I often get asked why is growth so important for a business. My response is if you aren't growing, there are only two other scenarios...you are either stagnant / stable or you are shrinking. What's wrong with stable? It’s okay for a time but long term stable often means you should take a more clinical examination of your business. You may be missing out on opportunities, enabling your competitors or future competitors to score on a breakaway, luring your employees into boredom or lacklustre performance, lacking excitement for customers, or leaving money on the table. So what can be done in these circumstances? Various choices are available. Doing nothing or ignoring the issue is always an alternative but it generally leaves you in fog without a clear path forward.
I often see companies that understand the need for growth decide that they will just “try harder” at the current marketing and sales activity. Sometimes that may work. Sometimes not so well. As a farm kid, trying harder might relate to pushing the combine to go faster causing a greater swath to run thru the pickup....if you don't have the capacity to process the extra load, you either plug the combine up or cause some mechanical breakdown....something has to give. Another issue with simply leveraging off what has worked in the past without re-evaluating is that you may be doing more of a suboptimal activity, missing the mark or pursuing less profitable business. If you wish to invest in growth, you might as well get it right.
The answers are usually in the details. Some of the details may be a bit foggy as your information and data at hand may not be ideal and the future is uncertain. However, digging into the details is usually where sound planning and growth strategies begin. There will always be some fog remaining. However, I have always found that the overall picture emerges if you make the effort and more effective decisions can be made that will provide better peace of mind for managers, executives and owners.
There are many ways to look at growth, but I find one of the most effective ways is to start with a detailed assessment of a company's current products and services. I often describe a reasonable process for assessing growth opportunities and strategy with reference to a Rubik’s Cube. A company’s business can generally be broken down into a number of dimensions – customers, products, services, markets, risks, competitive strengths, trends, internal capability, to name a few. Each of these dimensions form a different cut of your business (like one block of the many blocks in a Rubik’s Cube). All other things being equal, you will want to focus your growth investment in a strategic manner, with specific emphasis on your most profitable customers, products and services in the highest growth markets that are large enough with positive trends, where you have competitive advantage, strong internal capability, manageable risk and your greatest chance of success.
That all sounds pretty simple when you say it real fast. It usually is not so simple to evaluate in reality. It is not uncommon for many companies (even large sophisticated companies) to be challenged to break down their history and their predictions for the future into such dimensions to provide a reasonably clear comparative view of the different parts of their business. Historic performance is sometimes less important that forward projections, although it is most often a useful guide. Many if not most companies pay most attention to measures of ongoing performance in terms of corporate performance (e.g. net income at a total level), as that is how their financial reporting systems are structured and the relevant data for a more clinical examination is simply not tracked into neat little buckets over time. Analysis at a total corporate or consolidated level is usually not granular enough to develop effective growth plans from.
Unfortunately, many managers or owners stop there and resort to what I call “thumbnail growth planning”. This type of planning typically takes the aggregate financial data and marries it up with anecdotal and formal future-oriented data and predictions from available sources to complete a best-efforts growth plan. There is nothing inherently wrong with this approach. It just might not provide the best solutions, when compared with the answers that may pop out if one dug a little deeper in the analysis and stretched the evaluators to complete the allocations, assumptions and estimates to get more specific in the conclusions regarding where and how best to achieve growth.
Some relatively simple example questions might help you understand if your current growth plans are reasonable and sustainable:
Do I know which are my most profitable products or services?
Can I characterize the depth and breadth of potential growth opportunities across business lines or other dimensions of the company?
Am I certain which markets or products / services that my company has a significant competitive advantage?
Which specific customers, groups of customers and markets should I focus on for growth?
Which parts of my business do I have the internal capability and infrastructure to grow?
How do I measure growth currently and should I be measuring it differently in the future?
What is my best growth option for my business – organic growth, growth by building or expanding, growth by acquisition?
It is never too late to rethink your growth plan. Growth is the essence of your company’s ability to thrive and survive for the long term. It is also a key component to improving the valuation of your business. I encourage you to ensure you develop and document a growth plan, including all the analysis that goes into it, so that you have the ability to be more purposeful and specific in continually improving it over time.
A feature article by Dwayne Coben of Coben Advisory Inc. (www.coben.ca). Coben Advisory is a specialized corporate & executive advisory firm that offers services to help our clients plan, improve, grow and/or exit their businesses.
