Majority of CEOs see start-ups as key to growth
UK CEOs are increasingly looking to collaborate with start-ups in order to drive innovation and support their growth objectives, according to the findings of KPMG’s 2018 Global CEO Outlook.
The survey of 150 UK leaders and a further 1,150 global CEOs on their future investment plans, found that 61 per cent of CEOs in the UK are relying on a network of third parties to support their growth and innovation objectives, compared to 53 per cent globally.
Partnering with third-party cloud tech providers was top priority for actions CEOs are planning to take over the next three years at 65 per cent, followed by collaborating with innovative start-ups at 61 per cent.
Seventy per cent agreed that the only way for their organisation to achieve the agility it needs was to increase the use of third party partnerships, compared with 53 per cent outside the UK.
“The explosion of new technologies, which has impacted customer behaviours, has changed the landscape for businesseses looking for growth,” said KPMG’s head of tech in the north Graham Pearce.
“As a result, CEOs are having to turn to new strategies to increase the agility of their often large and multi-layered businesses.
“We are seeing more collaborations between large corporates and small businesses as they attempt to outpace their competition in the race for innovation to results.
“Entrepreneurial energy, an ability to spot gaps in the market for innovative products that customers actually want and speed of response to changing demands are what start-up ventures offer and what big businesses want to emulate.
“Conversely, small businesses benefit from big businesses’ strong routes to market, greater sophistication in business processes and mentors with worldly wise experience.
“It takes a board that is sufficiently entrepreneurial in its outlook to recognise that small and interesting companies could become a very valuable link in their supply chains.
“These newcomers might be your future competition. Better to be alongside and invested in them than competing against them.”
Rather than swallowing up start-up businesses via M&A, strategic alliances were cited as the most important route for achieving growth. Both global and UK CEOs see strategic alliances with third parties as the most important route for achieving growth, with 33 per cent ranking this top.
It was the highest ranked strategy for growth over the next three years followed by organic growth such as innovation, R&D and recruitment, then M&A, outsourcing and joint ventures.
However, they are also vigilant about getting the right fit with their company. 7 in 10 UK respondents said they had reconsidered third-party partnerships that could have helped with growth because the third party didn’t fit with the organisation’s culture and purpose.
“Whilst an alliance might make sense on paper you can’t ignore the vital importance of having shared aspirations and culture, which is often difficult to achieve,” said Pearce.
“It’s really important that both businesses are absolutely clear from the outset about what they are hoping to achieve together. A lack of understanding about how the other culture operates can stifle a good collaborative relationship.”