Companies Are Investing Heavily in Business Building, Placing A Quarter of Annual Revenue into High-Growth Opportunities — BCG Reports

• Business building, which consists of inventing, launching, and scaling new business lines, units, and services, or accelerating the growth of existing enterprises, is one of the most successful ways to accelerate growth.

• Only half (52%) of leaders said their companies are well prepared to pursue new high-growth opportunities.

• 73% of executives surveyed said that business building is a major priority for them, and their companies have pursued, on average, five new high-growth opportunities each year since 2021.

Business building, which consists of inventing, launching, and scaling new business lines, units, and services, or accelerating the growth of existing enterprises, is one of the most successful ways to accelerate growth. But only half (52%) of leaders said their companies are well prepared to pursue new high-growth opportunities, according to a new study by Boston Consulting Group (BCG) released today.

Beth Viner, global head of venture and builds for BCG X

The report, How Companies Can Speed Up the Business of Business Building, features findings from a survey of 1,051 senior leaders in 17 countries about their business-building efforts. Of the executives surveyed, 73% said that business building is a major priority for them, and their companies have pursued, on average, five new high-growth opportunities each year since 2021. Approximately 27% of these companies’ annual revenue is typically invested in launching, acquiring, or co-launching startup ventures.

“After two decades of building up their digital capabilities, companies are poised to harness these strategic assets for the launch of new ventures and an expedited growth trajectory,” said Beth Viner, global head of venture and builds for BCG X and a coauthor of the study. “2023 has undoubtedly been fiscally difficult for many companies but some of the most powerful businesses were launched under tough circumstances. Leaders should feel confident about business building if they adhere to a playbook based on proven results.”

The Time Involved in Business Building: More Cause for Concern

The survey also asked company leaders about the time involved in business building. On average, companies spend up to three years considering whether to add a new business to their portfolio, and then it typically takes another three years to commercially launch the offering. Leaders said they are willing to invest three or four years before the business must turn a profit.

Among the leaders surveyed, 48% said it would take them longer to release a product than it would a startup. A large majority identified two or three instances where their competitors launched businesses that they believe they could and should have launched first.

Nine Strategic Assets Critical for Successful Business Building

Informed by BCG X’s experience launching more than 200 builds, the report outlines the following nine strategic assets as critically important to enable a launch to break through:

• Intellectual property, including patents, trade secrets, and methodology

• Data (drawn from inside and outside the company)

• Access to sales and distribution networks

• A strong brand

• A financial position with a healthy cash flow

• A culture of innovation

• Strategic partnerships with other companies, universities, community groups, and government agencies

• The requisite technology

• Talent

Most survey respondents said they have five or fewer of these assets available and only 3% of companies claim access to all of them. Even when they do have the assets, only half of the companies surveyed are effective in leveraging them to build new businesses.

Three Basic Steps to Creating a Well-Designed Preparedness Plan

For leaders looking to capture growth, a well-designed preparedness plan could change a company’s trajectory and accelerate their time to value. BCG X recommends three basic steps to start:

1. Prepare: Examine your capabilities and differentiated strategic assets and compare them with your competitors.

2. Attract and deploy entrepreneurial talent. Consider a new talent support model for business building.

3. Acquire what you need. Acquisitions are just one vehicle for business building, but they can be leveraged to complement and accelerate existing efforts.

“There are many reasons to be optimistic about business building today, including uptick in technological innovation, consumers’ openness to new products and services, an enormous middle class developing in some emerging economies, and new tools and methods that exist for product development, mergers and acquisitions, and going to market,” said Viner.