Join Anil Gupta for an in-depth discussion in this video The growth imperative, part of Designing Growth Strategies.
- With the exception of small family-run businesses, such as a dry-cleaning shop, it is an imperative for every company to pursue growth. Not doing so will yield one of two outcomes. A sale of the company to another parent, or eventual decline and death. There are four reasons why growth is an imperative for almost every company. First, if your competitors are growing, but you are not, then you are losing market share.
This not only signals that you suffer from competitive disadvantage, but also that you are becoming weaker over time. This is exactly what has played out in the competition between Sears and Walmart. Walmart's more efficient supply chain enabled it to catch up with Sears. At the same time, by continuing to grow faster than Sears, Walmart has also been able to capture greater economies of scale than its competitor.
The result has been that Sears continues to become a smaller and smaller shadow of its former self. Second, without growth, it is hard to imagine how the company can attract or retain top talent. Growth creates opportunities for career advancement. Stagnation does exactly the opposite. Thus, if your company does not grow, it is a near certainty that the people you will attract or retain will be those who are not particularly ambitious, and who do not have promising career prospects elsewhere.
In such a context, your people are more likely to become a source of disadvantage, rather than the opposite. Third, pursuit of growth can serve as a powerful trigger for both innovation and efficiency. Making growth one of the company's key objectives means that you and your team will be eager to steal market share away from competitors. This is never easy, and can be achieved only by beating competitors on the innovation and efficiency frontiers.
In short, the pursuit of growth is an important mechanism through which corporate leaders can keep the company's vitality alive. Last but not least, growth is a key driver of the market value of a company's shares. Without growth, it's almost impossible to increase shareholder value. A company whose share price is going nowhere becomes a sitting duck for an acquirer who sees opportunities for growth, while the company's current leaders do not.
Much as I believe in the centrality of growth as one of the company's key goals, it's critical to remember that what corporate leaders must aim for is profitable growth, rather than growth which is accompanied by growing losses. For growth to yield the four advantages that I just outlined, it needs to be sustainable rather than ephemeral.
This is possible only when growth is accompanied by profits or there are credible prospects that growth will transform a loss-making situation into a profitable one.
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- Recognize the problems a company may encounter if it does not achieve growth.
- Identify high-potential opportunities for growth.
- Identify new customers for existing products.
- Use assessment screens to choose the best opportunity.
- Evaluate partnerships and acquisitions as mechanisms to fuel growth.
- Break down the components of an effective and growth-minded leadership team.