In 2008, just before the crisis, Accenture launched its first High Performance Business (HPB) study, which revealed that companies listed on Amsterdam’s AEX index were underperforming their international peers, largely due to less growth. Shortly afterwards, the fallout from the subprime mortgage crisis on the US house market led to a freeze in the credit supply in the financial sector. This triggered an economic crisis that hit (international) trade, which in turn resulted in a social crisis driven by increased unemployment rates.
The second HPB study, published during the crisis in 2009, revealed that AEX-listed companies were still underperforming and less well positioned for growth. However, this time their underperformance was also due to the fact that they lacked the operational agility to adjust quickly to the changed market conditions.
The following year saw a slow recovery, largely fueled by government investment in infrastructure projects, stimulus packages, the restocking of global supply chains and strong growth in many emerging markets. However, these measures only addressed part of the core issues, and the remaining weaknesses in segments of the banking sector and lagging production volumes in mature markets remain a major drag on the global economy to this day.
In the period 2002-2012, the AEX has been constantly outperformed by leading US and European indices
Meanwhile, in early 2012, the financial and social crises have not been resolved and governments have incurred massive debts. The level of governmental spending, through programs like quantitative easing and bailout packages, has increased to such a degree that debt-to-GDP levels are out of proportion in large parts of the Western world. And countries like Greece and Portugal are being kept afloat by commercial banks and international financial institutions like the European Central Bank and the International Monetary Fund.
There are early signs of a recovery from the crises, but different parts of the world are recovering at different rates. The US is making good progress in recovering from the crises, growth in emerging markets (e.g. China) is decreasing but still significant and most European countries are struggling with the euro crisis. People in every walk of life are wondering to what extent we have recovered from the economic collapse, or if we have recovered at all.
The emergence of structural imbalances
Even if the Eurozone does stabilize, structural imbalances are leading us towards a world that is permanently more volatile, uncertain and increasingly complex. We have made no progress in rebalancing global trade; countries like China, Germany and Japan still have large trade surpluses, while other countries like France, Spain and the US have structural trade deficits. This continues to aggravate trade imbalances in the resource, product & service, labor and capital markets.
Furthermore, demographic changes will probably lead to more imbalances. The planet is anticipating the arrival of another 1 billion people by 2027. At the same time, the middle class is on the rise in the emerging world, while the Western population is ageing rapidly. These imbalances could create bottlenecks, spikes and asymmetries in the global economy. And because the world is more interconnected than ever before – in terms of information sharing, trade and the financial markets – companies everywhere are affected by these structural imbalances.
In this volatile, uncertain and increasingly complex world, many businesses and governments around the globe are facing an uphill struggle to restore profitable growth and the jobs lost during the recent recession. There is an urgent need to reassess current strategies and vital capabilities to achieve high performance. Companies that want to stay in business need to make concrete plans for the future, with little room for errors. And not just related to production and sales, but also for fundamental business issues, such as developing talent and building (new) capabilities. After all, companies will need to keep launching successful business concepts or products to outperform their rivals in these economically and socially challenging times. The companies that understand this and act now will thrive at the top for decades to come.
Jumping the S-Curve (Nunes and Breene, 2011) explores and explains the secrets of lasting high performance by identifying what companies must do to successfully climb a business S-curve, especially in this changing marketplace. Imperatives include: (1) seeing and pursuing a ‘big enough market insight’ that can take a company to the top of an industry. This means identifying new economic motors that can drive accelerated expansion in output, income and jobs over the next decade. It also means that companies must (2) reach ‘threshold competence’ before deciding to scale up the business and (3) recognize the importance of becoming worthy to attract and sustain ‘serious talent’.
New HPB research
Business leaders cannot afford to allow change and uncertainty to paralyze their decision making. We are currently launching the third Accenture HPB study, to gain a clearer understanding of how AEX-listed companies and their peers are performing in this ever-changing marketplace. And of course to share that insight with the marketplace. Once again, we will also be identifying the companies that consistently outperform their competitors and reveal their road to success – this time in the context of a volatile, uncertain and increasingly complex world.