Why is business growth a choice - are you making it?

gigcmo
02/08/2022
'Growth' is the buzzword of the day - specifically, 'business growth'. It's just about the only thing that Rishi Sunak, Liz Truss and Keir Starmer can agree on; Business growth is the golden ticket out of inflation and out of recession and into greater economic stability.
 
Of course, growth is something that CEOs and business leaders almost always aspire to. Yet, according to a report by McKinsey, "about a quarter of companies don't grow at all, and between 2010 and 2019, only one in eight achieved more than 10% revenue growth annually."
 
Despite that somewhat bleak outlook, the global management consulting firm believes that not only is sustained, profitable growth possible, but it comes down to choice. So, what choices do you need to make to grow your business, and how could you inadvertently be choosing not to grow?

Are you paying lip service to business growth?

Businesses don't grow by themselves. Like anything, they need nurturing and monitoring, and sometimes course corrections. However, choosing to grow is very different from wanting to grow. Research shows that it requires a particular mindset and actions that growth leaders have in common.
 
For example, the decision to grow isn't just a goal for when things are starting or going well - it also defines actions when the surrounding climate doesn't immediately appear to be in your favour. A recession is a perfect case in point, and many high-growth companies, including Hewlett-Packard, Burger King, Hyatt Hotels, Microsoft, and Airbnb, were founded during economic downturns.
 
The McKinsey report, Choosing to grow: The leader's blueprint, also cited the example of US-based retailer Target:
 
"[They] managed to deliver growth during each of the last two recessions. In 2000, Target doubled down on growth investments, adding new locations, products, and partnerships that resulted in double-digit growth for sales and profits. In 2008, Target analysed customer trends and expanded its food offerings to include more fresh meat and produce; the food category has since added billions to annual revenue. In 2020, Target achieved record growth during the COVID-19 pandemic by investing consistently in online services and accelerating its ability to use stores as distribution centres and enable online-order pickups from their parking lots."
Roaring Out of Recession in the Harvard Business Review added: "During the 2000 recession, Target increased its marketing and sales expenditures by 20% and its capital expenditures by 50% over pre-recession levels."

What do business growth leaders have in common?

To understand the difference between wanting to grow and choosing to grow, it helps to appreciate some of the core stats in business growth around the world. McKinsey noted the following, which we found insightful:
  • Growth leaders generate 80% more shareholder value than their peers over a 10-year period.
  • Only one in 10 S&P 500 companies reported growth above GDP for more than 30 years.
  • Executives believe 50% of their revenues will come from new products, services, or businesses within the next five years.

Five key business growth mindsets

McKinsey identifies five key business growth mindsets and notes that businesses displaying at least three of these are 2.4 times more likely to profitably outgrow their peers:
  • They communicate their growth story internally and externally.
  • They have a clear, multi-year growth plan and are not inhibited by needing to show short-term results.
  • They get things done - prioritising speed over perfection.
  • They realise they won't achieve everything and make multiple long-term growth bets instead of one or two.
  • They seek to understand customers on a human level through a combination of formal and informal approaches.

The three business growth pathways

The Choosing to Grow report also notes that each growth leader tends to focus on three clear business growth pathways rather than just one. These are:
  • Expanding the core business
  • Innovating into new markets and adjacencies
  • Purposefully pursuing opportunities for breakthrough growth through new-business building or mergers and acquisitions (M&A)
That said, these three areas are not given equal weight. Typically, the research found that core business accounted for between 80-90% of growth, while the others were weighted at 12% and 6%, respectively, depending on the industry. 

Listen to your target market - not just the economy

One of the notable things to come out of the report - as well as our knowledge and experience of business growth leaders - is that they are in touch with the changing market and the requirements of their customers. 
 
This is an almost impossible thing to achieve without an outside perspective. Still, in a digital world, we are fortunate to have access to the capabilities that give more customer and market insights than ever before. For example, advanced analytics can improve the customer experience and client lifetime value. The report said: "growth leaders are 60% more likely to have successfully used AI and advanced analytics to predict customer behaviours and become a "sensing and predicting" organisation".
 
However, business leaders who are determined toward growth understand that this is information through which organisations can understand people - their customers. Rather than trying to be all things to all people, they use the data to inform, improve and innovate the customer experience in line with their changing wants and needs and the evolution of a competitive market space.
 
We have already mentioned the Target example. Another is Amazon, which famously expanded its e-commerce platform into public cloud services through Amazon Web Services (AWS). McKinsey said: "By leveraging its core competencies of brand and commercial strength, it built AWS into a business that generated $62 billion revenue."
 
The key here was building on the core business but packaging it for the needs of today. It's a commitment to innovation, identifying and understanding the needs and wants of the target market and existing customers, and focusing on the customer experience with a view to customer retention and acquisition. 

Getting the Board on side

Another essential facet of business growth lies in the capacity to change course and business leadership with a mandate to work towards long-term goals.
 
Many business leaders come up against challenges in their short-term obligations to the Board and shareholders. The most successful businesses have leaders who are sufficiently tuned in and empowered that they can and will make agile changes to strategy as things happen in the short-term. Still, they are held to account against long-term goals and are therefore not strong-armed into making rash decisions out of fear. 
 
Having that level of understanding and autonomy requires trust, clear communication, long-term vision and the buy-in of the Board to commit to long-term growth and investment (preferably against multiple goals, as mentioned before). Gaining that buy-in is something our CEO Whisperers can help you with.

Critical execution enablers for business growth

At gigCMO, we believe that the three pillars to business success and growth are mindset, strategy and capabilities. Sure enough, the research agrees. The last key to the business growth puzzle is the execution, having the capabilities and executing plans well for both long- and short-term growth. McKinsey cites the critical set of execution enablers as: 
  • Operating model and resource allocation
  • Ecosystems
  • M&A
  • Joint ventures and alliances
  • Functional capabilities
This can also mean making strategic decisions about how you access different capabilities. The modern world, with remote, gig and digital working, provides various options that support business growth and savvy budget management. 
 
Functional capabilities are essential, and assessing how best to access them to meet your needs is vital for business growth. In the gig economy, those skills don't always need to be internal - they should be looked at based on return and requirement.  
 
Knowing where your specialist knowledge lies is a crucial part of business development. Growth leaders get this and often look outside their business for access to complementary skills and capabilities to scale innovation and growth. That often includes M&A strategies. These create ecosystems where they can enhance their customer experience and offering.
 
However, in another space, that kind of lateral thinking also allows you to access strategic support differently. For example, employing a fractional model for the role of CMO. gigCMO delivers from day one with a proven playbook to increase your return on your marketing investment.
 
The key to business growth is in the way business leaders think. Those whose mindset is firmly on growth, consider it at every juncture - not only when they feel comfortable. It isn't about ignoring your surrounding circumstances - it's about understanding them and viewing them from a growth perspective.
 
It is about knowing your market, understanding the data and analysing your information. It all comes back to three things: mindset, strategy and capabilities, then tying them all to your aspirations and KPIs. Committing to growth changes how business leaders behave, manage risk, invest and organise businesses. What decision are you making?