Powering-up your profitability: efficiency over expansion
HLB Survey of Business Leaders 2025
The global economy is settling into a calmer period. Interest rates are stabilising and consumer consumption is on the rise. 46% of business leaders believe the global rate of growth will increase this coming year. However, companies are entering the new growth phase at uneven terms.
Ongoing market disruptions have eroded companies’ profitability. Yet, to navigate the changes in trade, resource costs, and consumption, continuous innovation is required. This year, we set to explore what makes companies more profitable and found three distinctive components: efficiency-driven operating model transformation, people investments, and customer-centric innovation.
This year, half of the leaders plan to increase investments in further automation and digitisation of business processes, as well as better data analytics and business intelligence capabilities. Leaders have also refined their approach to AI adoption, making faster progress on a smaller number of use cases, primarily aimed at augmenting human insights and productivity.
The top 25 percentile of businesses, whose profit margins increased by 5% or more over the last year, are 1.3X more likely to have a highly engaged, productive workforce — and they aim to maintain a competitive edge by increasing their investments in learning and development, performance management, and improved succession planning.
Building fit-for-future operating models
To thrive in the fluid market conditions, leaders need to continuously adapt. This year, 79% are working to improve operating models to gain extra operating speeds, cost efficiencies, and market resilience.
Highly profitable companies are 2.6X more likely to rate their operating model as ‘at optimum’, thanks to higher digital maturity, stronger emphasis on risk management, and increased commitment to sustainability. That is a forward-thinking strategy, especially in a world reshaped by rising climate risks, geopolitical instability, and disrupted trade flows over the past five years.
From our data, three performance segments can be clearly identified: Accelerators, Stabilisers and Defenders:
Profit Accelerators: Businesses with greater than 5% profit growth
Profit Stabilisers: Businesses with -5% to +5% profit change
Profit Defenders: Businesses with greater than 5% profit decline
These segments prioritise investment in different areas of efficiencies based on their operating model. It's clear that Profit Accelerators aim for action; 61% plan to adopt new technologies to grow this year and 56% invest more in their people. For Profit Defenders, their primary focus is on process and structure improvements over technology updates.
People investment is on the rise
There is a growing skills mismatch between the competencies employees have and the ones companies need to innovate and transform their operating models. Emerging technologies can be a great conduit of productivity and innovation, but they also require skilful operators.
To grow this year, half of leaders are prioritising investments in their workforce, in particular on training, professional development, upskilling, and reskilling initiatives.
Companies with high-profit margin growth are 1.3X more likely to operate with a highly engaged, productive workforce. Their recipe for success is building a culture of continuous learning, proactive performance management, and effective talent nurturing and retention.
Compared to peers, they are also more likely to use AI to optimise their staffing model, skills audits, and flexible work arrangements.
Customer driven innovation
Innovation—the ability to introduce new ideas or ways of doing something—requires a balance of technical know-how and customer-centric thinking. Technology paves the way to value creation, but it does not guarantee it.
Leaders aim to become more intentional about how innovation happens in their company, dedicating more resources to cultural transformations, cross-functional collaboration, and customer behaviour analytics. 71% now use predictive analytics to track future trends and 68% leverage AI for faster product prototyping.
Profitable companies are almost twice more likely to rank their innovation as successful. They are using AI to establish Innovation Labs within their organisation and plan to create customer advisory boards to transition from being product-led to becoming customer-driven.
Deploying AI-driven customer segmentation and prioritisation is the priority for 72%, alongside using AI to accelerate market research and product development.
