According to the latest study and high transformation needs, only 23 percent of managers are currently reconfiguring their business model. Nearly two-thirds of global companies expect the global economy to develop positively within the next twelve months. […]
The ongoing Covid-19 pandemic and the associated economic effects are increasingly revealing structural weaknesses in many industries and thus the need for comprehensive transformations. Even in the management levels of numerous companies, the realization is maturing that Covid-19 will change their business models beyond the pandemic. Globally, 80 percent of managers are convinced that the value creation processes of their companies will change from scratch in the next three years.
At the same time, 60 percent of respondents expect a positive economic development for the next twelve months, according to a survey conducted in March 2021 as part of the study “Navigating the New Reality: Restructuring for Growth” by Strategy&, PwC’s strategy consultancy. The current scenario analyses in the study confirm the optimism of the executives: a growth of the gross domestic product (GDP) of 3.4 percent in 2021 is forecast for the pan-European economy.
Industries in growth-Overview
The ongoing pandemic is making a K-scenario with clear winners and losers increasingly likely in various industries. Hard – hit sectors will recover more slowly than average due to persistent restrictions and can expect only low growth in gross value added in 2021-such as the European events sector (+5.5 percent) or the non-food trade (+4.7 percent).
While the travel and hospitality industries in Europe can expect growth of 14 percent in 2021, they are still struggling with the severe effects of the first pandemic year 2020 in the medium term (-22 percent). On the other hand, the telecommunications industry is proving to be crisis-proof and will grow by up to 2.3 percent in 2021. In addition, the pharmaceutical and life sciences industries are continuing their upswing, achieving up to 4.4 percent more gross value added by the end of the year.
“The crisis has revealed an individual need for transformation and restructuring for all companies, because the accelerated digitization or trends for the localization of supply chains and the consistent pursuit of ESG goals affect crisis winners and losers alike. On the other hand, anyone who strategically realigns their company and, for example, uses technological innovations for ESG transformation can emerge from the crisis stronger,“ explains Dr. Peter Gassmann, Global Leader of Strategy& and Global ESG Leader of PwC.
Change in business processes and priorities expected by 2024
The majority of managers worldwide are aware of the pressure to change: With regard to their transformation, 78 percent of companies say that their business processes will look different in three years from today; 32 percent expect that they will not only realign their processes, but also their business areas and the value creation for customers. However, the implementation of this transformation is slow: So far, only 23 percent say they are consistently reconfiguring their business model. However, there is no lack of optimism, as 50 percent of respondents believe in sales increases for their own company within the current year.
With regard to the strategic priorities for 2021, the managers clearly focus on initiatives to sustainably increase sales, instead of unilaterally focusing on cost reductions as in previous crises. 51 Percent want to develop new business models and 37 percent want to rethink the current corporate strategy. 28 Percent want to grow organically in new business areas and markets. However, it also becomes clear: 37 percent of companies plan to cut staff within the next twelve months in order to save costs.
This proportion is significantly higher for companies with pessimistic sales prospects at 54 percent; in contrast, more than 40 percent of the companies surveyed with a positive outlook want to manage their growth with constant or reduced staff.
“There is no one-size-fits-all solution to meet the challenges of the coming years. At the heart of all planning, however, must be the question of where the value of the company lies and how it can be generated in the future. An honest analysis of which products, solutions, markets and customers are currently creating value – and which are not-can serve as the basis for investment decisions. It is also important to no longer set up profit scenarios in a linear manner, but to simulate various developments in an agile manner,“ commented Manfred Kvasnicka, Head of Refinancing and Restructuring at PwC Austria.
The full results of the study “Navigating the New Reality: Restructuring for Growth” can be found at: https://www.strategyand.pwc.com/de/new-reality-restructuring.html.