Achieving Profitable Growth – Part 1

Achieving profitable growth is no easy feat.

Consider an annual growth rate in sales and earnings of 4-5%. Most companies believe they can attain this level or better. Sounds reasonable enough.

Yet a study of more than 2000 companies indicated that only about one in ten actually achieve that relatively modest goal over a 10 year period. In other words, nearly 90% of companies fail to achieve that growth objective.

Competitive advantage, by definition, is scarce and fleeting given market forces. The best companies are emulated by those in the middle of the pack, and best practices become commonplace rather than a market-beating strategy. Good strategies emphasize difference vs. direct competitors, potential substitutes or potential entrants.

Business leaders therefore face a growth paradox. In an increasingly turbulent and fast moving world, fewer and fewer companies are able to sustain a modest level of growth for more than a few years. And yet the vast majority of executives feel they have ample opportunity for growth.

The greatest challenge is not the market, but instead the internal complexity that clouds their focus, slows their reaction time and strangles their company’s ability to adapt.

To beat the market, advantages have to be robust and responsive in the face of competitive challenges. While the pressures of keeping up with the market seem intense enough, it is rarely sufficient. Weaker firms win surprisingly often when they display a divergent strategy.

Five Core Growth Pillars

  1. Build a strongly defined and well-differentiated core business – that is developed to its full potential and achieves a leadership position within its market. The most successful businesses are market leaders in their core business.
  2. Utilize that leadership position as it pertains to price, cost and investment opportunities to continue to strengthen the core business and distance oneself from competitors.
  3. Develop raving fans among your customers through sustained value creation. They will not only buy more from you, but will also sing your praises to friends and colleagues thereby reducing your Marketing and Sales costs.
  4. Follow a disciplined approach to expansion in adjacent markets. As companies spread out into new products, new markets and new businesses, the odds of success decline as a ratio of the distance from the core. Disciplined expansion – adding one new element at a time – doubles the probability of success.
  5. Repeat success. Apply your core assets and greatest strengths to new contexts, thereby generating further growth. As Grandma used to say, “stick to your knitting.” As you edge out, make sure you are on solid footing.

Building a solid strategy need not be overly complicated. Just make sure you incorporate a solid foundation to assure it stands the test of time.

Combining Vision and Innovation to Create the Future

© Rich Kohler 2017. All rights reserved. For copies, please contact Rich at rich@rich-kohler.com.

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