Choosing the right idea, operating with agility and having the necessary talent are the keys to the success of a new business
MADRID, 20 Nov. (EUROPA PRESS) –
Spain has large companies that “have the ingredients needed to create new businesses,” according to Santiago Fernández, partner at the consulting firm McKinsey.
In fact, 37% say that this is currently one of the three major priorities of their company, compared to 34% of business leaders who make this statement in Europe, as highlighted by Fernández in an interview with Europa Press.
The Leap by McKinsey report, titled ‘The CEO’s Choice for Growth: Creating New Businesses’, is based on surveys of more than a thousand senior business leaders in 68 countries across 28 sectors globally and nearly 150 public equity investors and analysts in North America, Europe and Asia.
Those surveyed in Spain indicate that 21% of their companies’ income already comes from new businesses generated in the last five years, and they expect that in the next five years, 33% of income will come from businesses that do not yet exist today.
Fernández has pointed out that “growth within the traditional business is increasingly difficult” due to the growing number of competitors and actors who come from other sectors for a certain ‘pool’ of income and profits.
Faced with this situation, innovation has evolved and has gone from developing it within the company to create new products, new services and new production modules to directing it towards the creation of new businesses.
These are businesses “completely different from the company’s traditional business”, but they are developed “without completely separating them from the ‘core’ business” (the company’s distinctive productive activity) and taking advantage of capabilities that they already have, such as “the knowledge of clients, channels, resources, capital and others”, he specified.
For 73% of business leaders in Spain, building new businesses has become a particularly relevant priority in the current, changing context marked by economic uncertainty. Worldwide, the percentage stands at 58%.
Investors also believe that this is one of the great levers to continue generating value for the shareholder in the coming months, according to the responses compiled by McKinsey.
Both business leaders and investors consider this a good time to generate new sources of income from the creation of new products, services or businesses.
For their part, company financial directors believe that this is the strategic line that their organization is most likely to apply in the next twelve months.
To increase the chances of success of a new business, you must first think about what business you are going to start, according to Fernández. “You have to look for ideas for which the company that is creating that new business has a series of differential or distinctive capabilities,” she stated.
Furthermore, it is necessary, as he has commented, to govern this new business with a different methodology than that used by large companies and to function more like a ‘startup’, which “is very agile and makes decisions very quickly.”
And, in the event that after a few months it is found that this business is not working, “the company has to have the courage to remove it and reinvest those resources in another idea,” he added.
Thirdly, you have to see what talent you have to be able to create that new business. “Many times it already exists within companies, but it has to be reconverted or ‘reskilling’ has to be done” (retraining), and perhaps for some functions or decisions it will be necessary to “bring talent from outside or do ‘partnerships'” (alliances), the McKinsey partner has indicated.
To value a new business, investors take several criteria into account. Among them, its materiality, “also closely linked to how it connects with the company’s strategy,” according to the McKinsey partner.
Likewise, investors expect “transparency in expectations” about the future of the new business, which normally “needs more time to mature,” so Fernández recommends “being patient and managing expectations so as not to destroy businesses that may have great potential.” “.
Finally, we must “give evidence of the results”, since investors “want to see that, indeed, there are a series of metrics that are creating impact,” he added. At first, aspects such as the number of clients are taken into account and, as the company matures, metrics such as profitability or profits are looked at.
According to Fernández, the growth potential of a new business depends on the sector the company is in, but, in general terms, there are certain areas in which “a lot of growth” is being seen.
This is what happens, for example, with everything that has to do with data, analytics and artificial intelligence, which, as he pointed out, “was already very strong in previous years and continues to be very relevant.”
In this sense, the McKinsey partner has stressed that artificial intelligence “is going to be one of the key elements that will help the creation of new businesses.” On the one hand, it will make it easier for them to be more productive and, on the other, it will allow them to develop new capabilities from which new businesses that do not exist today can be generated.
Another trend that, according to McKinsey, “continues to accelerate as one of the lines of business where more companies are entering” is sustainability: circularity, renewable energy, green manufacturing processes and sustainable products and services. In addition, ‘everything as a service’ businesses, in which subscription or service models are made available to customers, “have gained a lot of strength in recent months.”
On the other hand, digital retail businesses, which were very important during the Covid-19 pandemic, confinement and the aftermath, “are now losing a little relevance,” according to Fernández.
