Double the Impact: How New-Business Revenue Boosts Enterprise Value
In today’s rapidly changing business environment, many companies are struggling with stagnation and a lack of growth, particularly in Finland. Prominent voices from major pension companies have highlighted that Finnish companies have been overly focused on short-term profitability at the expense of long-term innovation and growth. This has led to insufficient investments in new-business building and decayed innovation competence, which are crucial for capturing new value streams, gaining competitive advantages, and adapting to market disruptions.
To break free from this stagnation and receive higher returns on capital, it is essential for Finnish shareholders to demand more substantial forward-looking investments in innovation from the companies they own. By prioritizing new-business building, companies can not only navigate volatility more effectively but also position themselves for sustainable growth and future success.
According to recent insights, companies that prioritize new-business building are significantly outperforming those that focus solely on core operations, with revenue growth rates more than 10% above market rates.
At Shift Actions, we recognize the societal and strategic importance of new-business building and work with organizations to create resilient, scalable business-building frameworks that thrive in dynamic markets. This article explores the benefits of new-business building for corporate leaders, insights from recent research, and practical steps companies can take to leverage this strategy for long-term success.
1. Why New-Business Building is Crucial in Volatile Markets
Economic uncertainty, rapid technological advancements, and shifting customer preferences have made it clear that the traditional approach of relying solely on core businesses is insufficient. New-business building offers a way for companies to diversify, explore new markets, and future-proof themselves against disruption. For many forward-thinking organizations, new-business building has become a top priority.
According to recent findings, companies that make new-business building a top-three priority achieve revenue growth rates that exceed their competitors by a significant margin. This approach has proven particularly valuable in sectors experiencing high levels of disruption, where agility and adaptability are essential for maintaining a competitive edge.
Shift Actions Insight: For boards and C-Suite leaders, the message is clear: making new-business building a strategic priority isn’t just beneficial—it’s essential. At Shift Actions, we support companies in defining clear new-business goals and aligning them with broader corporate strategies to drive value creation in volatile markets.
2. The Financial Impact of New-Business Revenue on Enterprise Value
One of the most compelling insights from recent research is the significant impact of new-business revenue on overall company valuation. For every euro generated by new-business initiatives, companies see nearly twice the enterprise value multiple compared to revenue from core operations. This means that each euro of new-business revenue has double the impact on a company’s valuation than a euro generated from existing operations or core business optimizations.
Why New-Business Revenue Drives Greater Value
This amplified impact can be attributed to several factors:
- Growth Potential: New businesses are often created to capture emerging opportunities, targeting high-growth areas that core operations may not address.
- Strategic Flexibility: New-business initiatives are designed with agility in mind, enabling them to adapt swiftly and capitalize on market changes.
- Customer-Centric Innovation: New businesses are frequently developed to meet evolving customer needs, fostering stronger engagement and loyalty.
This insight underscores the transformative potential of new-business building. For corporate boards and executives, the focus should extend beyond traditional revenue metrics to consider the broader valuation impact that these ventures bring.
Shift Actions Insight: At Shift Actions, we help boards and C-Suite teams capitalize on this high-value growth potential by aligning new-business initiatives with strategic goals. Our approach ensures that new-business efforts not only generate revenue but also maximize their impact on enterprise value.
Key Success Factors for New-Business Building
New-business building is not without its challenges. However, by following a structured approach and focusing on critical success factors, companies can overcome common obstacles and create successful, scalable ventures. We believe there are three main factors for success that one should focus on:
1. Aligning New-Business Initiatives with Corporate Strategy
New-business building must be strategically aligned with the organization’s long-term vision. Companies that excel in new-business building have a clear understanding of how each new venture fits into their broader portfolio and supports growth objectives. This alignment allows organizations to leverage existing resources and capabilities, accelerating the development of new businesses.
2. Building Agility into New-Business Models
The fast pace of market change requires new-business initiatives to be highly adaptable. Unlike core business operations, which are often optimized for stability, new businesses must be designed for flexibility. This agility enables teams to pivot quickly, experiment with different approaches, and respond to changing market conditions.
Shift Actions Insight: At Shift Actions, we help clients build agile new-business models that are equipped to thrive in dynamic environments. By focusing on flexibility, companies can ensure that their new ventures are resilient to external shocks and capable of rapid adaptation.
3. Investing in Talent and Technology
Successful new-business building relies heavily on the right talent and technology. Companies need leaders who understand both the startup mindset and the corporate structure, balancing entrepreneurial energy with strategic discipline. Technology is also critical, as it allows new ventures to scale efficiently and leverage data for informed decision-making.
To support new-business initiatives, many companies are investing in teams with experience in innovation, digital transformation, and data analytics. By combining these skill sets, organizations create high-performing teams capable of executing ambitious new-business projects.
Shift Actions Insight: We guide organizations in building cross-functional teams that integrate the diverse skills needed for successful new-business building. Our approach emphasizes talent alignment, ensuring that each new-business unit is staffed with individuals equipped to drive impactful outcomes.
4. Overcoming Common Challenges in New-Business Building
While new-business building offers significant advantages, it is not without its pitfalls. Companies must be aware of and proactively address the challenges that can undermine their efforts. Based on recent industry insights, here are some common challenges and how to overcome them:
Managing Resource Allocation and Funding
One of the most common issues in new-business building is balancing resource allocation between core operations and new ventures. Without adequate funding, new-business initiatives struggle to scale, while over-allocation can disrupt core operations. Successful companies find a balance that supports growth in both areas.
Navigating Organizational Resistance
New-business building can sometimes face resistance from within, as teams may view these initiatives as a distraction or threat to core operations. Organizations that successfully manage this resistance prioritize communication and create incentives for cross-functional collaboration.
Ensuring Accountability and Governance
New-business initiatives require governance structures that support flexibility while ensuring accountability. Many organizations establish dedicated oversight committees or innovation boards to monitor progress and make strategic adjustments as needed.
Shift Actions Insight: At Shift Actions, we help companies establish governance frameworks that provide the oversight new-business initiatives need without stifling agility. Our focus on balanced governance ensures that companies can maintain control while fostering an entrepreneurial culture.
5. The Role of Corporate Leaders in New-Business Building
For new-business building to succeed, corporate leaders—from board members to innovation heads—must play an active role in supporting these initiatives. Their involvement is crucial to driving alignment, securing resources, and cultivating an innovative culture.
Boards and C-Suite Executives
For boards and C-Suite leaders, new-business building is an opportunity to drive strategic growth and secure a competitive edge. By prioritizing these initiatives, they set the tone for the organization and demonstrate a commitment to long-term innovation. Leaders should focus on removing barriers to growth, championing high-potential projects, and ensuring that new-business initiatives align with the company’s broader objectives.
Innovation Heads and Venture Managers
For innovation heads and venture managers, new-business building offers a chance to lead transformative projects and transform their career path while delivering measurable impact. Their role involves not only developing new ideas but also managing resources efficiently, ensuring alignment with corporate strategy, and navigating the complexities of scaling new ventures.
Shift Actions Insight: We work closely with leaders at all levels to build the skills and frameworks needed to drive successful new-business initiatives. From strategic alignment to resource management, we provide the tools and guidance leaders need to bring their vision to life.
Conclusion: New-Business Revenue Doubles Enterprise Impact
New-business building has proven to be a highly effective strategy for growth in uncertain markets. Companies that prioritize this approach see faster revenue growth, increased enterprise value, and greater adaptability. By aligning new-business initiatives with corporate strategy, building agility into new-business models, and investing in the right talent and technology, organizations can create ventures that drive long-term success.
The key takeaway is the insight that underscores the significant impact of new-business revenue on overall company valuation. For every euro generated by new-business initiatives, companies see nearly twice the enterprise value multiple compared to revenue from core operations. This means that each euro of new-business revenue has double the impact on a company’s valuation than a euro generated from existing operations or core business optimizations
At Shift Actions, we specialize in helping companies build sustainable, scalable new-business frameworks and ventures. Our team works with corporate leaders to establish resilient business-building strategies and ventures that not only thrive in today’s market but also set the stage for future growth.
Is your organization ready to embrace new-business building as a core growth strategy? Connect with Shift Actions to learn how we can support your journey toward lasting success.
This article refers to a survey done by McKinsey: New-business building in 2022: Driving growth in volatile times
