Sat, Aug

Build yourself a growth engine

1. The route to growth

Targets can be very helpful, of course, but directors too often encourage their people to commit to a number - say, annual revenue growth of 7% - even though the path to achieving it isn’t clear. This can lead companies to chase growth in too many directions.

Natura has achieved success in Latin America by staying true to its relationship-focused business model and on launching new products that promote wellbeing, relationships and connection to nature. So, look very closely at your business offering that build relationships with your customers. And measure which products/services on offer produce you the appropriate net profit return with the least customer hassle.

2. Become a super competitor

The most sustainable growth comes from looking within so look to become a ‘super competitor’ in your market – to offer a combination of solutions that give your customers the best results, and that match your net profit requirements.

There is often more headroom for growth in core markets than companies think. By identifying unmet needs in new ways, companies can find growth at home, as well as in ‘adjacencies’ that take advantage of existing capabilities.

3. Model your SBP

A strategic business plan (SBP) is in effect a vehicle for deciding actions - one that every director, every manager, and every employee needs to have in his/her head. The plan itself should be simple – and can appear a poor return for all the effort put in by those who help frame it – but it is the model that simplifies the complexity of a detailed action programme that allocates responsibilities and outlines day-to-day management and purpose.

Only by going through the long process of developing common knowledge, understanding and attitudes to the company - often best done via workshops - does the simplified SBP become a `vehicle` for strategically managing the business.

4. Be a good leader

A good leader lays out a strategy that people will grasp and accept out of trust, then gets everyone working from top to bottom to achieve that strategy. A good leader builds long-term benefit for all of the firm’s stakeholders - not merely short-term shareholder value.

Examining strategy through the lens of `leadership` focuses the topic on the critical tasks that a leader must undertake to create and execute strategy. In choosing this focal point, managers may find that some strategic activities such as industry analysis, competitive analysis, and internal analysis become their second priority because it is not as important for the leader to do them as it is to make sure such activities get done.

5. Develop your vision and mission

The leader distinguishes between vision, which describes where the enterprise is headed, and mission, which articulates why the enterprise exists. A good mission statement encapsulates a firm’s purpose with its unique contribution. For example, Disney’s mission may be stated simply as: “To make people happy.”

Vision is the core of leadership and is at the heart of strategy. The leader’s job is to create the vision for the enterprise in a way that will engage both the imagination and the energies of its people. The vision must be tied to what the firm values, and the leader must make this connection in a way that the organisation can understand, grasp, and support.

The vision and value statements need not be complicated. Howard Schultz earns high marks for bringing Starbucks to where it is today by developing and promoting a strategic vision from the beginning: to make it “the most respected brand name in coffee and for the company to be admired for its corporate responsibility.”

6. Focus

The process of realising the vision is as important as having the foresight and the commitment to achieve the vision. Somewhere just beyond the horizon of vision and before the hard edge of strategy kicks in begins the leader’s work of setting strategic goals and objectives for the organisation. This activity calls for disciplined thinking to narrow the organisation’s focus.

Jim Collins, who presented the traits of eleven outstanding companies in his book ‘Good to Great’, maintains that focused, disciplined thought is a common element of good-to-great leaders and their companies. Great leaders focus their firms on a single, organising idea that unifies and guides all decisions. They boil down complexities into simple ideas that answer three questions: What can we do best? What is the economic denominator that drives our business? What do our core people care passionately about?

Set measurable goals and objectives for the company and build in incentives for attainment, what Collins describes as “catalytic mechanisms”.

7. Focus

Ask how are we as a firm going to employ our resources to achieve our goals? Taking a strategic position means accepting that there will be trade-offs with other positions. It also means choosing what not to do, as well as what to do. Tough choices must be made, and the leader must be the one to force the issue.

But crafting strategy is not all top-down. Gary Hamlet asserts that “revolutionary” strategy making involves getting to the “revolutionaries” who are embedded in every organisation and involving them in the strategy-making process. He advocates taking a “diagonal slice” through the organisation to pick up these revolutionaries who exist at every level and across every function. Furthermore, the leader should make sure that three kinds of people participate in strategy making.

8. Craft your strategy

Kathleen Eisenhardt, professor of strategy and organisation at Stanford University, maintains that a leader must embed strategy in the organisation: choose an excellent team, pick the right roles, and let the rest of the team make the strategic moves. The logic is that if you begin with the `right` people, you can more easily adapt to a fast-changing world because the `right` people already are adaptable and self-motivated.

In industries undergoing rapid change, the organisation structure should be kept flexible so that modular business units can be ‘patched’ onto specific market opportunities as they arise. Good organisational patching requires committed egoless leadership from the executive suite down to the business unit level and an organisational culture that encourages and rewards this behaviour over empire building, politics, and turf battles.

Concepts that provide a simple framework for the leader who would implement good strategy are: embed strategy in the organisation’s culture while focusing the organisation on a few key strategic capabilities; build a good team; and remember that any strategy is temporary at best, so make adjustments as needed.

9. Learn lessons in execution

Gary Hamel and Liisa Vlikangas coined the term “strategic resilience” to describe a firm’s ability to continuously anticipate and adjust to trends that can permanently impair the earning power of that company. The goal is a resilient organisation that is “constantly making its future rather than defending its past.”

In the face of rapid change, a company must conquer denial, nostalgia, and arrogance by cultivating good habits, such as visiting the places where change is taking place and getting to the real ideas and opinions of those who make change. Astute leaders keep their eyes open in order to accurately and honestly appraise strategy decay as it occurs.

At the same time, the leader must see that there is an adequate supply of options that can be cultivated into full-fledged strategies to replace the decaying ones. These may start out as small stakes bets; the most promising ones are then selected and funded to full development. The more strategy options that are created in this fashion, the more resilient the firm will be in the face of change.

A wise leader must consciously re-ask the questions: “What are we all about and where are we going?” and then, “Are we going where we need to go?”

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