- Eight in ten surveyed CEOs report new-business building as a top five priority despite recent heightened economic volatility.
- Surveyed business leaders report that their companies are building 50 percent more new businesses per year than they did two to five years ago.
- Business leaders report that every dollar of revenue from new businesses generates almost twice the enterprise value versus every dollar of core business revenues.
- Sixty-three percent of surveyed business leaders expect their investment in new-business building to increase from 5 percent of revenues today.
- Organizations will need to more than double their rate of business building to achieve leaders’ expectations that 29 percent of revenue in 2027 will come from new businesses.
- Responses suggest that new businesses built by large incumbent organizations currently generate $5 trillion in revenues and could grow to $30 trillion in five years (see sidebar, “New-business building and the economy”).
In the past three years that we’ve been surveying executives about new-business building, we’ve witnessed a marked shift in their perspectives on the topic: the 2020 findings reflected how much business leaders were starting to prioritize new business building.1 The following year’s survey results captured their thinking on the strategic value of those efforts as well as potential factors for success,2 and the latest McKinsey Global Survey on new-business building finds that markets, too, are recognizing the value of new businesses.3
The latest survey, which garnered responses from more than 1,000 business leaders in 75 countries, shows that companies that have made business building a top strategic priority have grown more quickly than other organizations during this year of high economic volatility. In an effort to create new revenues and capture more market share, they are creating new products, services, or businesses that require them to develop new capabilities. By doing so, they are setting themselves up to be rewarded by the market: the enterprise value multiple of reported new business revenues represents nearly twice that of core business revenues.
Surveyed business leaders say their companies are already investing a meaningful share of their revenues in new businesses and that their companies are building more businesses now than they were just a few years ago. Yet, to meet respondents’ expectations for the share of revenues that will come from new businesses built in the next five years, companies—particularly larger ones, with annual revenues of $1 billion or more—will need to quickly ramp up the number of businesses they build and increase their scaling and success rates. The findings show that companies see a broad range of new business opportunities. Our research also points to best practices that set apart successful new businesses from those that underperform or are discontinued.
Business leaders indicate that markets already recognize the value of building new businesses, and the scale of investment suggests that incumbent organizations have the potential to lead the next wave of innovation and disruption within their industries. However, companies will need to begin building many more businesses than they have thus far—and do it quickly, with increased investment—to meet their revenue expectations for the years ahead. Continuing with the current approach will not suffice. Companies can become better at scaling new businesses—and we anticipate, and prior research shows, that the more companies build new businesses, the better they become. Building this critical muscle over time will support their valuations and longevity.