If you seriously want your business to be successful over an enduring period, then you must understand and energise the catalysts of real growth. What stage of growth is your business at now?
Active Knowledge Questions:
Do you have a framework that allows you to understand the stages of real growth?
A framework to build the strength of the catalysts which drive growth.
Outputs, Not Drivers
In many aspects of business, we are drawn to think of and focus on the outputs of a business. This leads many businesses to literally ‘chase their tails’ in circles as they keep looking at the output and trying to work it, rather than stepping back and seeing the output’s drivers and catalysts.
We look at operating costs and want to reduce them, rather than understanding firstly what the drivers of those costs are and how they relate to our competitive posture. We identify cultural issues and adopt policies to eliminate them, rather than examining the leaders who are allowing these traits to take hold in the first place. We seek to build profit first, rather than its driver, which is the business’s ability to compete.
And business growth is no exception. When it comes to growth, we usually talk in terms of more customers, geographical expansion, additional products, new markets, and so the list goes on. We often do not pause, look and ask what the drivers are, or even better still the catalysts, of that growth.
If you are to capture the enormous benefits of compounding, or better still, a geometric domino progression, then you need to not only establish your pathway of growth, you must understand the depths or levels of growth that can exist in your business.
Three Levels Of Growth
I believe there are three levels (or depths, if you prefer) that a business may progress through in pursuing growth in their business.
These levels represent a framework that leaders should embrace so they can form a view of where their business is in this progression. Why? Because the further along this progression a business is, the greater its ability to capture market share and drive its capital value. Both of which are an outcome of the level of customer value that it is able to create.
The three levels are:
1. Expansion:
This is the simplest form of growth as it represents growing more of the same and
is the most competitive area of growth. Expansion usually includes expanding existing markets, product ranges, geographical boundaries, acquisitions and mergers of like businesses, and growing the brand equity.
2. Monitoring:
This phase represents a business that is seeking to be alert to the needs of its customers, and how they may be evolving in a changing world. In this phase of growth, the business is trying to have a greater customer focus, is looking for a change in the market, and is trying to understand how it impacts their market. It is also conscious of technology and how that may impact customer value.
3. Creation:
Reflecting the highest level of the growth phases, creation is where opportunities for growth are being seized in the expansion and monitoring phases and the business is completely aligned with the needs of their customers. They are redefining what value looks like for their marketplace ahead of their competitors and the market, and they are leading their customers to experience, and then expect, new levels of value.
They are achieving this through an intimate understanding of their customers’ needs, creating new services and products, and developing new business models for effective delivery. Further to this, through alliances, innovation and a blending of technology and value chains, they are stepping out where others have not yet thought to.
Leadership should be seeking to progress their business from expansion through monitoring to creation. Creation being when they will yield the benefits of compounding and driving the capital value of their business.
I define capital value as the ‘ability of a business to earn an enduring income’. This is the level of creation when your business has really achieved the ability to produce an enduring income.
The Progression
The ability of a leadership team to progress their business along the path of growth to a level where they are creating their markets really rests in the activation of the competitive engine in their business. Essentially, can they make being competitively fit the motive for being in business and follow the mantra ‘profit is not our motive, we’re here to compete’?
If the underlying competitive engine is firing then the progression becomes one of increasing focus, and that focus will then lead to creation.
Start with a clear understanding of what you are building, which is represented by purpose and then hone in on customer need (purpose, focus, need).
1. Purpose:
This provides not only a foundation upon which to build your business but an enduring focus upon which growth can be compounded. Purpose is most effective when expressed in a customer-value context as it sets a direction upon which effort may be invested. A well-crafted purpose allows your business to see beyond current services/products into the future and to move into the creation phase of growth.
2. Focus:
A clear focus is critical for real growth as it allows every effort to be built upon the effort before. Every success, failure, and learning are compounded, nothing is wasted. The question is upon what is your enduring focus built? What is your purpose? What are you building?
3. Need:
Customer need is the ultimate focus of any growth strategy. An intimate understanding of customer need is the goal where your business is able to envision and create the next level of customer value.
Real Catalyst
This framework of the levels of real growth may seem a bit abstract but its premise is very simple. This is that an increasing focus on customer need leads to the creation of greater customer value.
This is the true catalyst for real business growth. If you can’t see where customer need is tomorrow you will likely just be chasing the market. But if you can see a need and get ahead of it, then you are creating your own growth. This is where you want to be.
To be capable of progressing your business along this pathway with an increasing intensity, you must have a framework, which you can overlay on your business to guide your path.
Real value lies at the level of creation and this should be the journey every leader takes their business on. Where do you think your business presently is on this journey?
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All the best in the success of your business,
Richard Shrapnel
