Business confidence is not translating to high investment in innovation

The first quarter of 2017 saw the highest confidence levels in the local, U.S. and global economy since the National Center for the Middle Market (NCMM) barometer report began five years ago. This quarter, confidence remains high in the local, global and U.S. economies, even as survey results dipped slightly.

A look at the numbers The services industry is this quarter’s growth leader:
•  77% of firms experienced increased revenues
•  46% expect increased sales
•  Profitability margins expected to increase  
   3.7% over the coming year; costs remain
Source: Q2 2017 NCMM Barometer Report
Confidence in the U.S. and global economy was down from the first quarter, but remained at historic highs.

  • Larger middle market businesses ($100 million to <$1 billion) experienced the fastest revenue growth over the past 12 months.
  • The services sector experienced the greatest year-over-year revenue growth.
  • The retail sector led the way for employment growth for the second quarter, as it more than doubled from both this year’s first-quarter numbers and from last year’s numbers.
  • Manufacturing and financial services were the leaders in organic growth strategy for the second quarter.

A focus on core business Business leaders are simplifying and focusing on core business by selling non-core assets and looking inward for solutions. 62% of all middle market firms are choosing to focus on core business for 2017, pursuing organic growth (37%) and increasing profitability (35%) over acquisitions. 46% of larger middle market firms, however, are eyeing M&A in the next 12 months.

38% of middle market companies plan for M&A in 2017
Investing in innovation, but not enough
NCMM data shows that middle market growth relies on innovation and new product development for accelerated growth. Expansion and growth are directly related to investment in new products and markets, as well as in the nece ssary factors that facilitate innovation.
2/3 of businesses that innovate successfully Expansion undertaken in the past and next 12 months

Despite their investments, high growth businesses rate themselves only moderately well at innovation. They consider themselves better at business as usual:  managing their banking relationships, being a leader in the industry and retaining profitable accounts. NCMM’s data shows that, while middle market companies know that they need to ramp up on innovation, they face challenges in achieving it.
  Middle Market innovation

See how the second quarter compares to the first


NCMM quarterly data shows that high growth businesses are confident in the economy and enjoying strong growth. It’s a good time to capitalize on strong conditions and invest in the innovation to spur additional growth and secure business prospects for the future. Yet many high growth businesses are not seizing the opportunity and, instead, are focusing on core businesses and traditional operational improvements.

To learn more about how your company can invest in innovation to drive growth, contact:

Mike Ward

National Managing Principal, Business Consulting and Technology
T + 1 312 602 8500

Source: Survey data from the National Center for the Middle Market, Middle Market Indicator (NCMM MMI), fielded and published in June 2017.  The survey is fielded nationally and respondents are C-level executives.  

See also the NCMM Middle Market Indicator for the second quarter.