Business growth is a choice. The leadership of the business chooses to grow or not to grow. Choosing not to grow seems ridiculous because the subject of growth is so dominant in general business acumen, whether the perspective is through the lens of economics, investing, sustainability, profitability, market relevance, merger & acquisition…
The thought of a business choosing not to grow seems ridiculous because we assume that this is an intentional choice by leadership, but, often times, it is not about the choice to grow at all.
Deciding to Grow
The choice is about priorities…choosing to make growth a priority. Saying growth is a priority isn’t enough. It sounds good in press communications. It’s great for internal morale. It’s always a hot topic around the strategy table. All of the internal business functions talk about it in some way. The real question to ask is, “How are resources allocated?” Leadership chooses to allocate resources to growth…or they don’t. There are dollars, people and focus prioritized for growth…or there aren’t. Growth, as a side effect of something else, isn’t sustainable. Sustainable growth is intentional…it’s on purpose…there is a focus. A company either intends to grow or it doesn’t. On a macro level, growth is binary.
Some would argue that this point is too oversimplified. That growth isn’t that black and white. At The AxisPointe, we would argue that it actually is that black and white because we’ve seen the scenario over and over again.
Successful companies look at growth from a multidimensional view that requires a finance perspective, an operations perspective, a culture perspective, a market perspective, and, sometimes, a legal perspective. These companies will often also bring in a third party perspective in one or more of these disciplines because 1) they either don’t have the talent in house to address growth in this way or 2) they realize that internal bias or group think is keeping them from getting anywhere. The collaboration of all of these perspectives gives the company a clear path for growth. This is important because, as you see below, there are overlaps in the points of each perspective. These overlaps minimize risk, maximize opportunity and enable a competitive market position. You’ll see the overlaps in each perspective in bold:
The finance perspective accounts for:
- asset utilization
- use of resources
- cash flow and leveraging cash
- costs
- cost/revenue ratios
- cost efficiencies
- profitability
- speed to market
- valuations in M&A
- analysis and decision in M&A
- leveraging opportunities
- leveraging assets
- ability to navigate obstacles
- competitive advantages
- pricing models
- risk assessment
- risk management
- sustainability
The operations perspective accounts for:
- costs
- operational / process efficiencies
- cost efficiencies
- profitability
- competitive advantages
- capacities
- capabilities
- speed to market
- leveraging opportunities
- leveraging assets
- ability to navigate obstacles
- risk assessment
- risk management
- use of resources
- valuations in M&A
- sustainability
The culture perspective accounts for:
- capabilities
- talent acquisition
- use of resources
- asset utilization
- speed to market
- value in marketplaces
- ability to navigate obstacles
- profitability
- leveraging opportunities
- leveraging assets
The market perspective accounts for:
- competitive advantages
- comparative advantages
- asset utilization
- leveraging opportunities
- leveraging assets
- risk assessment
- risk management
- capabilities
- capacities
- costs
- cost efficiencies
- valuations in M&A
- analysis and decision in M&A
- ability to navigate obstacles
- profitability
- speed to market
- pricing models
- value in marketplaces
- relevancy
- sustainability
The legal perspective accounts for:
- ability to legally enter markets
- risk assessment
- risk management
- leveraging opportunities
- leveraging assets
- protecting assets
- legal restrictions
- ability to navigate obstacles
- competitive advantages
- analysis and decision in M&A
In theory, there are a handful of growth strategies that can be applied: a customer-focused strategy, a merger or acquisition strategy, a product or service-driven strategy or a positioning-driven strategy.
In reality, the application of strategy is not this clear-cut. It seems as though a stepped process inside of a predetermined framework would be logical, but the reality is that we have to consider everything at the same time. This is because we have to address short term goals and long term goals in parallel. The voice of the spreadsheet demands that we get to short-term goals as quickly as possible. The voice of sustainability is screaming for the company to not shoot itself in the foot in the long term. If the company is just in it to make money quickly in the short term and intentionally fade off into the sunset, then, by all means, it should live quarter by quarter.
Strategy for growth has many dimensions. Regardless of the focus of the market strategy, the realities are that:
- revenue utilization matters
- cost containment matters
- streamlined operations matter
- the ability to compete in the marketplace to sell products and services matters.
All of these points are co-dependent on each other:
- Revenue is generated by the ability to compete and sell products and services.
- Revenue utilization defines the flow of cash and its priorities.
- Revenue utilization can bring new market opportunities.
- Being more competitive helps to leverage those new market opportunities.
- Cost containment, streamlined operations and the ability to compete all affect profitability.
- The ability to compete determines relevance in both existing and new markets.
- Internal operational capacities and capabilities spur cost savings, new advantages and new revenue streams in markets.
- New capabilities, whether acquired through M&A or R&D, must be translated to internal and external advantages for relevance and the ability to compete.
Intentional growth requires regular conversations across functions.
The Finance function of strategy says:
- The fact is that revenue has a cost to get it and a cost to service it. Where is top-line revenue going to come from? How much is it going to cost to get it?
- When does the company hit profitability?
- Which aspects will be profitable and which ones will not? Is that a problem?
- Are some aspects simply for cash flow and to support more profitable offerings? If so, do we need to grow the aspects that we need for cash flow to have enough cash to support the other offerings?
- Is the growth initiative on its own P&L or does it fold into a single, overall P&L for the company?
- What resources are we going to need? What do we already have?
- What assets can be utilized?
- How much of a burden can our internal teams shoulder for this?
- Is it more efficient to bring in third party partners?
- Do we have to take on debt?
- Are we going to build additional capabilities internally?
- Are we going to merge with a competitor or a competitive peer?
- Are we going to acquire a competitor, a manufacturer or a distributor?
- How is the inflow and outflow of cash going to work?
- How does our pricing structure account for costs and profit?
- What are the risks?
- How much cash do we need in reserves to support or minimize risks?
The Market function of strategy says:
- Customers have a significant role in revenues and profitability. Do we grow with our same customer base? Why or why not?
- How do we best serve customers? Why are we the best choice for them?
- How do we become their first choice?
- How does our pricing structure optimize for profitability while allowing us to remain competitive?
- How elastic is customer demand?
- How do we maintain price integrity or get pricing power?
- What are the obstacles to getting it?
- How are we going to navigate those obstacles?
- How are we best positioned in the market to compete?
- Are we more competitive by building additional internal capabilities or capacities?
- Are we more competitive through a merger or an acquisition?
- Are we selling a little to a lot of customers…a little to fewer customers…or some combination of the two?
- If it’s necessary to get new customers, how are we going to get them?
- How can we leverage assets and networks to sell products and services? Do we need additional infrastructure to sell products and services?
- How do we use resources cost-efficiently?
- How much does the customer experience matter and how do we protect it / improve it?
- How should customer relationships be defined?
- What promises can we make to customers?
- What value propositions really matter? How should they be applied?
- What is the role of Sales? Of Marketing?
- How do we achieve short-term goals and long-term goals?
- What are the risks?
The Operations function of strategy says:
- How much volume will have to be produced? How do we manage that volume?
- What is the structure of any service offerings?
- How do we protect quality control?
- How can we be most efficient without cannibalizing our ability to compete?
- How can we leverage R&D?
- Which capabilities and capacities should be custom and which should be standard?
- How can we minimize costs?
- How should we manage inventory?
- What processes are relevant and valuable?
- What promises can we make to customers?
The Legal perspective is concerned with:
- How do we protect and leverage any IP?
- How do we remain compliant to avoid fines or legal action?
- What communications or behaviors must we be concerned with?
- How should documents be structured?
- How should strategic relationships/partnerships be structured?
- How should mergers or acquisitions be structured?
- Are there any legal implications and how should they be dealt with?
- What are the risks?
All of these perspectives are imperative for sustainable business growth. There is an ongoing conversation among all of these perspectives. Growth is not easy. It takes extreme focus and intent. At The AxisPointe, we have seen businesses and organizations struggle with staying focused and missing the details in execution. The ones that succeed maintain focus, apply strategy and pay attention to the details. Business growth is a choice that is made through prioritization and allocation of resources. This enables internal focus and sustainability in the market.
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