Hand using miniature watering can to water upward trend line.

Far too many companies fail to achieve their growth targets in revenue and profitability. However, the probability of achieving profitable growth is heightened whenever an organization has a clear growth strategy and strong execution infrastructure. One without the other impairs the probability of success. This author describes why and prescribes strategies.

Many organizations fail to achieve their desired growth targets in revenue and profitability.

Most businesses fall short of achieving their growth objectives for revenue and profitability. In fact, studies report success rates as low as 20%. Why is growth so elusive? These are the most sitecore professional services.

Based on our research and experience*, there are two major reasons:
  • Inadequate consideration of opportunities within the core business, adjacent to the core business or within new customer sub-segments.
  • An organizational infrastructure that cannot support successful execution.

However, managers can do certain things to improve the chances for success. This article will describe one such thing managers can do, namely build a systematic framework composed of three strategies for growth and three key elements for successful execution. The article will also explain how the three strategies and three key elements increase the probability for success.

* This article is an amalgam of extensive experience and research undertaken by the author and his colleagues, David Day and Dr. Donald Baer, on creating and implementing growth strategies, mostly with mid-sized firms.

Achieving growth: Recommendations for increasing the probability of success

1. Strengthen the execution infrastructure by investing in ‘safe bets’.
Regardless of which growth strategy is selected, a firm’s infrastructure must be up to a standard that supports successful execution. An on-going commitment to creating such an infrastructure is a ‘safe bet’. Achieving this requires (1) eliminating departmental or regional silos, (2) utilizing leading indicators and performance drivers that align with the strategy and (3) growing leaders at all levels – managerial and non-managerial. (See Sections 4, 5 and 6.)

2. Initiate a process to identify strategies with a high probability for success.
Three customer growth strategies are presented below: (1) Growing the core business, (2) Growing by sub-segmenting customers and (3) Growing adjacent opportunities. It is recommended that the senior leaders begin the process by considering the growth potential within the present core business and/or the opportunities and growth potential associated with creating innovative value propositions for underserved customer groups. As the senior leadership group moves through this process, it will become clear if and when adjacent growth options should be considered. (See Sections 1, 2 and 3.)

Customer-Focused Growth Strategies

1. The process of identifying profitable growth opportunities most often begins with the Core Business1, that is, the products, services, customers, channels and geographic areas that generate the largest proportion of revenue and profits. In-depth conversations with the senior leaders on the topic, “What is our core business?”, is the preferred starting point.

An evaluation of the overall performance of the core business follows. This involves measuring and benchmarking profitability, rate of revenue growth and the firm’s reputation with its most important customers.

Such an assessment will raise a number of questions. For example:
  • In what direction is each of these key indicators headed and why?
  • Who are and who are not the core customers? Why?
  • What is the firm’s key competitive market differentiator? How can it be strengthened?
  • Is the core business under major threat?
  • Are there attractive growth opportunities within the core?

When considering these questions, input from external stakeholder groups is very helpful, particularly from loyal and even not-so-loyal customers.

The overall process need not take a great deal of time, but can yield significant returns. These include:
  • A renewed commitment to operational excellence within the core business,
  • Insightful conversations on the growth potential of the core business, or conversely,
  • An urgent need to make significant changes to the core or even a plan for abandoning the present core and exploring more profitable growth options.

Acklands-Grainger Inc., a leading Canadian industrial supply company, initiated such a process.

Prior to doing so, Acklands-Grainger was described as a “stodgy Canadian supply company…complacent” and one with a 4% growth rate. “In less than 12 months” it had been transformed “to an exciting place to work with (close to) a 20% growth rate and higher profitability”.2 How did such a dramatic change occur?

The starting point was winning the commitment of key employees at all levels, individuals who were willing to step forward and lead.

Processes were created to help refocus on the core business. Key elements included (1) defining three market platforms on which the core business is based – Industrial, Fleet and Safety, (2) eliminating products and markets that did not fit on these platforms, (3) adding new products to augment the core and (4) strengthening market coverage with significant investments in the two major channels – sales depots and the firm’s website.

2. A second customer-focused growth strategy is based on the firm’s existing customers. This strategy involves creating High Impact Value Propositions for new customer sub-segments. Underpinning this strategy is the willingness to view customers through a different set of lenses.

A process can be created to assist both managers and specialists at the customer interface gain fresh insights into customer needs and preferences. This is a necessary first step in discovering underserved customer groups and hidden growth opportunities. (Senior leaders who frequently interact with customers can make a significant contribution to this process.)

Key elements of this process include (1) sub-segmenting existing customer groups based on newly discovered needs, buying patterns and contribution to profits and/or revenue, (2) creating innovative and high-impact value propositions for the most attractive sub-segments, (3) field-testing the new value propositions and (4) scaling-up based on the results of field tests.3

In addition, some firms choose to focus on lower end customer sub-segments. These are usually groups of customers for which the cost of supplying and servicing exceeds the revenue the customer generates. In such cases, value propositions can be designed which will move the customer to a profitable position or at least minimize the losses. For example, direct sales calls can be replaced with on-line ordering systems and non-essential product/service features can be eliminated. These actions not only lower the costs of serving customers but often also lower the customer’s cost. After the initial shock, many customers welcome the new lower-value proposition.

Leading Canadian financial organizations have successfully applied this overall approach to sub-segmentation. But so have mid-sized and small firms, e.g. The International Group Inc., a Toronto-based petroleum specialties manufacturer and third-generation family business. Also, think of your favorite owner-managed restaurant, the one you select for meetings with important clients or special family occasions. Such businesses often owe their success to delivering attractive value propositions to different customer sub-segments.