As we move through the middle of the decade, we see firms managing assets by listening to the voice of Wall Street (VOW) more, and to the voice of the customer (VOC) less. We see an alarming rise in cutting of value-creating mechanisms such as R&D, marketing and longer-term investments to appease Wall Street for the quarter. This focus on Wall Street—and away from customers and markets—is coming at a terrible price: a falling rate of innovation and the stagnation of organic growth. Growth is key to the health of our economy and, ultimately, to building value for shareholders. You can’t hoard your way to growth.
A Pivotal Juncture
According to the U.S. Chamber of Commerce Foundation, American companies are at a pivotal juncture. Over the postwar period from 1947 to 2013, the trend for economic growth in America was 3.3%. But since 2007, the rate has downshifted to a mere 1.5%, which translates into a meager 0.7% in growth per capita in the United States. Even more troubling, the nonpartisan Congressional Budget Office (CBO) projects that growth will only average 2.5 % over the next 10 years and drop off to 2.0% at the end of the period.
The global economy is not doing much better. In an important speech, International Monetary Fund chief Christine Lagarde warned us of a coming “new mediocre” era. She cited that the global economy is at an important “inflection point.” She calls for governments and firms around the world to recognize this trend, and make changes to see if we can build new momentum.