Traditionally, finance and strategy teams have been tasked with working together to promote corporate growth. Now, new research suggests they need to enlist a third partner—risk management—to achieve sustainable long-term growth.
A study conducted by CEB (now Gartner) of the Fortune 1000 and S&P Euro 350, found that just 60 companies have consistently outgrown their industry peers while simultaneously making margin improvements over the last 20 years. The biggest differentiator of these “efficient growth” companies was their ability to allocate capital to bigger, riskier bets. For example, their R&D portfolios were disproportionately slanted toward transformational innovation, their M&A deals were 40% larger on average as a percent of revenue, and they were quicker to reintroduce capital expenditure through the cycle. These riskier bets allowed them to become the “first-movers” in their industry while not spending any more on R&D or acquisitions than others.