Readying Australian businesses for success in 2016
10 December 2015
Based on findings from the 2015 Bankwest Future of Business Series research reports, this article provides a retrospective view on the challenges, opportunities and trends that impacted mid-sized businesses over the course of the year and aims to ready Australian businesses for success in 2016.
Mid-sized businesses employ one quarter of Australian workers and contribute a similar percentage of all business revenues^, however, the sector remains ill-defined and often overlooked within the Australian business landscape. Given the significant contribution of mid-sized businesses to the Australian economy, it is important to help business leaders understand and navigate upcoming trends.
In 2014, we launched the Bankwest Future of Business Series, a collection of research reports exploring topics directly impacting Australian mid-sized businesses. This year, we continued to build on the series and explore new trends, delivering insights to business leaders to help them make informed decisions and develop strategies for success. The research covers issues such as the economy, productivity, leadership and innovation, revealing many interesting challenges and opportunities that are expected to impact Australian mid-sized businesses in the year ahead.
By delivering these critical insights on key business topics, Bankwest hopes to help set Australian mid-sized businesses up for success in 2016.
Mid-sized businesses to drive economic growth
After a sustained period of economic prosperity, Australia is facing some tough challenges, including slowing growth, declining real wages and falling productivity. These macro challenges are causing cash flow pressures for mid-sized businesses, who expect to encounter increased operating costs, declining margins and new or increased competition over the next 12 months.
Despite this seemingly bleak outlook, the Future of Business Series confirmed that a sustained period of low interest rates and a weaker Australian dollar has had a positive impact on mid-sized business sentiment. An increasing proportion of mid-sized businesses are bullish on the short-term prospects of the Australian economy, with more than two in five now thinking the Australian economy will speed up over the next 12 months, up from fewer than one in three a year ago.
Furthermore, mid-sized businesses are finding ways to overcome cash flow challenges, with around a third expanding into new geographical or customer markets or offering new products/services over the next 12 months (33.7% and 31.8% respectively).
While not all of the mid-sized business sector is optimistic about the future, there are clear signs that confidence is increasing. And with interest rates and the currency expected to remain low throughout 2016, mid-sized businesses will continue to be an engine of economic growth, particularly through investment and exports.
Productivity and innovation are integral to business strategy
Productivity and innovation are two themes that will become increasingly important among mid-sized businesses in 2016 as businesses seek to tap into new drivers of revenue growth, control costs and compete for market share.
Mid-sized businesses see productivity as a cornerstone of business strategy and not just a corporate buzzword. More than two in five mid-sized businesses intend to increase spending on productivity initiatives over the next 12 months, including staff training, adopting lean manufacturing to eliminate waste and appointing dedicated staff to review and improve systems and processes. Overall, mid-sized businesses are set to increase their productivity spend by an average of 12% over this period.
The sector is also set to be at the forefront of innovation going forward, with the average innovation spend expected to exceed $1 million and some mid-sized businesses preparing to invest as much as $50 million over the next 12 months.
It is clear that mid-sized businesses are embracing the need to innovate in order to secure a sustainable competitive advantage. So much so that the next global, disruptive innovation could come from Australia, with the majority of mid-sized businesses assessing the need for disruptive innovation – radical advances that alter the basis for competition in an industry.
Some of the key innovation strategies that mid-sized businesses have been and will continue implementing in the New Year include developing new products and services and entering new markets, as well as more unique strategies that involve the use of small start-up incubators.
Digital technology will be an integral component of mid-sized businesses’ productivity and innovation efforts – nearly half of mid-sized businesses are ‘digital believers’ and anticipate trends in digital technology or technology advancements will aid growth over the next 12 months. More specifically, mid-sized businesses are looking to digital technology to streamline systems and processes, including automation, robotics, software and the cloud.
People and culture drive business productivity
While there is a strong focus on digital technology, the other key area of focus is people. This year, we have found that mid-sized businesses are increasingly using people, leadership and culture as a means to increase productivity and innovation within their business.
The large majority of mid-sized businesses are actively promoting a culture of productivity and innovation by embracing processes that allow employees to suggest and circulate improvements and ideas and be rewarded for their creativity and entrepreneurial behaviour.
Collaboration among staff, as well as recruiting people with creativity and imagination, are other common strategies mid-sized businesses are using to drive productivity and innovation.
Leadership burnout risk needs to be managed
With ambitions to drive growth, however, there is a risk of leadership burnout among mid-sized business leaders, half of whom say they lack a good work-life balance, which could lead to substantial costs, both financially and psychologically. Exacerbating these issues, managing workload and maintaining a healthy work-life balance are two of the most commonly cited challenges for mid-sized business leaders.
Fortunately, a range of strategies to manage the risk of burnout are available to leaders, the most common of which involve time off work in the form of regular breaks and days in lieu (35.4% and 33.1% respectively).
There is also a strong focus among mid-sized businesses on building future leaders internally through upskilling rather than importing new skills through recruiting future leaders. A range of leadership skills and techniques to develop new staff and identify future business leaders are employed in mid-sized businesses, with the most common being mentoring programs and executive leadership programs.
Positive growth outlook
A positive growth outlook among Australian mid-sized businesses highlights the determined nature of this sector. Increasingly, mid-sized businesses are looking within for inspiration, focusing on their people and culture to drive innovation and deliver productivity gains and sustainable growth. While not underestimating the challenges, most recognise the opportunities that exist and are refining their strategies around leadership, innovation and productivity to be successful in 2016 and beyond.
About our research
The Bankwest Future of Business Series, a collection of research reports exploring topics directly impacting Australian mid-sized businesses including economy and finance, leadership and innovation, provides an invaluable insight into how business leaders are feeling about business issues.
We will continue to deliver these insights to business clients to help them make informed decisions on key business topics and strategies for success.
Our research reports reveal an interesting overview of the challenges and opportunities expected to impact Australian mid-size businesses in the year ahead.
^ ABS Catalogue 8155.0 – Australian Industry, 2013-14 (released 29 June 2015)
IMPORTANT INFORMATION AND DISCLAIMER: The information contained in this report is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this report without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this report.
Executive General Manager, Business Banking, Bankwest