still attractive There is no question that most companies view emerging markets as the engine of future growth Nearly 40% of our survey participants have been expanding in the Asia-Pacific region for at least the past three years, and roughly one-half expect to expand there over the next three years Other emerging markets, in Latin America and the Middle East, will also attract a growing share of corporate investment, with around one-quarter of respondents expecting to invest in these regions within three years, although political upheaval in the Middle East may act as a deterrent in the short term l Technology was critical in helping companies to operate on tighter budgets during the recession, and continues to be a tool for growth Financial companies, in particular, cited efficiency as one of the most important elements of their success, and they plan to build on that by using more Internetbased software, analytical tools, and mobile technology At the same time, technologies from the consumer market are transforming the workplace, and companies that integrate phenomena like tablets, smartphones and social media are finding important new ways to attract customers and employees © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future Introduction F or companies trying to plan for the next few years, the second half of 2011 bore a worrying resemblance to the end of 2008 Economic confidence crumpled as a series of economic and political crises, improbable just months earlier, jolted the financial world The debt crisis in the euro zone escalated, sending economic-growth forecasts and capital markets tumbling At the same time, fresh political upheaval swept the Middle East, economic policy in the US and the euro zone was hobbled by political dysfunction and Japan continued to grapple with the aftermath of a devastating earthquake and tsunami The developed world confronted the harsh possibility of a double-dip recession, scarcely two years into the fragile recovery from the debacle of 2008 and 2009 The turmoil and uncertainty have forced businesses to evaluate continually the delicate balance between retrenchment and expansion “Unfortunately, over the last year, year and a half, there has [always] been something or other on the horizon that has prompted people to look at what they are doing,” says Vikram Gulati, chief executive of Happiest Minds, an IT firm based in India “If it was not the euro, it was the debt crisis in the US If it was not that, it was the earthquake and tsunami in Japan So, every three months there has been some political or social or economic crisis that has made people question what they are doing.” The positive result was that, by focusing on their ability to control spending and conserve cash, many companies survived the 2008 recession and the ensuing years in remarkably good shape Many have improved their processes, streamlined their workforces and amassed enormous cash war chests The executives in our survey voiced considerable confidence about the things they can control: their products and services, technology, processes and spending But they are very worried about the world outside their doors and the future looks worse in the developed markets that are home to most of our survey respondents Sixty-three percent see a double-dip recession as likely or very likely and roughly the same percentage expect default within the euro zone Nearly one-third see a deflationary cycle in developed markets as likely and 38% give it 50-50 odds By comparison, only 10% expect China’s economy to crash © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future The motive and the means to invest for growth B usinesses know they can’t shrink their way to growth According to our survey, companies expect revenue growth to be a higher priority than cost cutting over the next 12-36 months, although it remains a very close contest Survey respondents expect the Asia-Pacific region to be the focus of their expansion plans, acquisitions and revenue growth They also expect companies headquartered in AsiaPacific countries to be their main source of competition in the coming years Despite the challenges they have faced in recent years, many companies are stronger now than they were at the start of the recession And they have the cash to invest in future growth US corporate profitability is at a 40-year high and businesses are sitting on stunning sums of money By the third quarter of 2011, US corporate cash balances reached $2.1trn, a $716bn increase since early 2009, according to the US Federal Reserve and Treasury Strategies, a Treasury consulting firm Almost one-half of the companies in our survey say they have more cash now than they did three years ago The decision to stockpile cash is all the more striking, given that low interest rates usually make holding cash unattractive and rates globally have been at historic lows in recent years In addition to hoarding cash, companies have been bolstering their earnings with stock buybacks By mid-November 2011, around US$450bn in buybacks had been authorized, the most since 2007 When made by financially sound companies, these defensive moves have been harshly criticized for doing nothing to save jobs, create new products or position companies for future growth And it is clear to many business leaders that being good at surviving an economic downturn does not necessarily mean that a company will thrive Companies report financial strength despite the recession What are your organisation’s cash reserves compared to years ago? (% respondents) Significantly higher (eg, over 10% increase) 27 Slightly higher (eg, around 5% increase) 22 Around the same 20 Slightly lower (eg, around 5% decrease) 11 Significantly lower (eg, over 10% decrease) 16 Don’t know Source: Economist Intelligence Unit survey, September 2011 © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future during a more propitious period Surviving the recovery is likely to require investment “That cash is going to be a very powerful weapon over the next few years,” says Buddy Gumina, co-head of the healthcare group at Apax Partners, a global private equity firm based in London Indeed, some financially strong companies are holding onto cash, not out of fear, but out of expectation that a weakening economy could create exceptionally favourable terms for expansions and acquisitions, says Chris Boyle, a managing director at Black Diamond Capital Management, an asset management and private equity firm “We’ve tried to make sure we have dry powder,” he says A question of timing Although they see the need, corporate officers seem less confident that the moment has come to shift priorities from cutting to investing At the time of our survey, 47% say their emphasis remains on controlling costs, compared with 38% who put the priority on investing in the business Fifteen percent see the two as equally important at the moment Major capital undertakings are on the corporate horizon, but still seem daunting Only 16% of respondents have firm plans for the next 12 months, while 65% expect to launch major capital projects, but will wait at least a year Certainly not all the cash in corporate coffers is immediately available to spend Holding onto cash and stock can be prudent when customers are reluctant, shareholders are risk averse and lenders are tight-fisted Companies with high debt levels and weak credit ratings need to be particularly conservative, given that tougher lending standards could make refinancing difficult at best Even in a vigorous recovery, companies would be likely to stick with many of the cost-conscious strategies they used to cope with the recession In manufacturing, where demand has already begun to rebound in many areas, companies are finding that they need to add back far less than they cut, says Mr Boyle “They have re-learned how to run their businesses,” he says, which means that margins are recovering quickly as leaner businesses meet growing demand Many businesses, he says, would still rather be a little underprepared for a rally than overextended in a downturn Having already cut the obvious fat from their businesses, companies still anticipate finding new ways to become more efficient Despite the uncertain economy—or perhaps because of it—many plan to keep looking for opportunities to outsource various administrative and technological functions © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future Investing in innovation “[The past few years] gave us the opportunity to reevaluate some of our businesses and make them more resilient and more relevant.” Harris Diamond, Interpublic C ost control is enormously important, but, at some point, companies that don’t directly invest in expanding their markets and developing innovative products and services will risk atrophy and lasting competitive disadvantage The companies in our survey are starting to sense a fairly urgent need to act Despite their misgivings about the present, they rate investing for revenue growth as their top priority over the next 12-36 months, with reducing costs ranked second “We believe that standing still is going backward, so we’re pushing forward and we need to be innovative all the time” says Gil Priver, an executive vice-president at Retalix, an Israeli provider of transaction processing and supply-chain-management software for retailers “We need to be very clear about making sure we invest heavily in the areas that we believe in, making sure that we know how to say no and not get derailed or de-focused.” Many companies have fought to push forward in crucial areas while facing searing retrenchment “It’s nothing you’d ever recommend to anyone, but 2008 gave us the opportunity to re-evaluate some of our businesses and make them more resilient and more relevant,” says Harris Diamond, chief executive of the Constituency Management Group at Interpublic, a marketing and advertising group Revenue in Mr Diamond’s unit contracted by 16% in 2009 and things were far worse in some of the unit’s divisions Amid the inevitable cutbacks, Mr Diamond, who is also chief executive of the firm’s Weber Shandwick public-relations business, committed significant cash to modernizing technology While some functions were outsourced, the firm overhauled its infrastructure to fully integrate tablets, software applications (“apps”) and other portable technologies that have become central to a modern communications business The payoff was strategic, as well as financial “We are much more digitally involved,” says Mr Diamond That makes the company more attuned to its clients and audiences—and more attractive to talented workers, who increasingly judge prospective employers by how enthusiastically they embrace key technologies, he adds How to spend it As businesses map out strategies for the next few years, they will have differing priorities, depending on whether the spending is domestic or foreign A substantial minority remain determined not to spend at all When assessing opportunities in their home region, 41% foresee diversifying products and services, © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future Which of the following measures you expect your organisation to take in the next years? Select all that apply In which geographical regions will the labour cost changes predominantly take place in the next 12 months? Select all that apply (% respondents) (% respondents) Asia-Pacific Increased IT spending 24 34 Europe Increased capital expenditure 23 33 North America Expanded facilities 23 30 Middle East Consolidated facilities 17 29 Latin America Increased labour costs 11 27 Other markets Increased outsourcing spending 26 All markets Reduced labour costs 14 26 Reduced capital expenditure 17 Decreased outsourcing spending In which geographical regions will the labour cost changes predominantly take place in the next years? Select all that apply 13 Reduced IT spending 12 (% respondents) North America 23 In which geographical regions did the labour cost changes predominantly take place in the past years? Select all that apply Asia-Pacific 22 (% respondents) Europe North America Middle East 20 15 30 Latin America Europe 11 26 Other markets Asia-Pacific 21 All markets Middle East 11 13 Latin America 10 Other markets All markets 12 In which geographical regions did the IT cost changes predominantly take place in the past years? Select all that apply (% respondents) North America 30 Europe 24 Asia-Pacific 15 Middle East Latin America Other markets All markets 13 23 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future In which geographical regions will the IT cost changes predominantly take place in the next 12 months? Select all that apply In which geographical regions will the capital expenditure changes predominantly take place in the next 12 months? Select all that apply (% respondents) (% respondents) North America North America 26 Europe 25 Asia-Pacific 25 24 Asia-Pacific Europe 24 23 Middle East Middle East 13 14 Latin America Latin America 10 12 Other markets Other markets All markets All markets 14 14 In which geographical regions will the IT cost changes predominantly take place in the next years? Select all that apply In which geographical regions will the capital expenditure changes predominantly take place in the next years? Select all that apply (% respondents) (% respondents) North America Asia-Pacific 25 Europe 26 North America 21 25 Asia-Pacific Europe 20 20 Middle East Middle East 13 15 Latin America Latin America 13 Other markets Other markets 7 All markets All markets 13 11 In which geographical regions did the capital expenditure changes predominantly take place in the past years? Select all that apply In which geographical regions did the outsourcing changes predominantly take place in the past years? Select all that apply (% respondents) (% respondents) North America North America 28 Europe 26 Europe 23 Asia-Pacific 22 Asia-Pacific 20 Middle East 16 Middle East 10 Latin America Latin America Other markets Other markets 4 All markets All markets 10 24 10 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future In which geographical regions will the outsourcing changes predominantly take place in the next 12 months? Select all that apply In which geographical regions will the facilities changes predominantly take place in the next 12 months? Select all that apply (% respondents) (% respondents) Europe Asia-Pacific 26 North America 24 Europe 25 23 Asia-Pacific North America 24 23 Middle East Middle East 12 15 Latin America Latin America 11 Other markets Other markets 7 All markets All markets 13 10 In which geographical regions will the outsourcing changes predominantly take place in the next years? Select all that apply In which geographical regions will the facilities changes predominantly take place in the next years? Select all that apply (% respondents) (% respondents) Asia-Pacific Europe 22 26 Europe North America 21 24 North America Asia-Pacific 21 24 Middle East Middle East 16 12 Latin America Latin America 12 10 Other markets Other markets 8 All markets All markets 11 11 In which geographical regions did the facilities changes predominantly take place in the past years? Select all that apply (% respondents) North America 24 Europe 22 Asia-Pacific 16 Middle East 12 Latin America Other markets All markets 10 25 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future How would you rate your organisation’s overall experience with outsourcing (domestically and/or overseas) as result of the period of global economic uncertainty since 2008? What are your organisation’s cash reserves compared to years ago? (% respondents) (% respondents) Significantly higher (eg, over 10% increase) Positive experience 27 32 Slightly higher (eg, around 5% increase) Neither positive nor negative experience 22 45 Around the same Negative experience 20 12 Slightly lower (eg, around 5% decrease) Don’t know 11 11 Significantly lower (eg, over 10% decrease) 16 Don’t know Which of the following functions benefited most from your organisation’s use of outsourcing in the past years? Select all that apply ‘My organisation’s current cash position will enable domestic operations to…’ Select all that apply (% respondents) (% respondents) IT services 60 Accounting Diversify our range of products/services 37 41 Logistics Invest in new information technology 36 39 Training and development Invest in new equipment/facilities 28 36 Manufacturing Expand into new markets 18 29 Research and development (R&D) Make acquisitions 18 29 Other None of the above We are holding onto our cash at the present time 18 24 Consider how your company has performed in the period of global economic uncertainty since 2008 Which strategies adopted by your organisation have been most helpful in its performance? Rank the top three, where represents the most effective measure ‘My organisation’s current cash position will enable overseas operations to…’ Select all that apply Streamlining business processes Diversify our range of products/services (% respondents) Expand into new markets 41 1.8 29 Cutting labour costs Make acquisitions 1.8 26 Creating new products and/or services Invest in new equipment/facilities 2.0 25 Cutting capital expenditure Invest in new information technology 2.0 24 Finding new markets overseas None of the above We are holding onto our cash at the present time 2.0 21 Shifting geography of production 2.1 Financial restructuring 2.2 Outsourcing 2.2 Other 1.9 26 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future In which geographical regions did the acquisitions predominantly take place in the past years? Select all that apply In which geographical regions did the market expansions predominantly take place in the past years? Select all that apply (% respondents) (% respondents) Asia-Pacific North America 38 31 North America Asia-Pacific 20 23 Europe Europe 18 22 Middle East Latin America 17 10 Latin America Middle East 13 10 Other markets Other markets All markets All markets In which geographical regions will the acquisitions predominantly take place in the next 12 months? Select all that apply In which geographical regions will the market expansions predominantly take place in the next 12 months? Select all that apply (% respondents) (% respondents) Asia-Pacific Asia-Pacific 49 32 Middle East North America 23 27 Latin America Europe 21 23 Europe Latin America 20 16 North America Middle East 17 10 Other markets Other markets 14 All markets All markets In which geographical regions will the acquisitions predominantly take place in the next years? Select all that apply In which geographical regions will the market expansions predominantly take place in the next years? Select all that apply (% respondents) (% respondents) Asia-Pacific Asia-Pacific 48 38 Middle East North America 28 21 Latin America Europe 26 21 North America Middle East 18 20 Europe Latin America 18 20 Other markets Other markets 18 13 All markets All markets 27 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future In which geographical regions did the diversification of products/services predominantly take place in the past years? Select all that apply (% respondents) In which geographical regions did the investments in equipment/facilities predominantly take place in the past years? Select all that apply (% respondents) Asia-Pacific 25 Asia-Pacific 27 North America 21 North America 26 Europe 19 Europe 23 Middle East 11 Latin America 14 Latin America Middle East 14 Other markets Other markets All markets 10 All markets In which geographical regions will the diversification of products/ services predominantly take place in the next 12 months? Select all that apply In which geographical regions will the investments in equipment/facilities predominantly take place in the next 12 months? Select all that apply (% respondents) (% respondents) Asia-Pacific 37 Asia-Pacific 38 North America 25 North America 25 Europe 22 Europe 22 Middle East 15 Middle East 15 Latin America 18 Latin America 16 Other markets 10 Other markets 10 All markets All markets In which geographical regions will the diversification of products/services predominantly take place in the next years? Select all that apply In which geographical regions will the investments in equipment/facilities predominantly take place in the next years? Select all that apply (% respondents) (% respondents) Asia-Pacific 35 Asia-Pacific North America 40 24 North America Europe 22 20 Europe Middle East 20 18 Middle East Latin America 19 17 Latin America Other markets 18 13 Other markets All markets 10 11 All markets 28 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future What kinds of information technology will you be investing in at domestic operations? Select all that apply In which geographical regions did the new information technology investments predominantly take place in the past years? Select all that apply (% respondents) (% respondents) Internet-based software/services 59 North America 26 Europe Business-process-management tools [including customer relationship management (CRM), enterprise resource planning (ERP)] 56 22 Mobile communications Asia-Pacific 52 19 Data-analytics software Middle East 48 13 Cloud computing Latin America 40 10 Collaboration tools Other markets 38 Social media All markets 34 10 None of the above Don’t know In which geographical regions will the new information technology investments predominantly take place in the next 12 months? Select all that apply What kinds of information technology will you be investing in at overseas operations? Select all that apply (% respondents) Asia-Pacific 29 North America (% respondents) Internet-based software/services 24 43 Europe Data-analytics software 22 33 Middle East Business-process-management tools [including customer relationship management (CRM), enterprise resource planning (ERP)] 18 Latin America 33 16 Mobile communications Other markets 31 Collaboration tools All markets 28 10 Cloud computing 26 Social media 24 In which geographical regions will the new information technology investments predominantly take place in the next years? Select all that apply None of the above Don't know (% respondents) Asia-Pacific 30 North America 22 Middle East When you expect to begin investing in major capital projects again? (% respondents) 18 In less than 12 months 18 Between 12 and 36 months 16 Europe 35 Latin America 14 Between 36 and 60 months 24 Other markets In more than five years 10 All markets 11 We not expect to begin increasing capital investment any time soon 19 29 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future What are the two most significant factors holding back your to 5-year investment plans in overases operations? Select all that apply What can your country’s government that would most help your organisation meet its business priorities? Select up to two (% respondents) (% respondents) Increase investment incentives Geopolitical uncertainty 46 35 Reduce taxes Consumer confidence 38 28 Cut regulation Tax/regulation uncertainty 35 19 Reduce red tape Shortage of funds 32 19 Cut interest rates Exchange rates 10 17 Raise import tariffs Shortage of skilled labour 14 Stockpile commodities Long-term interest rates 11 Other Commodity prices 11 Environmental issues Transport costs Which region you think will be the most important source of economic growth in the next 12 months? None of the above (% respondents) Don’t know Asia-Pacific 58 North America 14 What are the two most significant factors holding back your to 5-year investment plans in domestic operations? Select all that apply Latin America 11 Middle East (% respondents) Europe Consumer confidence 42 Other markets Geopolitical uncertainty 27 All markets Shortage of funds 25 Tax/regulation uncertainty 24 Shortage of skilled labour 19 Which region you think will be the most important source of economic growth in the next years? (% respondents) Long-term interest rates 18 Asia-Pacific Exchange rates 52 13 Latin America Commodity prices 13 13 Environmental issues North America 13 Transport costs Middle East None of the above Europe Don’t know Other markets All markets 30 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future Where you think your organisation’s future investments are most likely to take place? Select all that apply What are your organisation’s overall top three business priorities for the next 12 months? Select and rank the top three, where represents the top business priority (% respondents) Asia-Pacific 52 North America 28 Latin America 23 Middle East 23 Europe 23 Other markets Increasing revenue 1.5 Reducing costs 1.8 Finding and retaining customers 2.0 Securing financial stability 2.1 Entering new markets 2.2 Maximising employee productivity 2.3 Creating new products and services 2.3 Streamlining business processes 2.6 Other 2.3 12 All markets What are your organisation’s overall top three business priorities for the next years? Select and rank the top three, where represents the top business priority What geographical regions you see your main competition coming from in the next 12 months? Select all that apply (% respondents) Asia-Pacific 48 North America 33 Europe 29 Middle East 12 Increasing revenue 1.5 Finding and retaining customers 1.9 Reducing costs 2.0 Securing financial stability 2.1 Entering new markets 2.1 Creating new products and services 2.2 Maximising employee productivity 2.3 Streamlining business processes 2.5 Other 2.0 Latin America 10 Other markets What you see as your organisation’s top competitive advantages in the next 12 months? Select two (% respondents) What geographical regions you see your main competition coming from in the next years? Select all that apply 43 (% respondents) Operational efficiency Asia-Pacific Innovative technology 36 57 North America 31 Europe 28 Middle East 16 Latin America 12 Other markets 31 Product/service superiority 26 Agility 23 Talent management 18 Geographic spread 17 Use of IT Other © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future What you see as your organisation’s top competitive advantages in the next years? Select two Does your IT department contribute to the success of your organisation's business priorities when it comes to reducing business costs, entering new markets, or managing risks? (% respondents) (% respondents) Product/service superiority 44 Operational efficiency 29 Innovative technology Yes 54 No 34 Don’t know 12 26 Talent management 24 Geographic spread 23 Agility 20 Use of IT Other Does your IT department play a role in shaping your organisation's competitive advantages? How well would you rate your IT department’s role in shaping your organisation’s competitive advantages? Rate on a scale of to 5, where 1=Very well and 5=Not well at all (% respondents) (% respondents) Yes 54 No 36 Don’t know 10 - Very well 14 43 33 - Not well at all What kind of priority does your organisation accord to the following strategies? Rate on a scale of to 5, where 1=High priority and 5=Not a priority (% respondents) High priority Not a priority Investing in technology 31 34 22 10 Outsourcing services 21 30 24 17 How would you rate your IT department’s contribution to the success of your organisation’s business priorities in reducing business costs, entering new markets, or managing risks? Rate where 1=Large contribution and 5=Small contribution (% respondents) Large contribution Small contribution Don’t know Reducing business costs 22 39 30 Entering new markets 14 23 29 17 13 Managing risk 13 32 31 31 15 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future Overall, does your organisation place more emphasis on cost cutting or operational investments? Drag the slider button to choose a relevant percentage split that reflects how each option should be weighted (eg, 60% to 40%) (% respondents) 100:0 90:10 80:20 70:30 60:40 50:50 40:60 30:70 20:80 10:90 0:100 Cost cutting : Operational investments 10 14 18 14 15 10 31 Over the next 12 months, how likely are the following scenarios? Rate on a scale of to 5, where 1=Very likely and 5=Not at all likely (% respondents) Very likely Not at all likely Don’t know Double-dip recession in the global economy 24 39 24 Sovereign debt default in the Eurozone 25 37 24 Break-up of the Eurozone 17 23 28 22 Further political turmoil in the Middle East 26 35 26 2 25 Oil prices spike to US$150 a barrel 23 32 Political unrest in China 15 28 31 17 Chinese economy crashes 21 33 32 Developed economies fall into deflationary spiral 27 38 20 High inflation forces policy tightening in emerging markets 39 31 14 Widespread social unrest caused by rising food and commodity prices 27 32 21 If the following scenarios were to take place, what impact you think they might have on your business? Rate on a scale of to 5, where 1=Very positive and 5=Very negative (% respondents) Very positive Very negative Don’t know Double-dip recession in the global economy 19 34 34 Sovereign debt default in the Eurozone 36 30 21 Break-up of the Eurozone 33 27 22 Further political turmoil in the Middle East 42 25 17 Oil prices spike to US$150 a barrel 12 24 27 25 Political unrest in China 40 26 16 Chinese economy crashes 10 29 27 25 Developed economies fall into deflationary spiral 25 34 28 16 High inflation forces policy tightening in emerging markets 35 35 Widespread social unrest caused by rising food and commodity prices 33 28 36 25 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future In which country are you personally located? In which region are you personally based? (% respondents) (% respondents) United States of America North America 25 19 United Arab Emirates Asia-Pacific 24 United Kingdom, Canada Western Europe 22 India Middle East 15 Pakistan Latin America Australia, China, Germany Africa Brazil, Israel, Singapore, Bahrain, Hong Kong, Nigeria, South Africa, Spain, Switzerland Eastern Europe Malaysia, France, Italy, Mexico, Saudi Arabia, Belgium, Indonesia, Portugal, Colombia, Czech Republic, New Zealand, Qatar, Thailand, Austria, Brunei Darussalam, Bulgaria, Hungary, Jordan, Lebanon, Netherlands, Oman, Philippines, Romania, Sweden, Turkey, Uruguay What are your company’s annual global revenues in US dollars? (% respondents) $500m or less 46 $500m to $1bn In which country is your company headquarters located? 13 (% respondents) $1bn to $5bn 15 United States of America 28 United Kingdom $5bn to $10bn $10bn or more 19 Canada, Germany India, United Arab Emirates Which of the following best describes your job title? Switzerland (% respondents) France, Australia, Pakistan, South Africa, Hong Kong, Israel, Brazil, Italy, Mexico Board member Bahrain, Singapore, Spain, Netherlands, Nigeria, Saudi Arabia, Belgium, Malaysia, China, Indonesia, Romania, Sweden, Austria, Brunei Darussalam, Colombia, Hungary, Japan, Lebanon, Oman, Portugal, Qatar, Thailand, Uruguay CEO/President/Managing director CIO/Technology director 27 CFO/Treasurer/Comptroller Other C-level executive SVP/VP/Director In which region is your company headquarters located? 16 (% respondents) Head of business unit North America 33 Head of department Western Europe 27 Manager 14 Asia-Pacific 17 Other Middle East 11 Latin America Africa Eastern Europe 34 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future What are your main functional roles? Choose up to three Which of the following best reflects the ownership structure of your organisation? (% respondents) (% respondents) General management 46 Privately-held company 51 Strategy and business development 39 Publicly-listed company Finance 35 24 State-owned enterprise Marketing and sales 24 Non-governmental organisation and/or not-for-profit organisation Operations and production 15 Other Risk 11 Customer service 10 IT What is your primary industry? (% respondents) Information and research Financial services 16 R&D Professional services 15 Human resources Manufacturing Supply-chain management IT and technology Procurement Energy and natural resources Healthcare, pharmaceuticals and biotechnology Legal Other Government/Public sector Consumer goods Construction and real estate Entertainment, media and publishing Education Logistics and distribution Chemicals Automotive Telecommunications Transportation, travel and tourism Aerospace/Defence Agriculture and agribusiness Retailing 35 © Economist Intelligence Unit Limited 2012 Cover image: iStockphoto.com Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd nor the sponsors of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper LONDON 26 Red Lion Square London WC1R 4HQ United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8476 E-mail: london@eiu.com NEW YORK 750 Third Avenue 5th Floor New York, NY 10017 United States Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: newyork@eiu.com HONG KONG 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: hongkong@eiu.com GENEVA Boulevard des Tranchées 16 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 E-mail: geneva@eiu.com [...]... it, since we’ve made a lot of moves that show us that we can adequately run a business during down times.“ © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future “It is not about doing the old things more efficiently, it is about doing new things more effectively.” Vikram Gulati, Happiest Minds 39% plan to invest in new information technology and... suggesting that buying whole businesses that already have operations overseas looks more appealing than building an operation or buying pieces of an operation The percentage of respondents reluctant to spend abroad is only 20% 12 © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future Diversifying products and services a top priority for companies... seems more likely that much-needed catalysts for growth and job creation will be a cumulative effect of organic economic developments and the actions of businesses themselves 17 © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future Keeping focus and growing smartly S elf-reliance may turn out to be a blessing for many companies that voiced striking... reputation for innovation, attract new customers and strengthen ties with existing ones Asia-Pacific and North American regions are expected to host the most companies eager to invest in these new products 19 © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future l Innovating with technology Businesses have been quick to see the benefit of using technology... to get beyond survival and succeed Many firms have already summoned the vision and the courage to become less defensive and more proactive about investing in future growth Others may want to consider making this strategic shift in the near future 21 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future Appendix: survey.. .Winners don’t play dead Doing more with less in an uncertain future CASE STUDY 1 Actuate: Investing in innovation The financial-sector debacle that began the US recession in 2008 posed a particularly gruesome threat to US software provider, Actuate, a company with around 600 employees that derives more than 60% of its US$135m annual revenue from global financial-services clients,... to begin increasing capital investment any time soon 19 29 © Economist Intelligence Unit Limited 2012 Appendix Survey results Winners don’t play dead Doing more with less in an uncertain future What are the two most significant factors holding back your 3 to 5-year investment plans in overases operations? Select all that apply What can your country’s government do that would most help your organisation... Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future Not surprisingly, survey respondents in financial services, where regulatory scrutiny has been intense, were most eager for a regulatory breather Reduced government involvement without a long-term financial recovery plan, however, is not enough for executives In the near term, it seems unlikely that random... willing to spend where it counts, is an overriding theme among corporate decision makers It counts when it helps to create a company’s future by leading to new products, new markets, new customers and new revenue 20 © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future Conclusion B usiness leaders expect little relief from the uncertain and sometimes... from areas like Spain’s ravaged housing market with growth in places like Brazil and Colombia, where 13 © Economist Intelligence Unit Limited 2012 Winners don’t play dead Doing more with less in an uncertain future Middle East and Latin America gain on Asia-Pacific market growth In which geographical regions will the market expansions predominantly take place in the next 3 years? Select all that apply ... dead Doing more with less in an uncertain future Preface Winners don’t play dead: Doing more with less in an uncertain future explores how companies are reshaping their business to succeed in the.. .Winners don’t play dead Doing more with less in an uncertain future Contents Preface Interviewees Introduction The motive and the means to invest for growth Investing in innovation... 2012 Winners don’t play dead Doing more with less in an uncertain future Keeping focus and growing smartly S elf-reliance may turn out to be a blessing for many companies that voiced striking