Sustainable Growth

As I began the first of 44 articles on Business Growth, Growth that is Fast and Sustainable, what struck me is how this topic is a major economic concern for countries, but there is almost nothing on the subject as a business issue.

A quick review today’s news:
KARACHI: Minister of state for finance and economic affairs Omar Ayub Khan has said the government is focusing on the development of infrastructure, energy and human resource development to sustain and further improve the GDP growth rate of 8.4 percent achieved in the previous financial year.

Brussels: Competitive and Sustainable Growth is one of the four thematic programmes of the Fifth RTD Framework Programme (1998-2002).
Conceived to help solve problems and to respond to the major socio-economic challenges facing Europe, the Programme, with a budget of Euro 2.705 million for the period 1998-2002, has clear targets: to increase economic growth and create new jobs in Europe, by sustaining the innovation effort of European industry towards improved competitiveness and to support Community policies that enable competitive and sustainable development.

And a quick review of today’s web search:
The sustainable growth rate is a measure of how much a firm can grow without borrowing more money. After the firm has passed this rate, it must borrow funds from another source to facilitate growth

G* = Earnings Retention × Asset Utilization × Profitability × Financial Leverage

Resource-Based Model
The currently dominant view of business strategy – resource-based theory – is based on the concept of economic rent and the view of the company as a collection of capabilities. This view of strategy has a coherence and integrative role that places it well ahead of other mechanisms of strategic decision making.

Organizational Capability Approach
"An organizational capability approach nurtures three of the most critical factors essential to achieve superior, sustainable results:

• strategic focus,
• organizational alignment, and
• operating discipline.

Conversely, taking action to achieve strategic focus, organizational alignment, and operating discipline develops capability thinking."

Robert Tomasko: "When it comes to business growth, bigger is not always better. The key to achieving growth is to change the way we think about it. Geniune growth has more to do with reaching maximum potential than reaching maximum size."

OK, so what does this random sample of news and ideas represent?

1. That growth for your business must be clearly defined. Tomasko’s definition that genuine growth is about potential and not size demands that the entrepreneur decide how big are their dreams. This provides the context to analyze the market and identify potential for growth
   


2. Investopedia’s definition of sustainable as maximum growth without borrowing money is aligned with all of our research on the impact of growth on working capital


3. 1000ventures analysis identified two types of growth: resource and capability further narrows the definition to one that is workable for startups, micro and small businesses – given your access to resources, what is the maximum capability your current infrastructure can deliver.

When we first hatched the idea behind Applied Knowledge Laboratories in 2003, our model for sustainable, fast growth reflected the research literature and the reality of North Americans best performing companies.

We kept our scope narrow to the following definition: given the resources available, how does a business maximize everything to grow faster than the market and their industry without securing more money or destroying working capital. This definition leads us to the following

The Growth Equation

Optimum Sustainable Growth = Market Intelligence + Brand Superiority + Talent + Operations

The Components of Best Practices for Sustainable Fast Growth are:

1. Driven by Market Intelligence to


2. Build a plan for Brand Superiority


3. That maximizes your current Talent and


4. Can be flawlessly Executed NOW

Optimum Sustainable Growth - Double the Sales, Double the Margin
The road to sustainable (and fast) growth is not for the weak of heart. Less than 10% of companies in the North America qualify as a "cheetah." It takes sales twice your industry average with margins meeting the same hurdle.

Market Intelligence - The Driver of Competitive Advantage
In order to design a strategy that achieves growth, the company must excel at understanding and applying market intelligence about customers, competitors, and the economy's impact on their industry

1. Keep Current Growth - identify and target most profitable customers to retain


2. Take Business from Competitors - identify their top customers that match your offer - what will it take for them to shift


3. Anticipate Growth - identify where the market is headed - what will it take to be first


4. Move into Comparable Markets - identify and target new markets for existing products & services


5. Invest in New Offers - identify and target new markets to develop new products & services

Brand Superiority - Create a plan for Market Leadership
All successful growth strategies have some common characteristics:

1. Spread the risk - create a portfolio of complementary initiatives


2. Take Small Bites - set up smaller growth objectives in complementary areas - rule of 1%


3. Balanced Initiatives - blend organic growth (existing clients - existing products & services) with new growth


4. Commit to Superior Value - ensure supremacy in one of three areas - price, quality of products & services, overall experience - avoid being average


5. Expand Growth Opportunities - management is the constraint, not market demand


6. Manage for Growth - managing a growth portfolio as a distinct executive function

Talent - Attracting, Developing, Retaining Talent
The challenge is capturing discretionary performance. Performance that is inspired because it is based upon self-management, each of us striving to exceed previous best performance.

Part of the equation is understanding our role in the show; part is having a well-designed job that maximizes our effort, and finally user-friendly methods of tracking performance.

1. Individual Scorecards


2. Corporate, Department, Team Dashboards

Operations - Flawless Execution
The challenge for most companies is to strike a balance between defining process, steps, and roles with the need to provide the flexibility for creativity and innovation. Successful processes are designed to create extraordinary results form normal, consistent performance. Imagine what is possible when the talent is extraordinary!
The 6 Critical Processes of Sustained Growth

1. Delivery of Products & Services


2. Design of New Products & Services


3. New Client Acquisition


4. Organic Growth of Current Accounts


5. Selection & Development of People


6. Performance Self Management