Companies and organisations have reacted differently to the economic difficulties, some with failure, some with declining sales and a few with success. As I look back over the last two years, reflecting on my client work and projects and reviewing others, I see a trend in company responses. It can be summarised, simply, as disbelief, cost cutting, staff layoff and trying to sell more. Although I have written it as linear, in reality this has often been circular, with companies seemingly going round in circles trying different things, finding it not to work and then trying something else. I think the way out of these economic difficult times is a company-specific, tailored Growth strategy. Some companies have started to look at a more strategy, concerted and structured approach to generate growth. What I would call ‘Growth Strategy’ – and which is where, I believe, we all should be focussing our energies.
There is only so much cost cutting a company can do, only so many staff to lay off, only so much equipment and technology not to replace or purchase. Cost cutting does not necessarily mean increased sales as so many companies have discovered. Yes, we do need to keep costs contained and in line with sales revenues and profit margins, but I advocate that we need to seek additional sales and search after new customers and markets. This is what I mean by a growth strategy – a planned and structured approach to growing the business in as many different ways as possible resulting in increased sales revenues and bottom line margins.
I think this is true of both the private sector as well as the public/voluntary sectors. I will write about ‘growth strategies in the public/voluntary sectors in another blog – but for now, I will concentrate on what a company growth strategy should look like.
As I reflect and analyse what I see and have done, I think it is possible to write a growth strategy in terms of a simple formula. I think there is value in this as it demystifies strategy into something that people at all levels in the company can understand. This is important because we need our people to actively engage with our growth strategy if we wish for success. In all my successful growth projects with clients, and I have many, there are recurring key themes or components that must be included and optimised for growth to happen. I represent it as this: –
Growth = [CI+ I] . S . R
I explain the terms and my thinking like this:
Growth – I think we need to move away from simply saying growth and try to put a value on it. A successful growth strategy will have a target number and a logical and defined approach for its achievement supported by appropriate milestones. Whilst not all my clients set numeric growth targets experience suggests those who do have more probability of success.
CI = Continuous Improvement. There are two key aspects of growth and one is the relentless pursuit of excellence, what we call Continuous Improvement. It comes from the Japanese word ‘kaisen’ meaning small improvements involving everyone. This is best done as a team or small group series of projects/activities continuously working on real issues at a low level. The benefits from these small improvement projects can best be seen by using the Productivity Triad:
Quality = or rather the Cost of Poor Quality (CoPQ)
Time = time saved is money, but only if you use it to do something else
Cost = hard pounds saved
Research has shown that as much as 15% annually. Can be added to the bottom line for up to around 5 years. It requires commitment, energy and focus and is not easy to do.
I = Innovation. Small improvements by themselves are not enough. The Japanese economy has been in a 10-year recession and still shows poor growth. Breakthrough thinking and the execution of change are required in an ongoing and structured way. Innovation is not easy to understand as it can mean different things to different people. People also find it quite difficult to do on a daily basis that actually creates new or additional value. I ensure that innovation that I work on with clients is focused on the high priority/impact areas such as problem solving, process design, new product/service development, new business model, market niches, customer classifications and delivering customer service in new and exciting ways.
S = Skills. If you want people to work differently, more productively and creatively, then you have to give them new skills. It’s that simple. I have seen much good Organisation Development (OD) fail because of a lack of skill in people, and this is true at all levels from owner/SMT right down to operator level. It’s why in all my client work I ensure a transfer of skills so that when the project is executed and I leave the company has the skills to continue to grow and develop. It’s what is call teaching people how to fish (see my other blog).
R = Receptiveness to Change. Why is it that most OD, improvement projects and growth strategies either fail or at best do not live up to expectations? I think it is the level of receptiveness to change, not just of the company but also of the market in which the company operates. I think it can be written algebraically this way:
R = IC . M
IC is the Internal Company receptiveness for change. All companies are at different and varying levels of organisational development. Some are ready for change, others less so. As I reflect on success and failure, I have developed this simple scale to help put a number on it:
1= Perfect receptivity, usually brought about by a loss of a major contract, substantial fall in sales, staff losses or pending layoffs or a new senior leader or manager.
0.75 = Good receptivity, usually brought about through a wake up call, or a severe shock or warning.
0.5 = Fair receptivity, the usual state of most companies in the current economic times. Everyone knows its bad and change is required, but maybe it’ll not happen to me, my team, or my company.
0.25 = Poor receptivity, not a good situation to be in, a feeling of misplaced belief that it cannot happen here or to me.
0 = Disaster is imminent.
M = is Market Readiness to accept the change. The condition of the market, your competitors, problems and perceptions all have an impact on its readiness or receptivity for change. As I reflect on success and failure, I have developed this simple scale to help put a number on it:
1 = Perfect receptivity, usually brought about by a market failure, sever problems with current solutions, customer awareness of ‘there must be a better way than this’.
0.75 = Good receptivity, usually brought about by knowing and understanding current problems and issues your customers have with your products or services. Good problem solving, process improvement or improved design will be well received by most current customers.
0.5 = Fair receptivity, the usual market reaction to SME’s, companies without strong brands, local businesses, when competing against large multi-national corporates or where your products/services are often seen as commodity like or without clear competitive advantage or differentiation.
0.25 = Poor receptivity, usually where your company is just a small player or one of a large number of players and you have little market impact or influence.
0 = Disaster is imminent.
You will notice in the formula I wrote it as R = IC . M
I believe this is what happens, as the impact is magnified when you multiply the two numbers (or quotients) together, making the lack of receptivity much more impacting.
As a reflect on my work and the work of others, always I am trying to observe patterns, comparisons and differences, trying to see insights and new perspectives. During this last year I have worked with many clients from micro-enterprise, SME through to large corporate, and this framework accurately reflects some of I successes that my clients and I have enjoyed.
This growth framework or formula Growth = [CI+ I] . S . R is best used in two ways, firstly (i) as a framework for a focused and ideally facilitated deep-dive discussion to identify where you should be focussing your efforts and resources for maximum impact and secondly (ii) as a formula to work out some numbers and see just exactly what growth is possible, ideally over a, relatively short, 2-year period. This growth strategy now becomes an important document, helping you in conversations with banks, financial advisers, stakeholders, key customers and suppliers and staff.
Like all these things, it’s easier said than done. I have a range of new thinking tools, techniques, methods and approaches to facilitate clients helping them to design and execute their most appropriate growth strategy, transferring the skills as I go.
I will write about Continuous Improvement and Innovation in my next blogs and explore in more detail how to execute these components of my recommended growth strategy.
Dr Adrian Gundy is an Organisational Development consultant with the Centre for Competitiveness. If you would like to discuss with me how I could assist you design your business growth strategy please contact me email@example.com