Thai firms focus on new businesses

Thailand is following an emerging trend seen across Southeast Asia where companies prioritise the building of new businesses, with strong interest in those relating to sustainability, according to a recent study.

The Leap survey by global consultancy McKinsey & Company revealed the priority of 76% of 85 leading companies in Southeast Asia is to build new ventures, spurred by disruptions such as digital transformation.

Corporate longevity, which has continuously declined since 1935 when companies’ average tenure was 90 years, requires building new businesses. The average tenure fell to 20 years in 2022, and is expected to fall to 12 years in 2027.

The report, which surveyed companies with annual revenues exceeding US$1 billion, anticipates that 29% of all revenue in five years will come from new products, services and businesses.

“There’s a need to continuously innovate and create a new growth platform because if you’re not growing, and if you’re not growing faster than the GDP in your own country, then the risk that you drop by the wayside is even higher,” said Nimal Manuel, senior partner and leader of Leap by McKinsey in Asia.

Southeast Asia has seen an increase in new business building compared with 2-5 years ago, as 27% more ventures have been launched in the last 12 months. Some 45% of firms that prioritised new business building indicated greater revenue resilience, the research revealed.

For Thailand, respondents showed similar levels of interest in building new ventures. Sustainability-related businesses proved popular for Thai companies, with 30% of respondents indicating support, said Alexander Gromov, partner at McKinsey.

The average share of revenue generated by new businesses across Southeast Asia in the last five years was 8%, but is expected to grow to 27% in five years, according to research.

Vivek Lath, partner and leader of Leap by McKinsey in Southeast Asia, said while companies might feel cautious about starting new ventures, slow global economic growth could lead them to rethink their heavy reliance on one business model.

“Many of the companies are realising the importance of launching new businesses in terms of diversifying,” said Mr Lath.