Once your business is up and running, you will be expected to grow rapidly as an indicator of long-term health and competitiveness. This makes continuous growth the biggest challenge for many entrepreneurs that I encounter in my consultancy practice. Everyone is looking for that magic strategy that will keep them growing even during market and business changes.
In fact, I’ve long believed that continued growth gets harder and harder as your business grows and matures, as your organization develops repeatable processes and adds overhead to mitigate risk.
I recently found this perspective confirmed in a new book, the crux, by Richard Rumelt. He focuses on how business leaders should become strategists to tackle this problem.
I support the key strategies and priorities, summarized here, that Rumelt offers all companies to meet the ongoing challenge of growth, regardless of their size and position today:
1. Deliver exceptional value to a growing market.
This may seem obvious, yet many companies ignore the keyword ‘exceptional’ or rely on an existing market that is not ‘expanding’. In addition, you need to focus on the unique value you bring and the gap between what customers are willing to pay and maintaining your best cost.
Obviously, the features of the solution you offer have a lot to do with whether your market is extensible and whether the value is exceptional. Therefore, an important aspect of any strategy should be regular updates to every solution, no matter how strong it is initially.
2. Reduce your overhead costs and reduce resources used.
Activities, or whole parts of your business, may have built up over time, but they don’t contribute to the bottom line. The resources can be money, public controversy or management attention. To grow your business, you need to trim it and focus on the business areas with growth potential.
Many advisors have compared 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.
3. Improve response time to competitive situations.
With growth opportunities, often the first capable response wins; not necessarily the first mover, but the first to give a competent response. Large complex organizations usually cannot act quickly unless there is strategy, unity and trust between the main actors. Optimize your responsiveness.
Business agility can also be improved by proactively looking ahead to emerging trends and technologies that are likely to attract competitors and customers. Don’t wait for a growth crisis to begin your efforts. Smart companies always have a few “experiments” in progress.
4. Use acquisitions to supplement 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 accelerate them. Smart companies use acquisitions to increase momentum and accelerate revenue growth.
When considering a merger or acquisition, never overlook the human factors of post-acquisition integration, such as stress among existing employees, IT incompatibility and employee turnover. In many cases, the return is not worth the cost.
5. Avoid overpaying by buying non-public businesses.
Public companies usually only have a premium over value, or even premium over a premium in a bidding war, big brand names or hubris. Do your homework in private to assess real-world value, intellectual property, and build relationships. Avoid stock deals and pay cash.
6. 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 plays and conflicts of interest. Successful companies often maintain six or eight seedlings, always emphasizing what has been learned rather than punishing the failures.
7. Don’t use accounting tricks to fake expansion.
Financial assets can be bought and sold quickly to generate profits that resemble growth, but in the long run you are just kidding yourself. Spend your IQ on how to be transparent to your voters, simplify your core processes, better understand competitors and respond quickly to market changes.
Finally, remember that your growth strategy can never be static – it must evolve and adapt to the changes in the market and competitors. Your challenge is to build a team and an organization that operates close to your customers and the market, and is agile enough to change when the competition and the environment demand it.
Only then can the business survive and prosper in the long run.