A BIAS FOR ACTION
SETS GROWTH LEADERS APART

2023 AlixPartners Disruption Index | Growth Leaders
2023 AlixPartners Disruption Index | Growth Leaders

The world keeps getting more complex. We all feel this every day. Myriad disruptions arise, feed off one another, cascade around the world at an accelerated pace, upend our operations, and knock strategies off course. The leadership challenge is unprecedented: Amid so many formidable issues but daunting long-term disruptions and difficult short-term demands—how should we focus our all-too-finite resources of capital and time?

In our 4th annual AlixPartners Disruption Index, business leaders cite this as the central dilemma, with 85% of CEOs telling us that it has become increasingly difficult to know what to prioritize.

For more than 40 years, AlixPartners has been helping our clients navigate disruption. In an environment of relentless change, the lessons we have learned from our roots in turnaround and restructuring are as relevant for healthy companies as they are for troubled ones. One of the most critical lessons we have learned is that you cannot combat disruption if you are overwhelmed with distractions. You must cut through the noise to find and focus on what really matters. You must be willing to take bold actions to move your company where it needs to go. And to do so at speed.

Our survey identified a segment of companies we call growth leaders—enterprises that are outpacing their competitors. If one thing sets them apart, it is bold action. More than half are changing their business models this year. Across the board, we see them performing better, yet still trying to do more, whether that’s fixing their supply chain or attracting the best talent or transforming their business with technology.

And despite all the challenges, including any potential unknowns, growth leaders are optimistic about the future. New technologies promise to solve some of our most existential threats, including those arising from climate change and aging populations. Growing geopolitical competition and conflict could actually demonstrate the need for greater international cooperation. Disruption may be the new economic driver, but it creates opportunities, not just threats.

Leaders must be prepared to meet the challenge of this disruptive age. I hope this report provides some insight into how to do just that.

All best,

Letter from Simon Freakley - 2023 AlixPartners Disruption Index
Letter from Simon Freakley - 2023 AlixPartners Disruption Index
Letter from Simon Freakley - 2023 AlixPartners Disruption Index

The world keeps getting more complex. We all feel this every day. Myriad disruptions arise, feed off one another, cascade around the world at an accelerated pace, upend our operations, and knock strategies off course. The leadership challenge is unprecedented: Amid so many formidable issues but daunting long-term disruptions and difficult short-term demands—how should we focus our all-too-finite resources of capital and time?

In our 4th annual AlixPartners Disruption Index, business leaders cite this as the central dilemma, with

85% of CEOs are telling us that it has become increasingly difficult to know what to prioritize.

For more than 40 years, AlixPartners has been helping our clients navigate disruption. In an environment of relentless change, the lessons we have learned from our roots in turnaround and restructuring are as relevant for healthy companies as they are for troubled ones. One of the most critical lessons we have learned is that you cannot combat disruption if you are overwhelmed with distractions. You must cut through the noise to find and focus on what really matters. You must be willing to take bold actions to move your company where it needs to go. And to do so at speed.

Our survey identified a segment of companies we call growth leaders—enterprises that are outpacing their competitors. If one thing sets them apart, it is bold action. More than half are changing their business models this year. Across the board, we see them performing better, yet still trying to do more, whether that’s fixing their supply chain or attracting the best talent or transforming their business with technology.

And despite all the challenges, including any potential unknowns, growth leaders are optimistic about the future. New technologies promise to solve some of our most existential threats, including those arising from climate change and aging populations. Growing geopolitical competition and conflict could actually demonstrate the need for greater international cooperation. Disruption may be the new economic driver, but it creates opportunities, not just threats.

Leaders must be prepared to meet the challenge of this disruptive age. I hope this report provides some insight into how to do just that.

All best,

The Age of Disruption - 2023 AlixPartners Disruption Index

In this, the 4th annual AlixPartners Disruption Index, we delve deeper into the changing nature of the global economy and what business leaders must do to adapt to and take advantage of these shifts. One thing is clear: Those leaders who say they are driving change in the face of disruption are behaving differently.

Normal is over - 2023 AlixPartners Disruption Index
The Age of Disruption
The Age of Disruption - 2023 AlixPartners Disruption Index
The Age of Disruption - 2023 AlixPartners Disruption Index
The Age of Disruption - 2023 AlixPartners Disruption Index
The Age of Disruption - 2023 AlixPartners Disruption Index
Welcome to the age of disruption - 2023 AlixPartners Disruption Index

We are in an era where the best-built plans of business are waylaid by forces beyond their control. A supply chain crisis. Hyperfast technological change. A pandemic. Climate change that alters industries and spawns more and more natural disasters. A sudden surge in inflation. A revolution in how work gets done—and in what employees expect. A war.

That’s why we say disruption is the new economic driver. Because every company, every executive team, every CEO must contend not only with the challenges of competitors, costs, and customers, but also with sudden shifts in the business environment and with inexorable, long-term trends that are transforming how businesses win—and lose.  

As CEOs look at this disrupted landscape, the data show that they see opportunity and threat in equal amounts. Can they seize the opportunities and defeat the threats?

In the pages ahead, we present the findings of the 4th annual AlixPartners Disruption Index, based on a survey of 3,000 senior executives around the world. We delve deeper into the changing nature of the global economy and what business leaders must do to adapt to and take advantage of these shifts. We will also look at the unique behavior of the companies that are thriving—the one company in five that says it is leading the pack when it comes to growth in their industry.

Simon Freakley, CEO AlixPartners - 2023 AlixPartners Disruption Index
Our Findings in Brief | Businesses struggle to manage disruption
Our Findings in Brief | Businesses struggle to manage disruption
Our Findings in Brief | Businesses struggle to manage disruption
Our Findings in Brief | Businesses struggle to manage disruption
Our Findings in Brief | Businesses struggle to manage disruption
Our Findings in Brief | Businesses struggle to manage disruption
Our Findings in Brief | Businesses struggle to manage disruption
78% of CEOs report being seriously disrupted in the past 12 months - 2023 AlixPartners Disruption Index

Executives are struggling with shorter-term crises that demand their immediate attention, while longer-term structural changes are remaking industries and creating new winners and losers.

The Business Challenge

Responding to disruption is the greatest strategic challenge for business
leaders, and it is unlike the tests they are used to. They must confront an environment that is shaped not just by the magnitude and sheer number of different disruptive forces, but also by their unpredictability and the complexity of their interconnected impact. 

The Business Challenge - 2023 AlixPartners Disruption Index

The AlixPartners Disruption Index—a measure of the number and intensity of disruptive forces companies face—edged down this year from 79 to 76, but remained significantly higher than 2021’s index number, 70. This year’s decline is unsurprising given where we were in the pandemic and supply chain crises a year ago.  After three years, it’s perhaps easy to forget that the earlier stages of the pandemic and lockdowns were not just profoundly disruptive to our businesses but to us all personally. While supply chain and workforce constraints, for example, may be softening, very high levels of disruption persist. When we look at our first survey, which was conducted in the fall of 2020, the index is up substantially (six points) on those levels. 

The index scores are a measure of both the magnitude of disruption in the past 12 months, as well as the complexity based on the number and degree of challenges reported by executives.

AlixPartners Disruption Index

ALIXPARTNERS DISRUPTION INDEX

CEO/mid-level leadership style thrives in a disruptive environment
CEO/mid-level leadership style thrives in a disruptive environment
CEO/mid-level leadership style thrives in a disruptive environment
CEO/mid-level leadership style thrives in a disruptive environment

No one would say things are calming down. In fact, nearly four out of five CEOs say their businesses have been highly disrupted, an increase of 10 percentage points over last year.

85% of CEOs said that is becoming increasingly challenging to know which disruptive forces to prioritize - 2023 AlixPartners Disruption Index

A constant and accelerating bombardment of challenges is their single-biggest worry.

On a regional level, most countries report lower levels of disruption this year. The outlier, though, is Asia, where China reported a 14% increase on the back of resurgent COVID-19 lockdowns and deteriorating economic conditions. Japan also reported a 5% increase year over year. Among industries, energy companies reported higher levels of disruption, on the back of war in Ukraine and price volatility, as did consumer– products companies, which struggled with inflationary pressures and a slowing global economy. 

Leadership strategies, business processes, and operating models that worked well in the past break down in the face of disruptive change. Businesses report accelerating the rate of business model change. 

98% of executives say their business models must change within the next three years - 2023 AlixPartners Disruption Index

No one would say things are calming down. In fact, nearly four out of five CEOs say their businesses have been highly disrupted, an increase of 10 percentage points over last year.

85% of CEOs said that is becoming increasingly challenging to know which disruptive forces to prioritize - - 2023 AlixPartners Disruption Index

A constant and accelerating bombardment of challenges is their single-biggest worry.

CEO/mid-level leadership style thrives in a disruptive environment

On a regional level, most countries report lower levels of disruption this year. The outlier, though, is Asia, where China reported a 14% increase on the back of resurgent COVID-19 lockdowns and deteriorating economic conditions. Japan also reported a 5% increase year over year. Among industries, energy companies reported higher levels of disruption, on the back of war in Ukraine and price volatility, as did consumer– products companies, which struggled with inflationary pressures and a slowing global economy. 

Leadership strategies, business processes, and operating models that worked well in the past break down in the face of disruptive change. Businesses report accelerating the rate of business model change. 

98% of executives say their business models must change within the next three years - 2023 AlixPartners Disruption Index

An environment like this is dangerous for the complacent and candy for the energetic. In it, the disparities between winners and losers are growing. Profits are progressively more concentrated among a few top firms. For CEOs, the risks of inertia have never been higher, but the opportunities have never been greater to capitalize on change. At a time when CEO turnover is at historic highs and the chief executive role has increased in complexity, 70% of CEOs in our survey worry about losing their jobs due to disruption. While down slightly from 72% last year, this figure is still up significantly on pre-pandemic levels, when 52% reported worrying about losing their jobs.

Disruption also appears to hit big companies hardest - 2023 AlixPartners Disruption Index

But smaller companies are more likely to be in reactive mode: The largest companies are 15% more likely to say they drive disruption in their industry.

Despite these concerns, business leaders are optimistic about the future. After three years of the pandemic, supply chain disruptions, and energy shortages, plus inflation at 40-year highs and a war in Europe, perhaps business leaders are becoming more confident in their ability to manage through competing crises while maintaining their focus on the future. Indeed, business leaders are about 12% more optimistic about their own companies than they are about the economy as a whole. The opportunities in the future to unlock greater productivity, make life better for people, protect the environment, and increase international cooperation are tremendous, if we can all rise to the challenge.

Disruption hits big companies hardest but smaller companies are most likely to be in reactive mode - 2023 AlixPartners Disruption Index
Disruption hits big companies hardest but smaller companies are most likely to be in reactive mode - 2023 AlixPartners Disruption Index

An environment like this is dangerous for the complacent and candy for the energetic. In it, the disparities between winners and losers are growing. Profits are progressively more concentrated among a few top firms. For CEOs, the risks of inertia have never been higher, but the opportunities have never been greater to capitalize on change. At a time when CEO turnover is at historic highs and the chief executive role has increased in complexity, 70% of CEOs in our survey worry about losing their jobs due to disruption. While down slightly from 72% last year, this figure is still up significantly on pre-pandemic levels, when 52% reported worrying about losing their jobs.

Disruption also appears to hit big companies hardest - 2023 AlixPartners Disruption Index
Disruption hits big companies hardest but smaller companies are most likely to be in reactive mode - 2023 AlixPartners Disruption Index

But smaller companies are more likely to be in reactive mode: The largest companies are 15% more likely to say they drive disruption in their industry.

Despite these concerns, business leaders are optimistic about the future. After three years of the pandemic, supply chain disruptions, and energy shortages, plus inflation at 40-year highs and a war in Europe, perhaps business leaders are becoming more confident in their ability to manage through competing crises while maintaining their focus on the future. Indeed, business leaders are about 12% more optimistic about their own companies than they are about the economy as a whole. The opportunities in the future to unlock greater productivity, make life better for people, protect the environment, and increase international cooperation are tremendous, if we can all rise to the challenge.

A recession's impact on businesses - 2023 AlixPartners Disruption Index
A recession's impact on businesses - 2023 AlixPartners Disruption Index
While most leaders say the disruptive effects of COVID-19 have ebbed, nearly one in five say it caused fundamental, long-term change - 2023 AlixPartners Disruption Index

WHAT GROWTH LEADERS DO DIFFERENTLY: A BIAS FOR ACTION GIVES SOME COMPANIES AN EDGE

Just under a fifth of respondents to our survey (18%) say that their companies set the pace when it comes to growth in their industry. These are the growth leaders. They are distributed more or less equally among industries–a little less likely than their slower-growing rivals to be in consumer products or retail, and a little more likely to be in financial services or telecommunications. 

Growth leaders’ response to disruption differs materially
from others. 

First, while growth leaders don’t report higher levels of disruption– 64% compared with 61% for the rest–they are much more likely to say that they drive disruption rather than react to it: 77% compared with 47%. They are also more determined to undertake big, bold change: 57% say they are changing business models this year, compared with 25% of slower-growing companies. 

But while they are driving and taking bold steps, they are also less satisfied with how well they and their leadership teams are responding to the challenges they face. 

Leadership skills thrive in disruptive environments - 2023 AlixPartners Disruption Index
Leadership skills thrive in disruptive environments - 2023 AlixPartners Disruption Index
27% of growth leaders feel supply-chain disruption is much more of a challenge - Leadership skills thrive in disruptive environments - 2023 AlixPartners Disruption Index
Growth leaders are twice as likely to say that finding and keeping talent is much more difficult Leadership skills thrive in disruptive environments - 2023 AlixPartners Disruption Index
57% of growth leaders are increasing their technology investment Leadership skills thrive in disruptive environments - 2023 AlixPartners Disruption Index

Growth leaders exhibit not only superior
performance, but also show greater determination
to perform even better. 

Supply-chain - 2023 AlixPartners Disruption Index

In supply chain, 69% of growth leaders say they are setting the pace in disruption; only 6% of the other companies say they are pacesetters.

Workforce and talent management - 2023 AlixPartners Disruption Index

In workforce and talent management, 64% of growth leaders say their companies set the pace; only 8% of the other companies say they are pacesetters. By a 92% to 83% margin, growth leaders are more likely to have an enterprise-wide workforce plan that is linked to strategy.

Digital tools and technology Leadership skills thrive in disruptive environments - 2023 AlixPartners Disruption Index

In digital tools and technology, 73% of growth leaders say they are setting the pace versus. 9% for slower-growing companies

Finally, the growth leaders appear to be taking faster, bolder measures to prepare for and respond to the slowing economy. In general, they are more likely to believe that a recession will be short. More than half say they are extremely optimistic about how well their companies will fare in a downturn; they are twice as optimistic as slower growers. Nevertheless, the growth leaders are taking more aggressive steps to protect themselves:

Growth leaders are taking more agressive steps to protect themselves - 2023 AlixPartners Disruption Index
Executives are prioritizing investment in digital technologies - 2023 AlixPartners Disruption Index

Seven out of ten companies are changing their business models now or within the next year—a response to disruption that is itself disruptive for the companies, employees, and customers affected. Acquisitions, sales, and carveouts are often part of business model change: portfolio adjustments that drive or accompany other initiatives such as digital transformation or dramatic shifts in operating models and costs.

Mann+Hummel Gruppe, a family-owned manufacturer of filtration systems headquartered in southwestern Germany, is one company that has changed its model—in M+H’s case, by exiting its non-filtration businesses in order to deepen and extend its filtration expertise for customers in industries ranging from agriculture and automotive to real estate and waste management. As part of the transformation, AlixPartners helped M+H to divest its high-performance plastic parts business, selling it to Mutares, a German company that specializes in buying companies in special situations.

Deals like this require sharp bifocal vision. First, the company needs to see the strategic big picture for both for itself and for the business it is carving out or spinning off, so that each finds itself in a better position than it was before. Second, it needs the detailed-oriented, close focus to design the operational, back-office, and customer-facing capabilities each will need to compete successfully. Ideally, our experience shows, strategy and execution—M&A Lead Advisory and the PMO—should be led by the same team, to ensure that both views stay in focus.

In the case of M+H, that process included optimizing the plastics business for sale, developing the target operating model with separation of key so-called Zebra plants, and contract manufacturing agreements, conducting a competitive M&A process including marketing, due diligence and negotiations, and more—all the while ensuring that both filtration and plastics businesses stayed up and running well during the process. The best management teams, after all, harness the forces of disruption to work for them, not against them.

DEEPENING DISRUPTIONS

Demographic Decline - AlixPartners Disruption Index 2023
Deglobalization - AlixPartners Disruption Index 2023

Climate Transition - AlixPartners Disruption Index 2023
Technology Acceleration - AlixPartners Disruption Index 2023
Thriving amid disruption - 2023 AlixPartners Disruption Index

Every executive team performs a balancing act
between short- and long-term thinking, delivering this  year’s earnings while investing for growth and eliminating waste while also innovating in products, services, and processes. It also needs to find the right mix of direction and empowerment, using the power of centralization versus releasing the energy of decentralization.

Thriving amid disruption - short term - 2023 AlixPartners Disruption Index
Thriving amid disruption - long term - 2023 AlixPartners Disruption Index

That is tricky even in a placid business environment, and 2023 promises to be anything but placid. Companies face an extraordinary confluence of forces seemingly bent on knocking them off balance. Their expense budgets have been shoved sideways by inflation. Their revenue forecasts have been blown apart by softening demand and, for some, recession. Rising interest rates are playing havoc with financing, acquisitions, and other plans. A soaring dollar is messing with costs and revenues. The economic uncertainty is compounded by political uncertainty in Asia, Europe, and North America. And plans can be upended by continuing and unpredictable aftershocks from COVID-19.  

More than ever, leaders need the ability to focus tightly on short-term issues while simultaneously envisioning their long-term strategy. A critical part of that bifocal capability is understanding what the major disruptive forces are, which will affect their company most, and what the effect on industry dynamics is likely to be in both the short and long run. The forces we have described in this report play out differently depending on the company and its competitive context. Is a disruptor something to work through–a challenge or an opportunity, but not a transformative one? Will it reshuffle the deck, producing new winners and losers? Will it change the game entirely, fundamentally altering the structure or profitability of an industry?

That is tricky even in a placid business environment, and 2023 promises to be anything but placid. Companies face an extraordinary confluence of forces seemingly bent on knocking them off balance. Their expense budgets have been shoved sideways by inflation. Their revenue forecasts have been blown apart by softening demand and, for some, recession. Rising interest rates are playing havoc with financing, acquisitions, and other plans. A soaring dollar is messing with costs and revenues. The economic uncertainty is compounded by political uncertainty in Asia, Europe, and North America. And plans can be upended by continuing and unpredictable aftershocks from COVID-19.  

More than ever, leaders need the ability to focus tightly on short-term issues while simultaneously envisioning their long-term strategy. A critical part of that bifocal capability is understanding what the major disruptive forces are, which will affect their company most, and what the effect on industry dynamics is likely to be in both the short and long run. The forces we have described in this report play out differently depending on the company and its competitive context. Is a disruptor something to work through–a challenge or an opportunity, but not a transformative one? Will it reshuffle the deck, producing new winners and losers? Will it change the game entirely, fundamentally altering the structure or profitability of an industry?

A comprehensive response to disruption - 2023 AlixPartners Disruption Index
A comprehensive response to disruption - 2023 AlixPartners Disruption Index
Tune up financial warning systems A comprehensive response to disruption - 2023 AlixPartners Disruption Index
A comprehensive response to disruption - 2023 AlixPartners Disruption Index
Tune up financial warning systems A comprehensive response to disruption - 2023 AlixPartners Disruption Index

BECOME RECESSION READY.

Planning as usual won’t suffice for unusual times. A budget and a plan that extrapolate from last year are likely to prove irrelevant; they might even be dangerous. Instead, companies should build five interlocking capabilities for recession readiness: 

Most companies see danger too late. Indeed, 87% of executives say they feel optimistic (including 31% extremely optimistic) about the future of their business considering a pending recession. Smart companies will take off the rose-colored glasses and deploy early warning systems that produce better visibility into financial flows and identify signals of potential distress across all levels of business (e.g. business units, geographies, channels and even individual products). Executives at these levels are likely to be the first to spot slowing orders, growing inventory, or delayed collections–but they often miss the broader significance of what they see. Redesign planning and your monthly and quarterly reviews so anyone running a business unit sees and reports all three views of your business: the P&L, balance sheet, and cash flow.

Input costs, raw materials, labor, and transportation–all may be much more volatile than usual. A zero-based cost budget provides much more specific information about sources of cost vulnerability; it is a powerful weapon against disruption. The same is true on the revenue side. Most plans look more keenly at costs than at revenue, but sudden drops in demand occur in a recessionary environment. What would that do? What assets will be impacted? Which customers, products, and channels are most profitable? Which are most vulnerable? 

When times are tough, cash is king. Working capital initiatives need to be built into company plans, with specific targets for how much will be saved when and by whom. Those plans—and the resulting cash generation—need to be actively monitored. This is the moment to hold onto cash and further build reserves by drawing down lines of credit, and to reexamine balance sheets and business models to identify fixed costs–such as fleets of trucks and server farms–that can be turned into variable costs via outsourcing. 

Scenario planning is a powerful recession-readiness tool. What would a mild, moderate, and severe recession do to your business? Which specific parts of the business would be hurt first? Which would be hurt most? What are the early warning signs that will inspire action? Who on your team is best equipped for what might lie ahead? Prepare three scenarios: An easy-to-do set of actions that will conserve cash with no long-term damage, such as hiring and travel freezes; a lever to pull if a downturn is fairly steep or long, with actions like delaying new product launches or cutting capital spending; and a crisis playbook in case of deep trouble. Prepare these scenarios now, when you don’t need them. That way, if business goes south, the question becomes when to act, not what to do.

Recession proofing cannot stop at the company door. Supply-chain disruptions have faded in the headlines, but not in the executive suite: 52% of business leaders say supply chain disruption is more of a challenge for their company than it was a year ago. The combination of recession and inflation changes the challenge. Before, it was firefighting, as companies scrambled to find supply at whatever cost and wherever they could. Now they should renegotiate the prices they just agreed to, so as not to overpay for goods they might not sell. They should build the same kind of early-warning system they should have for internal operations: control towers that provide real-time information about availability, price, and supplier performance, because a recession might put some suppliers in trouble, particularly smaller tier-two and tier-three companies they might not know well. Margin management must return to a front-and-center position among supply chain capabilities. This requires developing the ability to measure profitability at a granular level and integrate data in real time.

BECOME RECESSION READY.

Planning as usual won’t suffice for unusual times. A budget and a plan that extrapolate from last year are likely to prove irrelevant; they might even be dangerous. Instead, companies should build five interlocking capabilities for recession readiness: 

Tune up financial warning systems.

Most companies see danger too late. Indeed, 87% of executives say they feel optimistic (including 31% extremely optimistic) about the future of their business considering a pending recession. Smart companies will take off the rose-colored glasses and deploy early warning systems that produce better visibility into financial flows and identify signals of potential distress across all levels of business (e.g. business units, geographies, channels and even individual products). Executives at these levels are likely to be the first to spot slowing orders, growing inventory, or delayed collections–but they often miss the broader significance of what they see. Redesign planning and your monthly and quarterly reviews so anyone running a business unit sees and reports all three views of your business: the P&L, balance sheet, and cash flow.

Understand costs and revenues at a deep l