The global financial crisis prompted many companies to pull in their horns, hoard cash, trim costs, and take a wary view of large investments. Yet the same crisis ushered in a new age of capital superabundance. Bain & Company’s Macro Trends Group carefully analyzed the global balance sheet and found that the world is awash in money. Global capital balances more than doubled between 1990 and 2010 — from $220 trillion (about 6.5 times global GDP) to more than $600 trillion (9.5 times global GDP). And capital continues to expand. Our models suggest that by 2025 global financial capital could easily surpass a quadrillion dollars, more than 10 times global GDP.
Stop Focusing on Profitability and Go for Growth
Today’s era of superabundant capital rewards faster growth. The ready access to low-cost capital should change the way business leaders think about strategy – and, in particular, the relative value of improving profit margins vs. accelerating growth. But too many companies continue to pursue higher margins over growth. To thrive in this new world, leaders must overcome the obstacles to growth in their organizations. They must reward the creativity and ingenuity required to devise new growth options. They must avoid screening out too many growth ideas and opt instead to invest behind a portfolio of growth experiments (or options). And, finally, they must build the skills and capabilities required to capitalize on their most promising experiments. This requires treating the time, talent and energy of a company’s workforce as the truly scarce resources that they are and managing them with the same care and rigor as has been brought to financial capital in years past.