Sustainable company performance is driven by the extent to which corporations are able to link their strategic and cost agendas, finds the "2013 Fit for Growth Index" study conducted by Booz & Company.
“Since the 2008 economic crisis, when many firms had to slash costs in a rush, executives have been increasingly pressured to determine how to best reposition their companies for growth and economic recovery," says Vinay Couto, Booz & Company senior partner and coauthor of the study. "Many companies are sitting on healthy balance sheets, but few are really clear about how to make the most of their financial resources.”
The Index measures how well a company connects its cost and growth agendas by assessing companies in three key areas: strategic clarity and coherence with a clear and aligned set of capabilities; aligned resource base and cost structure; and supportive organisation.
The study finds there is a clear correlation between a company’s Index score and its market performance. Companies that focus on the three key elements of strategic clarity and coherence, resource alignment, and supportive organisation generate higher shareholder returns.
Although the steps may seem clear and the positive impact is obvious, less than one-fifth of the companies (17 percent) are well positioned to grow. Only a small subset of those (6 percent of the total) perform well along all three dimensions of the Fit for Growth Index.
Companies fall into five broad “archetypes,” each with its own characteristics and challenges. The study identifies a specific set of recommendations for companies in each archetype.
Companies with the highest Fit for Growth Index score tightly link their strategic and cost agendas while building supportive organisations. They clearly understand which capabilities are truly critical for winning with their strategy, and they funnel the bulk of their resources to those differentiating capabilities.
Finally, they strive to build supportive organisations so that the collective actions of their people align more closely to their strategy.