In this post, we discuss the hard, cold facts about growth. I hope you will enjoy these interesting statistics I uncovered during my doctoral research.
Fact #1: Most Companies seek to grow their business.
The majority of companies are seeking to grow their business. Nine in ten companies are seeking growth. Is your company one of these nine?
Fact #2: Companies are ambitious in terms of their growth aspiration.
A lot of companies put ambitious growth targets. The average target 5-year growth for Revenue is 100%, i.e., to double their revenue in 5 years. Similarly, the average target 5-year growth for Profit (EBITDA) is 400%, i.e., to quadruple their EBITDA in 5 years. How ambitious are your company's growth targets when compared to the averages?
Fact #3: However, growth is hard, and few companies reach their goal.
Despite their high aspiration, most companies fail to meet their goal… Only 2% managed to achieve their growth targets. This suggests that there are many bad strategies out there. Perhaps we can learn something by analyzing this successful 2 %.
Fact #4: Market Leaders grow faster than other companies, even in non-conducive markets.
It has long been known that a company’s profitability depends on which industry it plays. Think of Porter’s 5-forces: some industries have high profitability due to conducive forces; others have low profitability due to non-conducive forces.
However, when it comes to growth, performance depends more on market leadership than on industry. Meaning: even if you are in a difficult market, you can still grow fast if you are a market leader. And attaining the leadership position is a matter of having a Winning Strategy!
Fact #5: To become a Market Leader, you need to focus and become great at (at least) one thing.
Market Leadership is about having a competitive advantage, i.e., great at (at least) one thing. 95% of companies that become market leaders have at least one overwhelmingly undisputable strength in their core business.
My framework for this is the Shield and Spear framework:
To create a Shield, companies must invest to meet all the minimum requirements/standards expected in the industry. Think Food Safety for a bakery.
To create a Spear, companies must invest in a select few critical capabilities to the maximum possible extent. This means companies must be great in one thing that matters most to the customers – instead of trying to be good at everything (which makes it hard to be great at anything).
Fact #6: There is no single source of competitive advantage.
When we look at the market leaders, no single capability explains their leadership, i.e., their leadership is driven by different capabilities. In other words, any company can be a market leader – as long as you are choosing a capability that matters most to your customer. There are many sources of competitive advantage:
Fact #7: Most growth comes from your core or close to it.
Companies often mistakenly diversify when they want to grow. They choose to enter unrelated businesses. This move is wrong, as most adjacency moves fail. Research shows us that market leaders grow by focusing on their core or sticking close to their core business.
In other words, being disciplined and staying as close as possible to the core are the keys to successful growth. Instead of taking massive diversification, grow slowly via a series of one-step moves.
Fact #8: Bad luck happens, and you need to adapt quickly.
Most companies encounter challenges in their path to growth. But the most successful ones know how to mitigate and adapt, especially during bad times.
Fact #9: The soft stuff matters, whatever you say.
Most challenges for growth actually come from the inside. The main barriers to growth are mostly the internal soft stuff, not the external reasons. If you are losing on the inside, it is impossible for you to win on the outside. This is why a Winning Strategy pays close attention to the internal soft stuff.
If you are interested to learn more about strategy, I regularly write about Winning Strategy here.
Alternatively, check my book, The GOSPEL of Strategy, a comprehensive guide to developing and implementing winning business strategies designed specifically for CEOs.
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