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Dutch medium-sized businesses much more optimistic than international counterparts

Buy & Build

20 September 2018

Companies in the Dutch mid-segment are very optimistic compared to their international counterparts. This is revealed in a survey conducted by EY of CEOs of more than 2,700 companies in more than 20 countries with annual revenue of between one and three billion dollars. Dutch medium-sized companies’ strong focus on strategic supply chain management as a growth driver is striking.

EY contacted the members of its Entrepreneur of the Year Award alumni network to request them to complete a number of online questionnaires. The consultancy subsequently conducted in-depth interviews in order to gain additional insights.

The survey shows that nearly four out of ten Dutch mid-segment companies expect to grow by a minimum of 11% and a maximum of 25% in the coming year. In comparison, only 25% of mid-segment companies worldwide foresee these growth percentages. The IMF is even more cautious and expects growth of no more than 3.2%. What’s more, medium-sized companies in the Netherlands do not anticipate negative growth in 2018, while 5% of the respondents worldwide do expect negative growth. In short: Dutch medium-sized companies show above-average optimism for the future.

The Netherlands is a trading nation

Nearly one-quarter of the Dutch respondents (23%) considers entering new international markets to be crucial. Ernst Groenteman, Partner at EY Netherlands, says this reflects the Netherlands’ strong tradition of international trade. Groenteman: ‘The Netherlands is the world’s fifth largest exporter of goods: approximately one-third of the country’s income is derived from sales abroad. More than one-third of the respondents in the Dutch mid-segment says exports will account for more than a fifth of their income this year.’

The EY study furthermore shows that many Dutch medium-sized companies believe they can achieve further growth via strategy supply chain management. In fact, nearly one-third (30%) of the Dutch respondents says efficiency improvements within the supply chain have led to an increase in productivity. In comparison: only 18% of the respondents worldwide attach considerable importance to improvements in the field of supply chain management.

Lagging in diversity

The generally held confidence in the future expressed by Dutch medium-sized companies is also mirrored in their recruitment plans. Hiring more full-time employees is a top priority for 40% of Dutch respondents, while only 20% of their international counterparts are planning to increase their current workforce. In keeping with the strong Dutch tradition of freelance work, 17% of the respondents are also planning on engaging the services of more contractors/freelancers, compared to only 11% worldwide.

Nearly half (45%) of Dutch respondents say they give priority to diversity when recruiting new talent. This constitutes a remarkable 33 percent increase compared to the previous year. Groenteman says this is because Dutch companies are lagging behind when it comes to diversity [please refer to the Adan Basarn article from page 6 of Capital Magazine #10]. He refers in this context to a survey conducted by the Harvard Business Review that reveals that only 20% of the Senior Executive positions in the Netherlands are held by women. In comparison: the average is 25% in the rest of the world and nearly twice that percentage in Russia (47%) and Indonesia (46%).

Talent shortage poses threat

Approximately 34% of the Dutch respondents say finding the right talent is decisive for accelerating growth. According to EY, this percentage roughly corresponds with the rest of the world. EY says the international shortage of talent also makes it more challenging for Dutch companies to achieve their talent targets. So it is understandable that one-third of the respondents sees demographic shifts as the greatest disruptive mega trend, even greater than geopolitical uncertainty, increasing competition and regulatory and trade restrictions. These concerns are confirmed by other research showing that the Netherlands could face a shortage of more than 548,000 qualified employees by 2030.

The survey also reveals that Dutch medium-sized companies have a number of less strong points. For example, Dutch medium-sized companies struggle with their cash flow – a development that EY says can be seen worldwide. EY believes this is attributable to changing sales patterns. Groenteman of EY Netherlands: ‘Convergence, unpredictable online sales patterns and the necessity to invest quickly in order to meet changing consumer needs increases the need for liquidity that can be spent immediately.’ Technological disruption (20%) and rising production costs (16%) also represent concerns for Dutch companies in the mid-segment.

The rapid rise of AI technology

The research also shows that technological investments are aimed primarily at traditional objectives, such as improving the financial accounting and process efficiency. Only 17% of the respondents say they also utilise these kinds of investments to create, for example, new business models. Even fewer Dutch medium-sized companies (13%) invest specifically in optimising the customer experience. Many medium-sized companies in other countries score better in this regard.

The application of artificial intelligence (AI) is, however, one important technological innovation in which the Dutch mid-segment does focus on extensively. Virtually all the respondents say they expect to have implemented some form of AI within their companies by 2023. And 78% of the respondents indicate they are planning to implement this technology within the next two years, primarily as a means of supporting routine processes. This represents an increase of no less than 66 percent compared to 2017.

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