Growth is Hard

Columbia Business School professor Rita Gunther McGrath writes that only 8% of the 5,000 companies with over $1 billion in revenues grew sales by 5% annually over a 5 year period, and only 4% grew net income by at least 5% annually.* Compounding the challenge are the prevailing conditions found in many markets:

• The new product failure rate is repugnantly high: estimates range from a minimum of 40% to as high as 95%; 

• Few completely new categories have emerged in recent years;

• Risk aversion results in few real disruptive market strategies;

• Rivalry is intense and along many dimensions;

• The role of channels is becoming ever more pervasive and powerful; and

• Cost pressures continue to escalate, absorbing significant company resources to address.

Companies can beat the odds through a structured approach (chart):

• Marketplace insight – What is the customer need or problem a new growth initiative will resolve? How have recent competitive and supplier initiatives and technological developments impacted customer needs? What is going on in competitors’ minds, what are they planning, and how will they respond to our initiatives?

• Opportunity assessment and selection – How can we extend current capabilities to address new opportunities or change the nature of competition? How do we develop and test new growth opportunities beyond our current strategy? Which customer segments will we choose to serve? Which will we not serve?

• Strategy – How do we resolve a market problem / need in a valuable and differentiated manner? What is the value proposition? How will we capture value, what scope of activities will we perform and how will we protect our profit? 

• Organization alignment – What processes, systems, structures, and incentives need to be changed? What will inhibit successful execution of the growth strategy: culture, mindsets, resources, incentives?

• Execution – What specific actions will deliver the product / offering and profitably capture value? How will we measure success? How will we monitor results?

*McGrath, Rita Gunther, “How the Growth Outliers Did It,” Harvard Business Review, January – February 2012