Pulling the business levers for growth in recessionary times requires imagination and boldness, says Deloitte
Johannesburg - Business leaders who have extracted all the value they can from their companies during the present unsettled economic times must look beyond the austerity and increased efficiency measures they used for growth, and find new ways to grow their enterprises, says Deloitte.
The duality of growth demands that companies fortify and expand their businesses as they exist today, while simultaneously working on creating the business as it will exist in the future. However, says Mike Vincent, director in Strategy & Innovation at Deloitte, the business reality of today and that of tomorrow is separated by uncertainty which is accompanied by risk and impeded decision making. It is while at this strategic crossroad that errors are made.
“At this stage many companies mistake discussion for strategy. It is useful for companies to ring-fence the “Business of Tomorrow” from the “Business of Today”. Our experience has shown that corporate antibodies tend to kill business of tomorrow opportunities because of the unrelenting focus on the business of today. Capacitating a business of tomorrow focus with a separate team that has the freedom to investigate opportunities will significantly impact the effectiveness and success of new business opportunities. ” A future focus, unconstrained by the lens of history or the constraints of the business of today will allow organisations to identify the white spaces to outcompete its competitors, says Vincent.
In considering the business of tomorrow growth strategies, there are four major questions that must be addressed. These are:
· What is the appropriate growth target?
· Where and how will growth be found?
· How should the growth portfolio be aligned?
· How can the plan be executed.
“Establishing the right growth target requires bold leadership. A growth target can be scientifically derived, but should also include some creative input where the executives of a company contemplate their own aspirations to leave behind a legacy. Externally these factors could vary from the overall momentum of the industry, shareholder expectations, the economy and competition. Internally, account has to be taken of the company’s lifecycle maturity, culture, talent risk tolerance and the executive’s own ambitions.
“A sophisticated growth strategy should also account for uncertainty and the complexity of creating growth in current and future businesses. The last thing that executives need to think about is whether growth opportunities are core or non-core,” says Vincent.
After examining key areas of focus and issues such as pricing optimisation, customer retention and improving offerings, identifying growth opportunities means beginning to move up a strategic continuum. While moving up the continuum and seeking the levers that will spur growth, leaders will find that the choices, as they move further from existing operations, become increasingly blurred and difficult to identify.
The difficulty, says Vincent, is natural as identifying the business growth ‘levers’ becomes progressively more difficult as the company involved progresses from the certainty of today to the unknowns of tomorrow.
“It is useful to know what levers to pull, but creating the full strategy relies on knowing how these choices should be applied to specific markets and offerings. Where the growth plan focuses on core offerings and markets, the emphasis is on enhancing and extending what a company is already doing. In some cases, that can take as much creativity and innovation as creating something entirely new. Clearly, the further away from the core that a company operates, the greater the risk.
“Where growth is reliant on crossing frontiers into new areas of endeavour, it is time to explore, disrupt, create and leave the familiar and safe behind,” says Vincent.
Building the business of tomorrow may require consolidation to create scale, or even divesture to free capital for new uses. Also to be considered is the fact that for each growth lever a company has decided to pull, there may also be an entirely new set of capabilities required.
“Organisations must then define the leadership and talent required to pursue these opportunities. Exploring uncharted territory requires different skills, experiences and inclinations from those required to drive incremental improvements to the things an organisation already does. Finally, different metrics are required to measure success.
“While traditional metrics such as growth rate and market share may be appropriate for the business of today’s initiatives, non-traditional metrics such as growth rate above market, percentage of revenue from first-to-market launches and time to break –may be even better predictors of success when new markets are entered.
“Although many companies invest resources in defining and improving processes, particularly around quality, cost or efficiency, growth and innovation, because they are not as clear-cut, are ignored to a large degree when resources are allocated. This is a mistake. Setting clear targets, identifying the right levers, allocating investments amongst them and managing growth with repeatable energy are undoubtedly the keys to building the foundation for sustainable, long-term growth,” says Vincent.
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