Growth-Thinking

Cost Reduction versus Enabling Growth

Board directors have to carefully balance cost reduction versus revenue growth, we asked them to tell us the direction of their expectations. Of the respondents, 60 percent were focused mostly on revenue growth, while 8 percent said they were completely focused on revenue growth. That was in contrast to the 32 percent who were mostly or completely focused on cost reduction, a significant fraction of the total. It further reinforces the perception that the board respondents are trying to have it both ways, and that these are confusing times. They are emphasizing their concerns that lead to cutting costs, but they are still expecting to grow.

Attitude Towards IT

The result of our investigation into the attitudes toward IT shows sustained interest from 2011 to 2012. This is especially demonstrated in the question about the improved strategic contribution from IT in 2014. Eighty-six percent of board respondents believe that the strategic contribution of IT to the business will increase in the next two years, with 18 percent believing it will increase significantly. It is interesting to see that 86 percent of respondents see themselves as either mainstream or aggressive in technology adoption. The number that see themselves as aggressive in this sample is also significant at 36 percent, which is more than double the percentage from our 2011 survey.

Taken together with board directors’ growth priorities, we see the following implications:

Boards seeking for ways to build or extend their competitive advantage will look to IT as a source of that advantage.

IT-enabled business models will be useful as advances in technology continue to gain ground.

The reputation of IT as a means to improve productivity persists and will be a useful place to propose new investments for the company.

All in all, the phrase that describes how board directors view the current condition is “stay in balance.” They operate in a world that is defined by the need to watch costs closely, while demonstrating and executing on a willingness to invest. Organizations will need to segment the investments that will pay off in the longer term from those that will pay off in the coming 12 to 24 months. In a volatile investment marketplace, the payoff for being right in these investment decisions can be great. The punishment for being wrong can be devastating, with little margin for error ahead. It will be important to think of contingencies in each investment case until the market uncertainty is more moderate