There is an unspoken belief that when we talk of growth in business, we mean ‘getting bigger’ and making more sales and profit. But this paradigm drives all the wrong outcomes. It’s important we challenge this idea now before it’s too late.

 

Active Knowledge Question:

How do your growth goals for the next three years help build the competitiveness of your business?

 

The Fallacy That Growth Means More Profit

‘Every year we must get bigger’ – which means more sales, more people, bigger premises and, hopefully after all that, more profit. Growth is all about size and that means upsizing each and every year. And if you don’t or can’t, then you are seen as a failure. And of course, your personal rewards will also be tied to this agenda.

But let’s freeze frame this for a moment and take a step to the side. What are we actually trying to achieve through growth and whose agenda is pushing this focus on sales and profit? Is it shareholders, stockbrokers, financiers and punters who are hoping to profit in the short term from our financial results? And is it where the focus should rest for the vitality and strength of the business?

The reality is that growth is far more complex than just sales and profit. And a rolling short-term focus does not deliver an enduring capital value. Business growth must be viewed far more strategically. And I believe the community, as employees, customers and even shareholders, are now calling out businesses on where their focus lies.

 

 

 

Leadership must have a roadmap as to how they are building their businesses.

 

 

 

 

 

Many Shapes And Sizes Of Growth

Growth can and does come in many shapes and sizes and should be tailored to each unique business. Continual growth is essential for the life of your business.

Growth should reflect the movement you are seeking to achieve as crafted in your strategic business plan. This movement can range from the macro to the micro, or strategic to tactical, actions.

Here’s a simple list of what growth could include:

• Expanding the geographical reach of your business.
• Introducing more products/services.
• Opening more stores.
• Closing some stores.
• Creating more channels to market.
• Improving your inventory management.
• Streamlining your supply chain.
• Upskilling your sales team.
• Reducing overhead costs.
• More considered purchasing and reducing the cost of materials.
• Greater R&D, creativity and innovation.
• Vertical integration.
• Horizontal integration.
• Creating alliances to improve your value offering.
• Better data analytics.
• More customer research.
• Improved lifestyles for the business’s owners.
• Greater leadership.
• Global expansion.
• Reduced operating risk.

And I am sure you can add many more items to this quick list.

The point being that the list of things that could be described as ‘growth’ is almost endless. While many of them will not directly increase sales, they are likely to create flow on effects with longer-term profits being one of them. And, as IBM is presently doing, sometimes it is necessary to prune and reduce sales to rebuild for the future.

We must also recognise that growth for closely held businesses versus publicly-listed businesses will, in some respects, vary. And that variance will be based on the ability to directly include personal goals into the growth agenda of a closely held business, such as an improved lifestyle for its owners.

 

The Quintessential Nature Of Growth

Although growth may come in many shapes and sizes, I believe there is a quintessential nature to growth in all its forms.

Growth is about improving strength, which can be characterised as vitality, durability and impact.

Growth is about improving the competitiveness of your business, so that it may out-compete everyone else in your chosen markets. This is achieved by delivering more customer value than anyone else on an enduring basis, and, through these outcomes, it will deliver profit and improve capital value.

Growth is about always striving to achieve a great business, not because you necessarily want to be great but because the catalysts of building a great business are the ones that all businesses should focus on.

To focus on profit is to miss the point of business altogether.

 

The Living Nature Of Growth

Growth requires a living environment for it to exist. But many businesses lose sight of what kills the competitiveness of a business and allow these elements to form.

A living environment requires:

• An eye to the future where the past is not forgotten but it is not what secures the business’s vitality. Discussions are always about the future and what exciting opportunities and possibilities exist.
• A youthful attitude among young and old where change is just what the business does well. ‘Better every day’ is the mantra that everyone lives by.
• A willingness to experiment. To try things which have never been done before and to try those which previously failed again.
• The presence of evangelists, those who have a vocal passion for what you do as a business, the customers you support and the excellence of your products and services
• Worthy leadership at all levels of the business where humility and gratitude flourish and self-interest is never permitted.

Any growth agenda must include a focus on sustaining and strengthening the living environment within the business.

 

Focus Of Growth

If growth is about improving strength so that the business can compete with greater impact, what are the categories of activity that might arise?

The following broad categories will provide a context and starting point to develop growth plans that align with your strategy:

1. Build your leadership. A continuing focus on building the traits of exceptional leaders in your business provides a cornerstone for growth. This impacts recruitment, promotion, training, and culture to start with, and are all areas of investment for growth.
2. Think and act strategically. Actions should not be random and only opportunistic when consistent with your strategy. Your entire business must learn to think and act strategically. Communication across the entire business is essential. Tools, such as simple guiding principles, support strategic actions from the coal face and upwards.
3. Understand intimately your customers’ needs. Only through an intimate understanding of needs can you anticipate and create a future. Introducing new products/services must be led by a recognition of existing or future needs.
4. Make your products easy to buy. There are many channels to market and many more barriers to customers finding the experience of buying your products/services compelling and easy. This is a continuing area of growth opportunities.
5. Drive your organisation’s performance. While competing is about effectiveness in the marketplace, efficiency is about the delivery. Both areas of performance require the mantra of ‘better every day’.
6. Continually grow your business. Renewal, stepping out and reinventing are attributes of growth. Creativity and innovation must be seeded and nurtured to support a culture of continual growth.
7. Expand globally. The construct of thinking globally is an energy you must instil in growth whereby ideas and knowledge are drawn from around the world to lift the value you deliver.
8. Understand your number. Data is a window to understanding where you are and what opportunities and needs may exist. Investing in understanding your numbers is a feature of intimately understanding your customers and your performance.

 

Let’s Not Forget About ‘Compounding’

Growth is a journey and is best seen as a winding path where you are continually weaving your way through in fulfilment of your purpose as a business. Visions are key milestones where, when achieved, you pause and reset before striking out again. Your business strategy is your intended path but, as we know, strategy is often emergent and not deliberate.

The element that is often missed and forgone is that growth is a single continuous journey that lifts the benefits of compounding to the surface.

In compounding your growth, nothing is wasted or thrown away. Your view should be to build upon every action and lesson. It’s the old adage of ‘Yes I became an overnight success, it just took me 10 years’.  Indeed, 10 years of trying different things and not giving up and building upon what has gone before.

You can only compound your growth if you have a strategic view of where you are going, how you intend to get there and your growth plans are built upon and deliver these intents. ‘Just getting bigger’ does not support nor allow for strategic growth to build an enduring value that creates great businesses.

 

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All the best in the success of your business,

Richard Shrapnel