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Asked to rank which sources of revenue growth will have more impact in 2007, CEOs name new technology (63 percent) and new product development (62 percent) as runners-up to management teams. More than half pick strength of a company’s brand as the most important source of revenue growth. No single factor dominates greatest impact on revenue growth, but according to CEOs capital expenditures in equal measure with management teams will play a key role in sales if the future pans out as CEOs expect.
Technology also figures as an internal driver of profits among 64 percent of respondents. An even larger portion — 70 percent — cite compliance costs as having more impact on profitability. When asked to choose a single internal factor that could most sap profitability, compliance costs top the list.
The economic landscape eclipsed other external factors likely to affect overall growth through 2007. Virtually all (99 percent) of U.S.-based CEOs indicate that the American economy will be an influence, as do nearly three-quarters (73 percent) of non-U.S.-based respondents. CEOs also indicate that emerging markets will account for an increasing share of corporate growth.
Among external factors, regulation could affect growth, say 91 percent of CEOs — more than the 89 percent who cite energy costs and the 88 percent who cite M&A activity. Asked for a more detailed outlook on M&A, CEOs by a wide margin expect organic growth to increase revenues. Only 15 percent of respondents foresee M&A as the primary source of company growth.
CEOs predict budget increases in virtually every area, with the majority expecting budget boosts for health care, energy, technology and capital expenditures. Most forecast increases of less than 10 percent. Although more than three in five CEOs expect to increase spending on technology in 2007, only one-quarter claim that the return on their technology investments to date has fully met or exceeded their expectations. The disconnect between the investment in technology and whether it met expectations was greatest among smaller companies, with just 13 percent of CEOs whose companies had a market capitalization of less than $1 billion indicating their technology investments fully met or exceeded expectations, compared with 30 percent of companies with market caps of more than $1 billion.
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