Rethinking Business Growth

Company leaders worldwide seek business growth for many reasons. Whether it is to expand profitability to drive shareholder value, to build a stronger market value in preparation for a transaction, or because it allows them to support and promote their employees and by extension their families and community, growth is desirable for just about every organization. So why is it so elusive?

Would it surprise you to know that according to a study done by Bain and Associates that only 13% of companies are able to sustain a relatively modest single digit growth rate for 10 or more years? What about the rest? They invest inordinate time and money while enduring substantial stress in trying to get on a growth trajectory that they believe is consistent with the potential of the organization, often with mixed or disappointing results.

A Model for Business Growth

The key to understanding the gap between desiring growth and achieving it is not found in the actions of the organizations which pursue it. A strategic plan by itself won’t help you grow; it is a plan on paper. A great culture won’t turn the company around if the product isn’t innovative enough to capture market attention. All the hard work in the world won’t make a customer buy. It isn’t the activities themselves that matter, it is how the organization approaches them. The sole source of growth regardless of industry is the organic composition of the company—its DNA. I’ve developed a model for business growth that will help organizations correctly diagnose what is holding them back, and in making the changes they need to achieve their growth goals. I call it GrowthDNA.

What is GrowthDNA?

Like you and me, organizations have DNA; the genetic imprint that determines outcomes. Unlike human DNA, company DNA can be altered. That DNA consists of how people approach problems, how work is defined, how decisions are made, and how communication takes place. Companies that are mired in tradition, are highly rote and scripted, struggle more with growth than those that are more strategic in their thinking and participatory in their behaviors.

There are four essential strands of GrowthDNA. Each of these strands is distinct but they are also interconnected. All four strands must be present to achieve sustainable and significant growth results, and all four must be continually strengthened to sustain that growth. The four essential strands of GrowthDNA are:

  1. Confidence based on market intelligence
  2. Clarity created through strategy
  3. Commitment from leadership
  4. Culture that drives performance

Let’s look at each of these in more detail, and explore what might need to be done in the organization to begin building each one.

Confidence based on market intelligence

The source of information on which important decisions are made is critical to success. In today’s business environment where most organizations are pressed for time and leaders have years of industry experience, business decisions are too often made using executive insight and industry standards. The problem with that is that past experience is not always relevant, given the accelerating pace of market change. Relentless market pressure requires the organization to take a different approach—an “outside-in” approach –to developing growth strategy and solving daily business problems. Business leaders need relevant market facts, not antidotes. They need a solid understanding of what customers want.

Significant growth doesn’t come from doing something slightly better than competitors. Often it requires looking at what is going on beyond the industry in which the organization competes to adapt and apply new ideas. Market intelligence is a combination of good internal operational knowledge about what is needed to run the company balanced with insights about what is expected and desired by today’s customers. That kind of market intelligence gives organizations the confidence to think and act boldly. This is the first strand of GrowthDNA.
Market Intelligence spawns growth because it is fact-based. Facts are not emotional or experiential. They provide a greater degree of objectivity in business decision-making, they promote alignment in understanding across different business functions, and more often than you might think, they debunk company lore. Great leaders use data because they understand that new insights combined with industry knowledge provide superior and relevant solutions– a powerful and winning combination.

Clarity created through strategy

Strategy answers the question of how an organization will win in the market. It is not a list of actions but rather a single overarching concept that guides every decision of the organization. Like a compass, it navigates the company from today to tomorrow. Great strategy, the kind that enables organizations to double or quadruple in size, is not founded on incremental thinking. It requires big ideas rooted in market knowledge. It demands letting go of what an organization has always done to embrace the potential of what could be done. It doesn’t start with what is done now but rather defines what is needed.

Strategy must be extremely clear. In order for strategy to take root in an organization and serve as a driver of performance it must be understood by everyone involved in its implementation, and in the same way. Clarity of strategy is as important as the strategy itself.  Leaders who share strategy without defining what it looks like in the organization are unintentionally undermining results. To be clear, leaders must define what specific changes are needed in the organization, what the new priorities will be (and equally important what they will not be), what contributions are needed from each department and person, how success will be measured and where new ideas and solutions are encouraged.

Strategy is different from what a company makes. Being an industry leader in widgets doesn’t describe why customers buy. When what a company makes is challenged by new technology, which it eventually will be, then the strategy becomes outdated.  Connecting strategy to a specific solution rather than the underlying need jeopardizes long term performance, tying activities to operations rather than market behavior. Good strategy can and should last for many years.

Leaders need to continually assess the clarity of strategy. Strategy needs to be unique to your organization, directional at an enterprise level, broad enough to encourage scalability, and specific enough to be clear. To determine if your strategy is clear ask these questions:

• Can everyone in the organization easily define strategy?
• Does everyone in the organization describe strategy using the same words or phrases?
• Do people know what to say no to?

The clarity that comes from well-defined strategy is the essential second strand of GrowthDNA.

Commitment emanating from leadership

In companies with GrowthDNA, leaders understand their role to be that of coach, not just boss. Coaches are effective at providing the game plan, or strategy, and motivating players to cross the finish line. For growth to occur, the collective brain power of the organization must be engaged. Almost any advantage in business is short-lived or replicable but people and creativity are not. Developing buy-in and encouraging contribution at an individual level is central to success. Commitment of individuals in the organization enable not only the enthusiastic embrace of the company’s priorities, but an acceptance of the responsibility to implement them.

A study published in Harvard Business Review revealed that unrealized growth potential is largely the result, not of market factors or external influences, but of poor communication. That includes things like poorly communicated strategy, activities not clearly defined, unclear accountabilities, organizational silos, and inadequate performance monitoring. Nothing is more important to the successful implementation of growth initiatives than ongoing, consistent, and visible communication about the strategy, its priorities, and progress on both.

Any organization that doesn’t have a purposeful, proactive communication plan that is faithfully implemented is vulnerable to the employee malaise that comes from doing what they are told rather than being inspired to create value. Committed organizations are enthusiastic, proactive, and grass roots innovators. Only leadership has the authority and influence to determine the direction of the company and prioritize investment. It is leadership that must convey and convince those parties necessary for successful implementation the importance of the strategy to all collectively, and individually. Not until leaders feel they are “broken records”, spending far too much time communicating the same critical message, have they likely started achieving traction.

Developing commitment by all stakeholders to contributing to performance, as measured by outcomes not activities, is the third strand of GrowthDNA.

Culture driving performance

The final DNA strand and perhaps the most critical is that of culture. Culture is the collection of behaviors of an organization—derived from shared attitudes, values, goals, and practices– that characterizes an institution or organization. Every organization has a culture—some by default, and some that are purposefully created. Cultures that seek to maximize a department or function, rather than thinking about how that function can contribute to the success of the overall organization, detract from long term growth. That has to be corrected at the top of the house where department leaders are rewarded on overall company performance and not on departmental excellence alone. Further, the leadership team must function as an integrated team, working together to achieve high priority projects that foster growth.

Employees need to be encouraged to contribute ideas and solutions to common problems. All decision makers at every level need to have insight into the criteria necessary for investing in new solutions so they can make thoughtful recommendations enabling decision-making authority to be dispersed. To accomplish that, an “ask, don’t tell” practice is important. For many time-pressed managers just trying to get through the day with dozens of demands, telling employees what needs to be done and how to do it seems most expedient. However, the long-term effects are employees who either don’t know how to think creatively or don’t feel welcome to.

The Gallup organization reminds us every couple of years that nearly 70 percent of employees are actively disengaged. Asking employees what they think they should do encourages them to be knowledgeable—about the customers and competitors so they can contribute “outside-in” ideas, about the company’s financials so they understand the impact of recommendations, and about operations so they understand the internal ramifications of suggestions. Leaders and managers can’t cultivate an involved culture if they themselves are not clear about strategy, priorities, and decision-making parameters. According to Deloitte, 94% of executives believe that a distinctive culture is connected to success but fewer than one in three executives (28%) report that they understand their organization’s culture. Forbes shares that companies with strong cultures saw a 4x increase in revenue growth.

In Turn the ship Around, David Marquet, Retired Naval Captain shares insights about how to engage people and improve performance. Recognizing the power of teamwork and determined to generate more leadership than followship, he challenged traditional leadership practices. Some examples include: Having conservations instead of having meetings, focusing on people over technology, augmenting direction with rich, contextual, informal communication, and giving control rather than take it. The fourth strand, a growth-minded culture, generating engaged and empowered employees, is essential for achieving and especially sustaining next-stage business growth.

What next?

In next week’s post, I will reveal how these four strands connect and interact to produce the results you are seeking.

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