Editor’s note: Grant Thornton LLP is the U.S. member firm of Grant Thornton International, a global accounting, tax and business advisory organization with regional offices in Raleigh, Charlotte, Greensboro, and Columbia, SC. Mark Larson is a Partner in Grant Thornton’s Raleigh office and can be reached at Mark.Larson@GT.com. This article is reprinted with permission of Grant Thornton.
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Technology company chief executive officers (CEOs) are under a tremendous amount of pressure. With stakeholders scrutinizing their every move, customers raising the bar of expectations and competition ever increasing, technology company CEOs are being squeezed from all directions.
With this in mind, technology company CEOs must be willing to take risks and move into new markets, while existing in an environment which has attached higher risk to making bold moves. It might be said that it’s the best of times and the worst of times for technology company CEOs given the increased focus on investing in technology as a way to support growth (which has many technology companies thriving).
Grant Thornton’s Survey of U.S. Business Leaders reports that CEOs are making bold decisions to capitalize on opportunities in this fast-paced business environment and managing the associated risks by making strategic, balanced choices.
According to the report, nearly two thirds (65 percent) of technology executives say that making and managing high-risk choices is a more critical challenge in today’s business environment. Many factors contribute to the need for companies to make these high-risk choices in order to increase business growth.
Among those most noted by the survey’s technology leaders were intensified competition (70 percent), an accelerated pace of change (66 percent), greater need for differentiation (65 percent) and heightened expectations from consumers and stakeholders (63 percent).
“For several years, management of U.S. companies looked at internal operations to find cost-cutting opportunities. Now that they have cut costs and created efficiencies internally, companies are looking externally to grow revenue,” says Cal Hackeman, managing partner of Grant Thornton’s technology industry practice.
“It has become a very customer-centric business world and the market is demanding that companies focus on customers. If your company is not meeting — and exceeding — customer expectations, at least two competitors are willing to fill the void.”
High-Risk Growth Strategies
With the goal of meeting and exceeding customer needs and ultimately growing their business, technology business leaders are looking to — if they have not already done so — a number of high-risk growth strategies, including:
“Business leaders understand that technology is essential to their growth efforts — to improve process efficiency and cut costs, as well as reach new markets — and are making heavy investments in this area. While they realize this can be a risky investment — technology can become outdated almost as soon as it is implemented — business leaders understand that there is a greater risk in not making the appropriate investment in technology,” says Hackeman.
The Role of the CEO
Of course, technology companies are also continuing to focus on their chief executive officers and what these individuals are doing to increase the probability of success in making higher-risk choices, as well as how well they are doing it. According to technology survey respondents, CEOs felt they were stronger in areas such as:
However, despite technology CEOs’ acknowledged desire and need to be more familiar with and accountable for the daily operations of their companies, there are some areas where their self-assessment indicates a need for improvement, including:
“In the wake of several high-profile corporate scandals, the CEO has been rudely reminded that the buck stops at the CEO suite. It is no longer acceptable to say, “I wasn’t aware–” CEOs today are expected to know the ins and outs of the company and have information systems in place that will provide them with information in an efficient manner,” says Hackeman.
It’s obvious. Business risk is an area of growing consideration and focus for technology companies today. However, despite this concern, the majority of technology companies still continue to operate at a high level – with 94 percent of technology firms saying they are optimistic about the growth of their business, 57 percent still expecting to increase their headcounts and 85 percent on track to meet or exceed their sales targets.
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© 2005 Grant Thornton LLP, U.S. Member of Grant Thornton International. All rights reserved. This Grant Thornton LLP Update provides information and comments on current accounting issues and developments. It is not a comprehensive analysis of the subject matter covered and is not intended to provide accounting advice. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at accounting that complies with matters addressed in this Update.
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