A clear majority of executives say their companies are pursuing growth in categories outside their core business—and report a strong belief that doing so has created company value. But a Burk Global Survey suggests that over time, companies’ aspirations to grow through these activities have produced only modest results and that few companies have the right practices in place to support such growth.
These are the key findings from a survey on how companies expand into product or service categories beyond their core business. Nearly nine in ten respondents say that in the past five years, their companies have either pursued at least one activity in a new category, have considered it, or plan to do so in the next five years. Companies are most likely to pursue new activities through investments in organic growth and with long-term interests in mind. Executives at emerging-economy companies report greater paybacks than their peers at developed-economy firms—but few respondents overall say that over time, the activities have added much to company revenues. This could be because, according to the results, there’s much room for improvement in the ways that many companies identify and evaluate new opportunities.
Significant value at stake—and modest results
At most companies, pursuing growth in new product or service categories outside the core is already on the agenda. Three-quarters of respondents say that over the past five years, their companies have pursued at least one business activity in a new category. Another 14 percent say their companies have either considered pursuing this growth or plan to do so in the next five years.
For many of these companies, growth beyond their core business is a long-term play. Among C-suite executives (who respondents most often say are responsible for evaluating these opportunities), only one in ten say their companies consider new activities for short-term returns. C-level respondents also say their companies are equally likely to consider such a move to access new profit pools as to strengthen their core business.