Despite record-high stock prices and at least some rosy analyst estimates for the second half of 2014, many American businesses are struggling with fundamental growth challenges. In fact, analysts have overestimated earnings growth in three of the past four years. Of 108 S&P 500 companies that have issued 2Q guidance, for 81 companies, that guidance has been negative. So while share buybacks, de-leveraging and other corporate initiatives have pumped up stock prices, they also pose the question of whether U.S. companies can deliver strong, reliable revenue growth.
How will businesses create value for shareholders three or five years from now, once the financial leaning-out of corporate America has run its course? Most companies expect to continue growing faster than the overall economy, but our recent research suggests otherwise.
Even if a CEO has a growth strategy, our research points to the fact that the organization often isn’t ready to deliver on it. In one survey, 55% of respondents reported that their companies were not focused on executing their strategy, while 42% said their companies weren’t aligned behind their strategies. In a second survey, 83% of respondents said their business strategy wasn’t well understood across the company. And less than a quarter believed their company’s strategy translated into concrete operational objectives and initiatives.
That said, some companies are able to establish bold strategies and execute on them effectively. How? These companies know what they can do better than anyone else. And they identify ways to leverage those capabilities to grow their markets. Think of Amazon’s key capabilities in retail interface design, supply chain management and customer analytics. Those distinctive capabilities allow Amazon to outcompete its rivals.