A quick guide on revamping your company’s growth potential
Original Publish Date: February 9, 2021
How do you decide on the ‘right’ growth initiatives to chase?
Take a few seconds to reflect on this question. Do you have a simple answer?
Growth initiatives in companies usually show up as an unrelated mess of efforts to serve multiple agendas promoted by different stakeholders. See if any of the following situations ring true within your own company.
Growth initiatives are…
Often shared as an outcome of sales meetings or sales presentations
Treated as an afterthought and sometimes include ideas past their prime
A list of activities that the competitors are doing at a point in time
What other quirk do you observe around growth initiatives?
I want to propose a straightforward philosophy to think about growth for your business. A philosophy that helps you select the ‘right’ growth initiatives. A philosophy that ensures you cover all the bases by managing a healthy growth portfolio. I call them the 4 types of growth every company should chase at any moment.
Before we jump into the philosophy, let me briefly highlight the difference between deliberate strategy and emergent strategy.
“A deliberate strategy is a roadmap that a company or an individual puts in place and sets out to follow. An emergent strategy involves the decision to follow a new path when opportunity knocks unexpectedly, or when an unexpected roadblock arises.” – Adapted from the paper by Mintzberg & Waters
Now that we know the difference, you’ll notice that the 4 types of growth I want to talk about span the spectrum from “deliberate to emergent” (on the x-axis) and from “exploit to explore” (on the y-axis). Let’s look at how each growth type is crucial to your company.
Growth Type #1 – Present Day Targets (think like a sales rep)
Your company needs to enhance sales right now no matter the growth prospects of the future. You must continue to improve your margins and top line by getting your current products and services out of the door to existing and potential customers.
Therefore, the persona well suited to understand this growth type aligns with a sales rep. The growth initiatives in this quadrant are all about maximizing your sales potential.
Few examples of initiatives in this growth type: using agent networks to cover gaps in sales channels and access multiple markets, improving account management techniques for higher conversion rates, ramping up cross-selling initiatives.
A lot of companies don’t really have any problem coming up with initiatives that fit this growth type!
Growth Type #2 – Strategic Tunnels (think like a C-suite executive)
Remember strategy retreats? Different senior company executives would get together over few days or a week to head out to their version of Walden Pond. The outcome from the retreat normally turns up as a 1 or 3 or 5 or 10-year strategic plan.
We can always debate the effectiveness or nimbleness of these plans. But these strategic plans normally offer a list of priorities for the company in the short, medium, and long term.
This growth type is all about thinking like a CEO (for example) to craft growth initiatives. Understand and identify which markets are going to be crucial for the future of the company. And create a time-bounded plan to “win” in those markets of interest.
Few examples of initiatives in this growth type: adopting a revamped, new product development strategy to tackle new markets, a well-thought HR strategy to attract top talent for assistance in specific markets, a simple acquisition strategy to break into a new market.
Growth Type #3 – Opportunity Windows (think like a private equity firm)
Enough people know about private equity firms at this point. I still want to offer a simplified version of the purpose of these firms to think about growth initiatives under this type.
Private Equity (PE) firms seek to provide investors with a profit usually within 3-5 years by investing in new or existing companies. They normally buy companies to increase their value by implementing growth plans, process improvements as part of their range of strategies. Finally, the PE firms “exit their investment by either selling the company to another PE firm or a strategic buyer or maybe even going in for an IPO”.
In a nutshell, PE firms unlock a window of opportunity in a market or through a firm’s operations in certain markets that drive their investment with a plan to increase value and exit profitably in a time-sensitive manner.
Few examples of initiatives in this growth type: repositioning an existing portfolio of products with few modifications to enter a new market undergoing a window of growth due to regulations, solving a temporary bottleneck in a customer’s state of operations, outsourcing to achieve scale and improve project economics for a brief demand spike in a market.
Growth Type #4 – Minimum Viable Bets (think like a venture capitalist)
Venture Capitalists (VCs) make long-term investments in startups capable of disrupting markets while showing a high potential for growth – for example, VCs can expect more than 5 times their initial investment after 8-10 years. The sizeable return on investment occurs when the startup goes the IPO route or gets acquired by another company.
Despite the big payoffs, the success rates of VC investments are relatively low. Some estimates even show that “65% of venture capital-backed deals fail to return investment, and only 4% make substantial returns”.
Adopting the mindset of a venture capitalist forces you to avoid overvaluing the short term. An unpredictable future calls for calculated bets on technologies, customer preferences, new regulations, ESG expectations, and much more. Spreading several minimum viable bets across different future scenarios helps a company to be as future proof as one can expect to be. Plus, it balances out the high failure rates.
Few examples of initiatives in this growth type: funding promising startups working on specific disruptive technologies in your competitive arena to better anticipate changes to your business, university partnerships to drive research into the latest cross-industry trends as it applies to your technical challenges, a resident incubator aimed at launching few businesses per year to push your current businesses “out of work”.
My challenge to you is as follows. List all the active growth initiatives in your company. Group them under each growth type per their respective descriptions.
What do you see?
Do you have a well-balanced growth portfolio? Or are you heavily betting on the short-term? Are you risking your portfolio by focusing more on the emerging trends? Or are you strictly making a few big bets on narrow growth opportunities?
The 4 types of growth like diversification in the stock market helps you come out on top no matter the timeline.