We need to grow the business faster than “system” growth (i.e. faster than the overall industry growth rate). The Board is challenging the lack of top-line or profit growth and senior executives are scrambling to find the next big thing. The core business is under huge competitive pressures and we need to find another source of revenue, profit and growth and diversify our business.
All of the above are regular challenges faced by businesses and set off a range of activities to try to develop strategies, plans and projects to generate more growth. My observation and experiences in these situations suggests a few things that may help with the process and those that may hurt.
Part 1. Things that help
Some business competencies and requirements that will facilitate the ability to act on the desire for growth include;
1. On overarching business strategy that is clear about your core capabilities, key markets, why you are in business and why clients should deal with you. In a Porter framework this may be whether you are a low-cost leader, product innovator or niche customer focussed. It is little value for a niche focussed high service business to decide it wants to compete in a new market on a low-cost model. The lack of scale and underlying high service business model will react poorly to the conflict and cause a lot of wasted effort and eventually reduce margins, leading to a decline in the existing business and limited results from the new effort. Clearly knowledge and understanding of different strategic views and experience in assessing business opportunities through these differing viewpoints is important.
2. A business model for product and service development. As an example the Lanning & Phillips value proposition model starts with a focus on the client segment you are trying to serve/attract and the superior value proposition that you are offering to that segment of the market. You need a starting point and the best place to start is “who” is going to buy your offer – in a detailed micro-segmentation sense. I still remember research on banking products and discovering in the focus group research the very different needs of small business owners from other demographics we had determined. Define your segments along multiple factors to test what the differences are in needs before aggregating common segments. Competencies in segmentation, market research and value proposition development are key to this analysis.
Understand the different levers for growth e.g.– acquisitions, vertical or horizontal integration, new markets, new services/products, new distribution channels, new media, bundling/packaging and new pricing models.
3. As you start this process you will immediately understand the need for coordination and integration of activities as well as driving for outcomes. A strong project management methodology with embedded project management skills will be important to achieve desired results.
4. Intrinsic to many of these elements is a need for creativity, insight and innovation. An ability to see unmet needs of clients that you have the capability of fulfilling and doing so profitably. What are you developing in your organization that supports innovation and creativity? Does your culture embrace new ideas or are they subjected to bureaucratic torture? Will someone with a great idea be forced to write paper after paper, asked to prove beyond doubt their idea will work and end of dejected and uninspired to try again? Look at Atlassian FedEx days to get some ideas about innovation and rapid development.
5. This feeds into the idea of risk-taking and clarity about the level of risk that an organization is wiling to take and Board acceptance of the risk-reward trade-off. No risk means low-level rewards in most cases. Being clear about how much risk is acceptable will help guide the nature of projects and the sort of expenditure that can be approved. There are a number of articles on the benefits of smaller wins (see also Ram Charan’s: Profitable Growth is everyone’s business).
6. Collaboration from the business to input ideas, resources and engage with the program for growth. How will staff engage with the growth initiative? Will business heads see it as a political exercise and seek to protect their patch, budget and staffing? A highly engaged culture with high levels of trust and cooperation will dramatically assist the business in moving forward and supporting the growth project. A fundamental component is a communications plan to keep all stakeholders informed.
These are just some of the key elements to a successful growth initiative and you probably get a sense of how wide-ranging and interrelated these different elements are and how difficult it may be to switch them on quickly. All businesses need to be developing these capabilities if they want to achieve high levels of growth. This list is not comprehensive – what would you like to add?
Next Blog – Traps to avoid when developing new growth initiatives.