Studies prove that 90% of successful companies have been unable to sustain growth which creates above average shareholder returns for more than a few years – That’s in spite of these companies employing the best managers in their sector and investing vast sums in their innovation efforts. This supports just how difficult it can be to maintain growth.
Why is this? What can we do differently?
How can entrepreneurs make growing a business less of a black box activity and more predictable?
Why is sustaining growth so difficult?
Here are three of the most common reasons doing the rounds:
1. The managers driving the growth are of below average quality.
Intuitively we know this is unlikely to be true because we recognise how much work goes into recruiting, training and supporting the top execs in big successful companies.
2. The companies have become risk averse over time.
Again, it’s unlikely that this is the root cause because we’ve all seen examples of companies that invest big time in new products, mergers and acquisitions but fail to achieve consistent growth.
3. Creating new growth is unpredictable.
For evidence of this people point to the venture capital industry which assumes that out of every 10 companies that they back, 2 will be outright failures, 6 will limp along and just about survive and 2 will be knock out successes. And of course, it’s these 2 home runs that make the overall investment in the 10 worth it.
Sounds a bit like gambling doesn’t it!
Wouldn’t it be much more comforting for us entrepreneurial types if we could make the whole growth game just a little more predictable?
Rock star Innovation guru, Clayton Christensen, from Harvard University did extensive study of this problem and concluded that one of the biggest problems we have in the study of growth is that just like in the VC industry, growth is treated like a black box activity.
In order to pry open the black box of growing a business he believes we need to “understand the forces that act upon the individuals involved in building businesses – forces that powerfully influence what managers and entrepreneurs choose and cannot choose to do.”
After more than 35 years growing businesses, we feel qualified to explore with you some of the forces that make business growth a subject that can frustrate, perplex and humble some of the best entrepreneurs in the world.
Here are some of the forces (expressed as questions) that we will be exploring over the weeks ahead to provide an insight into how we help our clients bring some additional predictability to the greatest business challenge of all:
- How can we beat the most powerful competition in the market? What strategies are more likely to see us being destroyed by the competition and which could give us a distinct advantage?
- Which new customers should we target to deliver the most stable business growth platform?
- What new products should we develop? How can we be assured that improvements to our existing products and services will equate to our customers happily paying premium prices?
- Which activities should we Outsource, and which should we Insource?
- How can we ensure that our organisational culture is capable of delivering disruptive growth?
- How do we craft a winning strategy?
- Which investment funds will help us succeed, and which could be the kiss of death?