GREAT COMPANIES GROW IN
GOOD TIMES AND BAD
Strategy Yields Growth
The economic recovery has been struggling to take hold, but it is slowly gaining momentum. As the rising stock market once again becomes all-too synonymous with a strong economy, one is prompted to ask: Did we learn nothing from 2005 - 2010?
CEOs and small business owners know that they need to grow their businesses by executing a strategy that is right for their company. A.T. Kearney research reveals that 70 percent of the growth opportunities available to any company lie in internal factors that are under the CEO's control; only 30 percent are beyond the company walls.
CEOs who achieve superior growth don't possess a covert script that others lack. Rather they simply know how to map out a course for all parts of the company, from the ground up, and then execute it flawlessly. The bottom line is that superior growth is within reach for all companies, in all industries, and in all phases of the economic cycle.
Most companies begin to grow by removing operational and structural barriers, and by focusing on their core strengths. Companies that achieve superior results are able to reach new heights in all aspects of their business: satisfying customers, delivering high-quality products or services, achieving a low-cost position, building a team of motivated top-performing employees, and, most importantly, making money.
How do they do this?
1. Operations: Cleaning House
The first step on the growth path is to do some operational housecleaning. Companies that overlook the growth potential in operations do so at their own expense: A.T. Kearney's research indicates that the operations improvements can account for 60 percent or more of a company's future growth potential. At your next management meeting, raise these questions: Are you truly the low-cost competitor in your industry? Do you have the highest levels of product and service quality? If not, the operations step is critical to returning your company to a growth trajectory.
The key areas to focus on include:
Sourcing and Vendor Management. The decisions surrounding purchasing goods and services account for 20 to 60 percent of the cost structure of most companies. And when a company optimizes its sourcing process, it can reduce its total costs anywhere from 6 to 13 percent.
Product and Service Quality. During his tenure at General Electric, Jack Welch brought Six Sigma quality standards to the world. Yet companies continue to struggle to achieve consistently superior product and service quality.
Sales Effectiveness. The sales team is the main link between products and customers, and having the people and the processes needed to consistently achieve your sales goals is critical. However, identifying potential lapses in this area is often as difficult as correcting them. Small companies can boost their bottom lines by revisiting and updating some of their key sales strategies, such as altering their compensation for their sales team or targeting new markets.
Pricing Strategy and Execution. Gone are the days when the market determined prices. Companies are finding that they have considerable power and flexibility in setting price, and are seeing their profits rise as a result. Recurring revenue models are key for long-term growth and profits.
2. Organization: Structuring for Success
The next step is to create a solid, high-performing organization. Organizational growth improvements can account for another 25 percent of your company's future growth potential. The two key components of the organization step are customer focus and organizational speed. In the eyes of your customers, how responsive is your organization, and, in your own eyes, why do you lose customers? Can your company make faster, more effective growth decisions than your competitor?
Eliminate Friction. In creating the best company, CEOs and business owners must not only find and eliminate existing points of friction or bottlenecks, but also create a structure that encourages potential and success. In other words, it's not just about fixing parts that are broken; it's about building a platform for growth.
Break Down Growth Barriers. Ask any CEO who has dealt with organizational silos and barriers, and he or she will tell you they aren't the ideal way to grow. It is critical to remember that the key to growth is to develop processes that cut through or across a company to unleash the power of the businesses' most talented people.
Improve Decision-making Processes. Clear and efficient decision-making processes, particularly in volatile situations, can mean the difference between profit and loss. In a business climate where the potential risks and liabilities are increasing, the natural inclination for CEOs and business owners is to rein in the decision-making processes.
3. Strategy: Pulling the Growth Levers
When CEOs and business owners think about the role of strategy in growth, they often think of a big strategic breakthrough that will transform their industry and result in a sales jump of tens of percentage points. But our research suggests a different course of action. Most companies are already on the right overall strategic track. And rather than look for a miracle breakthrough, they should take a comprehensive look at their core business and identify specific growth opportunities within it.
What's the right strategy for your company? The best answers always begin with the best questions:
What is your customer growth strategy? Spending time with customers and learning more about what they need and how they use various products or services can yield a goldmine of information about good opportunities for growth. Customers should be at the center of your growth strategy.
What is the best product or service mix? Reshaping your products or services may sound like a tactical improvement, not a strategic one. But companies need to work from a more strategic perspective when deciding what products and services to offer and promote. How might your products and services be tailored to better meet customer needs? Do your products and services cannibalize each another? How well do you develop and launch new products and services?
Where do mergers and acquisitions fit in?Acquisitions can be an important part of the strategy step. Companies such as GE Capital, HSBC and Teleflex use acquisitions to bolster the competitiveness of their core business by acquiring companies to enter new geographic markets or gain access to new technologies or complimentary products or services. A key success factor, however, is that they patiently wait for the right M&A opportunities to emerge and refuse to overpay. CEO Advisor has extensive experience in smaller, opportunistic acquisitions to fuel growth.
4. Growth Breakthrough
You might look at your product or service offerings for opportunities to expand your customer base, your customer service levels, or the level of convenience and customization you provide. You might extend your value chain or business model, your geographic reach, or your partnership and risk-sharing approach to accelerate growth. You might stretch the way you go to market through your distribution channel strategy or your branding. You might look to new technologies to change your entire company or get to the next level.
Top performing companies accelerate their growth along several dimensions simultaneously. And while many good companies are able to maximize their growth in interesting and innovative directions, being able to take that final step is what today's CEOs and business owners executives would do well to set as their goal. The path to getting there isn't flashy or quick, but with flawless execution and unwavering focus, sustainable, superior growth is a goal that any company can reach.
CEO Advisor is an expert in helping companies grow to the next level. Contact Mark Hartsell today at (949) 759-8676 or email him at MHartsell@CEOAdvisor.com for a free initial consultation.