Copyright Exigent Ventures Ltd 2010-
Growing a business is a challenge in its own right, growing a business in an environment of high growth is doubly difficult. To get an idea of just how difficult that is you only have to look at how few businesses manage to sustain high growth (20%pa) over say 4 years; and what a tiny percentage of those will achieve this state for a decade. So be under no illusion sustaining high growth is a major challenge.
So what makes it so difficult? It is my contention that too many businesses focus on the wrong issue. In any business there are two basic components that need to grow together sales and the organisation. Sales is the easy bit. OK so that’s a bit of an oversimplification. Growing sales is tough, how tough, depends to a significant degree on market growth. It is self evident that its harder to achieve high growth in a slow growing or even stagnant market compared to a market which is also in high growth. Some might even say that growing at 35% when your market is growing at 50% is actually under-
Why is it so difficult? Firstly, because it involves managing multiple disciplines successfully not just one. Further these different functions have to, as far as possible, be kept in balance along the way. In addition the matching of organisation to sales has to be close enough to allow the business to make a profit sufficient to allow it to reinvest in maintaining growth. This is because for the most part businesses have to rely on their own cash generation to fund growth. There are businesses that generate extra ordinary growth but this usually only possible because they have access to extra ordinary amounts of cash. Those cases aside its up to the business owner to fund his own growth.
To illustrate this in a different way, let's use the analogy of a hammer thrower. At its basics you pick up the hammer rotate across the circle and hurl it into the distance. In reality it is a very technically demanding sport. The key to success is to remain in control even though your rotate faster and faster across the circle before launching the hammer into the distance. In order to be successful the hammer thrower needs to stay ahead of the hammer. This means that the hammer stays slightly behind the throwers rotation so that they retain control. If however the hammer gets ahead of the thrower then control switches immediately from the thrower to the hammer as they are in effect being pulled around by the hammer. The result is that the subsequent throw is out of control and either it crashes into the side netting or if by chance it does make the opening it has no great distance or direction. The problem for the hammer thrower is that if the hammer gets ahead of him it is impossible to slow the ball down a little bit to get back in control. Slowing down inevitably results in sufficient loss of momentum for the hammer to just falls to the ground. If we read sales growth for the hammer and organisational growth for the thrower we can see that if organisational growth falls behind sales growth the only way for the position to correct itself is for sales growth to slow. The problem is, that like the hammer falling to the floor, sales growth tends to stall completely.
This common occurrence is evidenced by what I call "shooting star" businesses that shine brightly, for a brief time then disappear. These are businesses that grow very rapidly for a year or so but then the wheels come off management spends the next year to 18 months clearing up the mess. Significantly this experience is so painful that the business often makes a conscious decision to avoid high growth in the future.
Secondly, it requires a very broad range of business knowledge and expertise. Its something that few business owners are aware of, especially in the early stages when often they are struggling to make the mind shift from being an exponent of what they do to being the MD of a business that provides those products or services Even if they are aware of it few business owners have thought about managing the impact of growth or assessing the interconnections between functions which accentuate both good and bad decisions. I've put them into seven areas. They are:
Vision, Culture, Strategy and Planning, Talent Management, Financial Management & Control, Business Processes and Business Development. The first are about leadership and infrastructure. The other 5 look at key business activities but will be much more effective if the infrastructure is in place.
The challenge for a business in maintaining high growth is to grow the organisation consistently over time to match sales. In supporting businesses to understand and undertake this challenge in a knowledgeable way we are much more like to provide sustainable high growth businesses.
|Definition of High Growth
|High Growth Challenge
|Strategy and Planning
|Financial Management and Control
|Systems and Processes
|The High Growth Challenge
|Matching Organisational and Sales Growth
|The Impact of Badly Managed Growth
|Its All About Culture
|Healthy Culture Delivers Better Business Performance
|Using Your Culture for Competitive Advantage
|Good Culture and Return on Investment
|Are You Winning on the Cultural Battleground?
|How a Strong Culture Improves Your ROI with New Recruits
|The Importance of Planning
|Getting Your Vision
|Building A Structured Sales Process
|How To Ruin Your Sales Efforts With One Question
|The 6 Signs of a Dysfunctional Board