A BIAS FOR ACTION
SETS GROWTH LEADERS APART
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,
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
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,
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.
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.
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.
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.
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.
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.
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 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
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 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
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.
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.
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.
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.
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.
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.
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.
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.
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.
Growth leaders exhibit not only superior
performance, but also show greater determination
to perform even better.
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.
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.
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:
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.
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.
