Each quarter we survey growth stage CEOs who are running innovation driven companies. This quarter, we had more than 60 CEOs responding. CEOs were running companies in broadly defined technology (software, hardware, semiconductor, telecom), Internet (e-commerce, media, social, entertainment), medical devices, biotech, and cleantech / renewable energy sectors.
A note on methodology. We send these surveys only to those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies). All responses were anonymous due to the web-based survey technology employed. The majority of respondents were in the United States, with the highest concentration on the East and West coasts (New York, Boston, and San Francisco/Silicon Valley areas).
For prior survey results from Q2 2010, titled “Impact of Economy and Renewed Growth”, go to http://www.bostonsearchgroup.com/blog/ceo-survey-results-q2-2010-%e2%80%93-impact-of-economy-renewed-growth/ .
The first set of questions was around the economic conditions in which each CEO felt s/he was operating. One question we continue to ask and re-ask over the last six quarters or so targets the turbulence in the macro- economic climate. It is interesting to compare CEO responses to the same question, “Do you anticipate a double dip in the near term future?”
* In Q3 2009, more than half (54%) of CEOs polled were expecting a double dip, and planning accordingly
* In our Q2 2010 survey, again 50% felt a second economic correction was likely, the biggest percentage of those CEOs believing it would be in either Q3 2010 or sometime in 2011. The other half of CEOs felt the specter of recession was behind them
* Currently in Q4 CEOs were consistent with prior quarters with a bit more than 50% indicating they didn’t feel a double dip was likely, and the other half of the CEOs saying either a 50/50 probability or greater (16% feeling more likely than not)
So less than 1 in 5 CEOs feel another economic dip is likely. No CEOs selected the ” greater than 75%” probability.
It’s interesting to do a meta graph of the changing CEO sentiment on this question. Surprisingly, the graph would be sloping downward, but not as much as many would hope. The high point was certainly back in Q3 2009, but even throughout 2010, as many CEOs were fearful of a negative correction as those who felt it was behind us. No doubt this “lack of confidence” index doesn’t inspire the CEO with a swashbuckling, damn-the-torpedoes-full-speed-ahead attitude toward growing their companies. Rather, it makes CEOs think in short-term windows, perhaps 3 months at a time, with little appetite to make medium or long-term bets.
Those CEOs who felt another downturn was likey referenced several factors that might tip the scales negative– gridlock in Congress due to midterm elections and likelihood that Democrats lose congressional majority, a belief that a bad Q4 holiday retail shopping was likely, and the persistent overhang of ongoing commercial and residential loan defaults.
As for when another economic dip might occur if it were to occur, the vast majority of CEOs pointed to Q1, 2011, with Q4 of this year and Q2 2011 tying for second at 18% each.
Almost 50% of CEOs polled said that they had either made a shift in strategy in 2010, or were planning to in the near future. Granted, growth-stage companies are prone to shifting strategy until they land upon the best formula for significant and sustainable growth. However ~50% is a big number, and clearly a chunk of those companies have been driven to rethink their strategies because of the challenging economic climate, the concern over the future, and the possibility that 2010 might represent “the new normal” where with no economic “rising tide” no help generated to float all company boats as in periods of economic expansion in the past (1997-2000, 2005-2008, etc).
The majority of CEO survey respondents (49%) indicated that they were still planning on burning cash over the next 2 quarters. 24% indicated they would be profitable. CEO comments regarding this question indicated an overwhelming drive toward cash flow break even. That was the big push and focus for their companies in 2010, and if they hadn’t achieved it yet, they were gunning to by end of the first quarter of 2011. CEOs also commented that they were trying to run their companies at break even, with any extra EBIT being reinvested back into the company for additional growth.
COST REDUCTION PLANS
When asked what were the top 3 areas CEOs were targeting for cost reduction, the following table summarizes their responses, representing a combination of spend reduction and staff reduction in non-core areas. There was a preference by CEOs to favor non-staff cuts over cutting headcount if at all possible, but many acknowledged that in order to make meaningful cuts, staff had to be considered in the equation.
CEO responses when asked about increasesin spend were logical. The top three in order were sales, marketing, and R&D. Many of the comments about this question noted the fact that outside of directly growing revenues, additional spend was hard to build in when many CEOs are driving toward a minimum cash-neutral mandate and economic uncertainties are driving CEOs to think conservatively rather than expansively.
[Click on "more" below for remaining 8 slides and narrative from Q4 2010 CEO survey]