If that directive sounds familiar, it may be because it is a commonly issued challenge senior leaders receive from their Boards, stakeholders, activist investors, and CEOs. It is also one that can be perceived as a set up for failure, even for the most aggressive senior leaders.
Many leaders choose to address this challenge by avoiding it altogether. In perceiving the task as near impossible, they busy themselves preparing cursory spreadsheet exercises and generic answers, hoping to avoid meaningfully addressing the real issues, and that they will eventually be replaced by something else on the agenda.
Another ineffective approach is to face the growth imperative too literally, taking actions — like price cuts and deep discounts — that can damage the organization’s long-term outlook to deliver short-term growth.
And even when there is a growth strategy, there are often difficulties in getting the organization aligned and selling the vision to the Board and investors. Success is a function of both the growth strategy itself and the ability to characterize it in a digestible, compelling way — the growth narrative.
Keep in mind that while a growth challenge may initially feel unpleasant, it can present a unique opportunity to have a candid discussion, and permission has been granted to bring innovative options to the table.
A compelling growth strategy and its associated growth narrative is built around the answers to 3 questions:
Why do we need to grow?
To what extent are the growth opportunities within reach?
How will we support and sustain the growth?
If you can answer these questions for your organization, you will improve the quality of the dialogue with your stakeholders, making you more likely to achieve alignment behind the growth agenda, and ultimately experience better execution of your growth plans.
Few teams try to address this question even though it is a natural starting point for a discussion on growth. Achieving a shared understanding of why we need to grow will help us decide how we will grow. As a result, you will have your team better aligned around the growth plan.
To answer this question, we can start by acknowledging that there are appropriate reasons and inappropriate reasons to grow. Among the inappropriate (but common) driving forces are the desire to lead a larger organization; a general belief that bigger is better; and concerns about keeping up with other organizations or the market.
The failure of many roll-up strategies illustrates the perils of pursuing growth merely for growth’s sake. One marquee example is the roll-up of funeral homes a few years ago: there are minimal operational or revenue synergies in operating funeral homes in multiple markets.
Pursuing growth for any of these reasons sets your organization down a path where, at best, you’re playing someone else’s game. At worst, you commit significant resources to actions that don’t reflect market, competitive and/or internal realities.
Conversely, some examples of common appropriate reasons for growing are:
In order to identify why you need to grow, you can start by looking for evidence that any of these (or other) reasons is applicable to your organization.
For example, growing to achieve pricing power often requires greater concentration in core products, but degree and duration may be limited by the core products’ life cycles. On the other hand, growth through vertical integration normally requires expanding offerings and broadening core capabilities, likely bringing new competitive dynamics into play.
This is a complex question more easily addressed by breaking into two pieces:
Market and competitive space. You should be able to build a point of view by using your own data-driven evidence of:
Through market sensing and voice of the customer analytics, your organization can find and size reasonable growth paths.
Take a deep look into your organization. How you are positioned to capitalize on the market opportunities? You can answer this question through two analyses:
One word of caution when executing these analyses: it is common to be overly optimistic and underestimate your own weaknesses or competitors’ strengths. This has led many organizations to failure by pursuing real market opportunities for which competitors are better positioned.
Only with a realistic assessment of your own capabilities and positioning you can gauge the likelihood for success of a particular path and address any risks inherent in following such.
Growth, for all its advantages, can put tremendous strains on an organization due to the nature of change and added complexity. These strains come in several varieties, ranging from infrastructure to culture to talent.
Important points of stress for supporting and sustaining growth are:
In short, it is important to anticipate the changes and stresses associated with your plan and prepare adequately to handle them effectively.
Being presented with a growth challenge from your stakeholders is an excellent opportunity to look at your operation anew, identify and understand your paradigms, and see what you can do differently.
Following the suggestions in this article will increase the quality of your growth plan by approaching it in a holistic, organized fashion, ultimately increasing the chances your growth objectives will be achieved.