While sustainable growth has long since been the aspiration for the majority of brands and businesses, it is increasingly evasive – a distant achievement that a rare few actually achieve. London based strategy consultancy Cognosis today release results from their Sustainable Growth Index, identifying four interlocking behaviours that drive sustainable growth: Customer Centricity, Future Focus, Adaptability and Purpose. one at the centre of ensuring a positive outcome in these areas – Purpose.
And there is particular caution for the FMCG industry when working towards long-term growth, as new research from Cognosis examining 15 of the top FMCG companies* by revenue reveals that the percentage of net income used for cash dividends has increased by 22% (up from 42% in 2009 to 64% in 2019). Meanwhile, net reinvestment through business and investment has decreased by 4.2% to 1.5%.
John Hosking, Managing Partner at Cognosis, said, “The fact that net income used for monetary dividends has increased by a fifth since 2009 highlights short term thinking from the FMCG industry. Future focus is one of the four key drivers we have identified for sustainable growth, so investing in the future, as opposed to rewarding the short term will play a strong part in achieving it. With re-investment decreasing through the same period there is much more these brands could be thinking about in terms of investing in their future.”
The Cognosis Sustainable Growth Index (SGI) researched 1400 listed companies, examining what they focussed on most and what management practices they employ, to determine drivers and behaviours of sustainable growth. Other factors in the research were over 250,000 financial data points, contributions and an advisory panel from 25 C-suite executives and the biggest global database of employee rated culture**. This resulted in an index of 100 established businesses; benchmarked and ranked according to the key indicators of sustainable growth and a sustainable growth model with four areas of focus.
Looking to the future has never been more critical. Conducting an analysis called Appetite for Change, a consistent theme emerged. The organisations focussed on their future business drove greater growth. Indeed, companies who disproportionately invest in future growth opportunities create on average a 32% revenue benefit to companies focussed on current business. Of those companies who are future focussed, the ones who undertake transformative change, with large but irregular levels of investment create greater value than those who have a constant rate over the years. Showcasing the value of a future-focussed business, Cognosis’ research showed that businesses with a future focus outperformed their category on every measure.
Cognosis’ Sustainable Growth Index shows that ‘Agility’ has the single strongest relationship with sustainable revenue growth and also helps protect and grow Return on Invested Capital. The ability a company has to pivot its focus whenever needed is key to achieving sustainable growth and respond to a changing environment with more speed and precision than the competition.
Market research is no longer enough, to achieve sustainable growth, brands need to make the switch from product-centric to customer centric. While adaptability has the strongest correlation with sustainable outperformance in the SGI, when the impact on improvement is measured, customer centricity is the most important factor. Indeed, customer-centricity was the driver of the most improved businesses in the index
Cognosis found Purpose to be at the centre of the framework for sustainable growth, inter-relating all behaviours, enabling and empowering effective Future Focus, Adaptability and Customer Centricity. The SGI shows that the role of a shared identity in navigating change is vital. Every company in Cognosis’ SGI has a clear view of what their vision is and what they bring.
“A lot of businesses talk about purpose, but don’t truly understand it. It is critical that a business purpose has a direct link to the value you bring to your customers for it to truly be embedded in the organisation. Bringing these four behaviours together, with purpose at the centre gives a model for sustainable growth. No company may be excelling in all four of these areas but benchmarking where you stand can help you focus on your future and find the areas to prioritise.” Hosking concludes.