This is a guest post by Keary Crawford and Wayne Simmons, the authors of “Growth Thinking”
“If it’s not growing, it’s going to die.” Michael Eisner, Former CEO, Walt Disney Company
The relationship between politics and business growth has long been a flashpoint between competing political ideologies.
Reinforcing the idea that growth is political, terms like sequestration, quantitative easing and austerity are now being viewed as the determining factors in whether companies can grow in the future. This is, of course, a myth.
Companies that are inherently growth-focused replace political ideology with the pragmatism needed to achieve and sustain growth. These companies acknowledge that they have virtually no control over political outcomes, and that some level of political volatility will always be present in the business environment. From this understanding, rather than be transfixed or even paralyzed by these factors, they look to convert the ever-changing political winds into opportunities for growth and expansion.
The myth that growth is political is one of many myths that can inhibit the ambition and future growth prospects of companies.
As the pursuit of business growth becomes even more urgent, companies must overcome these myths, some of which include:
Companies Can Buy Growth
Modern finance encourages companies to use mergers and acquisitions to “buy growth.” This process results in the application of favorable accounting treatment that allows companies to adjust their growth rates retroactively— a proxy for real revenue growth. Growth-focused companies don’t buy growth, rather they focus their M&A activities on emerging technologies and complementary offerings that provide them with the differentiation, first-mover advantage and critical mass required to drive high growth.
Finance creates growth
In some finance-dominated corporate environments, growth can be viewed as a mathematical output of complex, internally focused formulas and financial engineering. In the 1990s, for example, while revenues fluctuated or generally trended downward, Exxon was famous for building its culture and communicating its value by using the internal metric of return on capital employed (ROCE). In contrast, growth-focused companies view their health and viability, first and foremost, through the ultimate metric of top-line revenue growth and their ability to sustain that growth. Internal metrics are critical, but top-line revenue growth is an outside-in measure that determines the ultimate outcome—the rate at which companies are creating value for customers.
More growth equals more jobs
In many industries, growth has become synonymous with an expansion in hiring. Business leaders exacerbate this misconception by measuring their “status” by the number of the people working under them. However, as the Federal Reserve Bank of Chicago reports, “work that took 1,000 people in 1950 now requires only 170 people.”
Growth-focused companies concentrate on productivity relative to revenue growth, rather than headcount, to determine their competitive advantages and the long-term sustainability of their enterprises.
Growth is tactical
Many companies view their growth exclusively as a function of their marketing mix and sales force. Unfortunately, marketing campaigns and sales activities are inherently tactical and designed to deliver short-term results.
Growth-focused companies also focus on improving long-term growth prospects by creating highly differentiated customer value propositions and pursuing first-mover advantages. This approach takes companies from tactically fulfilling demand to strategically creating the new demand that leads to high growth.
Growth is a “black art”
With well-known stories about Silicon Valley startups and breakthrough companies going from dorm rooms to oversubscribed IPOs, high-growth can be easily viewed as a pop culture phenomenon rooted in some sort of “black art.”
In practice, regardless of the size, growth-focused companies go through an entrepreneurial thought process similar to that of a startup. This often involves using outside-in observation to formulate a divergent view of the future, applying intellectual curiosity to identify areas of opportunity within that future, and executing the ability to convert these hidden opportunities into high growth.
Growth-focused companies dispel the many myths associated with growth by focusing on the factors that really determine business growth:
- Reframe market volatility to uncover hidden sources of growth.
- Reposition tangible and intangible assets to improve future growth prospects.
- Renew products, services, and experiences to create unique sources of value and differentiation.
- Realign the competitive landscape by strategically changing the basis of competition.
- Reinvent business models to create structural competitive advantages.
Left unchecked, the many myths associated with business growth can be paralyzing. Fortunately, individual companies can take a different approach by formulating their own views and taking preemptive action to achieve and sustain business growth.
Wayne Simmons and Keary Crawford are the founders of The Growth Strategy Co. From their research, writing and experiences as successful serial entrepreneurs, in the spring of 2013, they will be launching GrowthCloud, an enterprise SaaS platform for business growth. For more strategies to achieve sustainable business growth, read their book “GrowthThinking: Building the New Growth Enterprise”.