Many companies may miss out on growth opportunities, including acquisitions, if they do not reassess their strategy in light of today’s economic environment.
According to an article in CFO Magazine, a number of companies are not executing acquisitions because they maintain a high hurdle rate, even though the cost of borrowing capital is relatively low in today’s market due to low interest rates. By some estimations, several of these hurdle rates have not changed for the past 20 years, despite the fact that the world has changed significantly since 1997! Think about it – the ubiquitous iPhone was only released in 2007.
This is just one example of a larger principle we see at play, where countless executives and companies fall into the trap of doing what they’ve always been doing because it’s the path of least resistance. Unfortunately, doing nothing is rarely, if ever, a pathway to growth and can lead to disastrous results.
The business environment is changing rapidly, and more than anything, success today is dependent on the ability to adapt to and anticipate change. Following an antiquated strategy and using old metrics to make decisions could mean missing out on key opportunities for growth. This is common sense when you pause to think about it; however, inertia and habit are powerful driving forces.
What does this mean for you?
The days of developing a three to five-year strategic plan and forgetting about it until the next planning session are gone. To avoid falling into the “do nothing” trap, review your growth strategy and question if it still applies today. Make it a practice to continuously reevaluate your strategic growth plan with a focus on issues that impact your company including consumer demand as well as economic and industry factors.
Being proactive will ensure you don’t miss out on the best opportunities for growth. Take steps today to ensure your success in the future.