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Once your business is running and sustainable, everyone these days expects it to grow, as an indication of long-term health and competitiveness. Thus continued growth becomes the biggest challenge for many of you business owners I meet in my consulting practice. Everyone is looking for that magic strategy that will keep them growing, even during market and company changes.
In fact, I have long believed continual growth gets more and more difficult as your company gets bigger and more mature, as your organization develops repeatable processes and adds overhead to reduce risk. I found this perspective confirmed recently in a recent book, “The Crux,” by Richard Rumelt. He focuses on how business leaders have to become strategists to address this issue.
I support the key strategies and priorities, summarized here, that Rumelt offers for all companies to address the continuing challenge of growth, no matter what their size and position today:
- Deliver exceptional value to an expanding market. This may seem obvious, yet many companies ignore the keyword “exceptional” or they count on an existing market that is not “expanding.” In addition, you need to focus on the unique value you bring, and maintaining the gap between what customers are willing to pay versus your best cost. Obviously, the attributes of the solution you offer have much to do with whether your market is expandable and the value is exceptional. Therefore, one key aspect of every strategy should be regular updates to every solution, no matter how strong it is initially.
- Trim your overhead and reduce spent resources. Activities, or whole chunks of your business, may have built up over time, but are not contributing to the bottom line. The resources may be money, public controversy, or management attention. To grow your company, get it trimmed and focused on the business areas that have growth potential. Many advisors have likened this strategy to regularly weeding your garden. Keep your company focused on the business areas and functions that fit your strategic direction, by periodically eliminating non-contributing activities, organizations, and business units.
- Improve reaction time to competitive situations. With growth opportunities, the first capable response often wins; not necessarily the first mover, but the first one to provide a competent reaction. Large complex organizations usually cannot move quickly, unless there is strategy, unity, and trust among the major actors. Optimize your ability to react. Business agility can also be improved by proactively looking ahead – for new trends and technologies that will likely attract competitors and customers. Don’t wait a growth crisis to begin your efforts. Smart companies always have a few “experiments” in process.
- Use acquisitions to complement organic growth. Look for economies of scale, complementary skills and technologies, or access to a broader and stronger market. This strategy should not replace organic growth efforts, but should expedite them. Smart companies use acquisitions to enhance momentum and accelerate revenue growth. When contemplating a merger or acquisition, you should never overlook the human factors of post-acquisition integration, such as stress among existing employees, IT incompatibilities, and employee turnover. In many cases, the return is not worth the cost.
- Avoid overpaying by buying nonpublic companies. Public companies usually only come at a premium over value, or even premium on a premium in a bidding war, big brand names, or overconfidence. Do your homework privately to assess realistic value, intellectual property, and build relationships. Avoid stock deals, and pay with cash.
- Plant seedlings outside the core for safe growth. These need to be cultivated and shielded from your core management process, which is usually hampered by power games and conflicts of interest. Successful companies often maintain six or eight seedlings, and always highlight the learning, rather than punish the failures.
- Don’t use accounting tricks to fake expansion. Financial assets can be quickly bought and sold to generate gains that look like growth, but you will only fool yourself in the long run. Spend your IQ on how to be transparent to constituents, simplifying your core processes, better understanding competitors, and reacting quickly to market changes.
Finally, remember that your growth strategy can never be static – it needs to evolve and adapt as the market and competitors change. Your challenge is to build a team and an organization which operates close to your customers and the market, and is nimble enough to change as required by competition and the environment. Only then can the business survive and thrive for the long-term.
Related: 6 Due Diligence Goals When Vetting Business Partners