The current uncertain economic situation may lead to a strong focus on costs. But securing the future requires more: strategic realignment and a clear vision for the future! There is great potential for growth, even and especially in economically challenging times. This potential - in both core and new business - is confirmed by 75 percent of the executives surveyed in the Horváth Growth Study. While German companies want to grow primarily in other EU countries, U.S. companies are focusing on their domestic market.
But what does growth mean? And how do companies grow successfully? Growth is often measured in terms of revenue growth, EBIT growth, market share gains or the increase in free cash flow. While this is not inherently wrong, it is only half the story and provides a very superficial view of the value creation of an industry or a company. A true holistic view must consider the investment needs and opportunity cost of the capital employed.
The Key Growth Indicator: Economic Profit
A sustainable increase in economic profit is only possible if a company leverages its competitive advantages. This makes it possible to measure and evaluate the actual growth performance of companies and individual initiatives more precisely.
And that is exactly what we did. Based on economic profit, we set out to find true “growth champions”. To do so, we analyzed the world’s top 4,200 publicly listed companies and compared their economic profit over the period from 2014 to 2023. We wanted to understand: What distinguishes the top performers? What levers and patterns do they use to achieve growth success, and what can other companies take away for their own growth stories?
The results show: On average, the three most profitable sectors - “Telecommunications Services”, “Personal & Household Products & Services” and “Pharmaceuticals” - generate two to three times the economic profit of the following segments. While growth in the top sectors was comparatively easy to achieve, it was particularly challenging in the segments “Real Estate” and “Transportation”. When evaluating growth opportunities, it is therefore essential for a company to understand whether it is able to use its strengths to generate economic profit above the industry average in the long term.