Businesses become more focused and agile by Stephen Vinall, Managing Director, Moorhouse on 16-May-2014

UK  businesses are becoming more focused as they reorganise to take advantage of the recovery, says Stephen Vinall, Managing Director at Moorhouse.

According to our new research among the most senior leaders and managers in the FTSE 250, UK multinational and public sector organisations published in the report The Barometer on Change 2014, not only are senior leaders reporting an increase in overall clarity of business strategy over the past twelve months, but there is also a greater focus on a single clear and defining market position. In 2013 only 9% of organisations claimed they were focused around a single market differentiator (creating the best products, maintaining an efficient operation or delivering bespoke customer solutions). This figure is now 38%. Over half (52%) of business leaders say that their strategy is 'extremely clear', up from 44% in 2013.

The Barometer on Change 2014 survey spoke to over 200 Board members and their direct reports in UK organisations. Respondents were responsible for an average spend on change initiatives of £20m. It reveals that organisations are increasingly confident about the future; with more than two thirds (69%) saying they expect to see at least 6% growth over the next three years. This figure compares with just over a half (55%) in 2013. The economic climate remains the most significant factor driving change and reorganisation in their businesses. Respondents are also more confident their organisation is focusing on 'the right things' for success and those organisations with a clearer strategy are also more confident about the road ahead.

Trying to be all things to all people is no longer seen as a viable or compelling strategy. As confidence in the economy grows, the smart organisations are shifting to a more focused portfolio of products and services. But having a clearer strategy alone will not guarantee business success.

The year-on-year data in this year's Barometer show that organisations experiencing lower growth rates and predicting a less positive outlook are stuck in a vicious cycle of poor performance. Cost reduction and performance improvement are likely to remain important to every business, regardless of the improving economic conditions. But unless low-performing organisations rebalance their portfolio of change initiatives and broaden their focus beyond cost cutting alone, they risk being permanently left behind. This can be a tough challenge but the research shows that high growth organisations are becoming less focused on defensive strategies and are devoting more time and resource to forward looking initiatives such as accessing new markets, M&A or new product development.

The differences between low-growth organisations (those that grew by under 5% in the last year, as defined by respondents) and their high-growth counterparts (more than 5%) show a clear divide. High-growth organisations tend to have had and continue to have greater confidence in their strategic focus. In addition, high-growth organisations continue to predict higher growth. In 2013, only 37% of low growth organisations claimed their business strategy was extremely clear and by 2014 this figure has reduced slightly to 35%.

Over the same period, the same measure of strategic clarity for high-growth organisations rose from 50% to 59%. Low-growth organisations are still more focused on cost reduction programmes than high-growth ones (49% compared to 32%). Conversely, high-growth organisations are approximately twice as likely to invest in new products or services, or in accessing new markets, and on the whole appear to have more balanced portfolios.

Overall in the survey, senior leaders feel their organisations are becoming more agile, with almost three times as many saying their business is 'change-embracing' compared to twelve months ago (19% in 2014 compared to 7% in 2013). However, this is still less than one-in-five organisations, which appears low. Almost 60% now say they feel they can deliver transformation programmes and initiatives to budget and on time, compared with just over 40% in previous years. 40% of organisations state that at least 80% of their transformation programmes are successful compared to less than 20% in 2012.

However, the third annual Barometer of Change also shows that accessing the skills, experience and capabilities needed to deliver on the business plan is a growing concern among UK business leaders. From 2013 to 2014 the proportion of leaders saying that they need new skills and capability to deliver the strategy to a great extent has more than doubled (18% in 2014 compared to 8% in 2013). Conversely, over this period the percentage that are at least very confident they will be able to access these skills has dropped to only around a third (35%) compared to almost half (47%) in 2013. Additionally, since 2012 a lack of dedicated resource and a lack of experience or skills within the team is seen as more significant threats to the success of change initiatives.

Without access to the rights skills and capabilities, even the best business plan will not succeed. Organisations should have already planned where they will get the skilled resources they need, as access to the right capability is set to become a major bottleneck for the delivery of transformation programmes. In the race for growth, organisations, without access to the right resources will stumble before they have left the starting blocks.

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