Private company issues and opportunities
What to consider in 2016
Emerging trends and technologies can disrupt industries, giving forward-looking companies a competitive edge. Yet a recent Deloitte survey suggests private company leaders are taking a cautious approach to future-oriented investments. To be successful, private companies need to balance immediate needs with investments that position them to capitalize on emerging trends and technologies. In this report, Deloitte offers private company leaders an overview of three emerging trends and 10 strategic areas of focus to consider in 2016.
Finding the right balance between immediate needs and long-term goals is a challenge for all companies. Lately, however, it seems that challenges and uncertainties in the marketplace have monopolized management focus for private companies—perhaps at the expense of future success.
Deloitte believes that private companies should pay close attention to developments with the potential to disrupt both their own businesses and the business ecosystem as a whole. For your consideration, we have categorized the topics covered into one or more of three strategic dimensions:
- Running your business
- Growing your business
- Positioning your business for the future
The icons detailed below are used throughout our report to identify which issues may align with these aspects of your business.
Read the full report to understand emerging trends and issues with the highest potential to impact private companies and find best practices for managing these challenges.
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Technology-centric trends to watch in 2016
- Behavioral economics are yielding new insights about the ways we think and act in our work and personal lives
- The Internet of Things (IoT) is quickly evolving as a source of innovation and advantage across a wide range of industries
- Mobility is on the cusp of dramatic change, with massive implications for the ways we move people and cargo
Scroll through the boxes below for introductions to each topic.
Learn more about the individual report topics
In addition to the longer-forming trends, there are also core elements of the complex business environment that private company leaders should address and prioritize in the near term.
As technology becomes more and more integrated into the world around us, companies have access to an abundance of useful information about customer needs, employee behaviors and business processes. A problem is that many companies are unsure of how to use those insights to drive results. Investments in data analytics—technologies that help businesses measure, interpret and optimize the information in and around their organizations—hold the greatest promise for productivity gains, according to Deloitte’s most recent technology survey of private companies.
Private companies face some particular challenges as they try to expand their businesses in today’s slow-growth business environment. While the US economy continues to expand at a moderate pace, slackening demand overseas threatens to ripple through global trade and increase uncertainty. In Deloitte’s latest mid-market survey, growth in capital spending slowed significantly as other business metrics such as profits and prices moderated. That’s raising the stakes for private company leaders when deploying capital and seeking to maximize the use of existing assets and resources.
Cloud computing continues to dominate the technology landscape for many private companies. By 2019, around 40 percent of the projected $141 billion in spending on public cloud services will originate from small and mid-sized firms. As growing numbers of organizations choose cloud-based solutions—for enterprise resource planning, data center support, and a host of other functions—the virtualization of IT is helping private companies go head-to-head with bigger competitors.
Private company leaders increasingly view technology as a strategic asset that can drive competitive advantage. But as businesses become more reliant on technology solutions to spur growth, they are also exposing themselves to a new kind of risk. Cyber threats are more prolific than ever, with criminals pursuing a myriad of alternative paths to steal sensitive data or cause reputational harm. Many private company leaders may feel their cyber risk is lower than larger public firms, but inadequate detection and defenses may in fact make them more vulnerable.
Digital and social strategy
Companies use social media to recruit new talent, promote their products or services, and boost their executives’ standing as industry thought leaders. The increasingly mobile-powered networks form part of a broader focus on technology that has the potential to make strong companies excellent, particularly when a clear digital strategy is in place. In Deloitte’s fourth annual survey with MIT Sloan Management Review, 76 percent of respondents said digital technologies are important to their organizations today.
Private companies have enjoyed an attractive financing environment for years, supported by historically low interest rates, balance sheets that have been bolstered by increased collateral values, and growing cash flows. But the first Federal Reserve rate increase in nearly a decade, combined with reductions in cash reserves and concerns about the economic expansion’s sustainability, have many private companies concerned about the credit outlook.
Many privately held companies continued to pursue international business opportunities in 2015, despite weakness in some key global markets and a strong dollar that crimped international sales. More than two-thirds of the executives in our latest mid-market survey said their company generated revenue overseas last year, and nearly a third said international markets accounted for more than 25 percent of their sales.
Governance and succession planning
It is often said that family-owned businesses and other closely held companies enjoy a number of advantages by staying private, including increased flexibility and less time spent on regulatory and compliance issues. But often, this relative freedom can rob private company boards of a sense of urgency to set and update their strategy, assess emerging threats to the business, and identify opportunities in the marketplace.
Mergers and acquisitions set a global record in 2015 but activity among private companies was not as robust as the year before. The moderating interest in M&A may be a direct result of the surge in activity in recent years, which elevated acquisition prices and reduced the number of available targets. Acquisitions require in-depth knowledge of the competitive landscape and a deep understanding of valuation and financing methods, especially during times when deal multiples are rising and buyers need to remain disciplined.
The labor market continues to be a bright spot in the US economic recovery, with unemployment falling to five percent at the end of 2015. Given such tight job market conditions, it’s getting harder for businesses to find and compete for skilled talent. Private companies may offer a number of qualities that job seekers value, including access to leadership and more flexible work environments. Company leaders will likely need to expand on these potential advantages to secure the talent they need to grow.