5 Counterintuitive Facts About Growth Strategy

Growth is rarely accidental

While there are certainly anecdotal examples where businesses or products were unexpectedly discovered by a new market segment and sales grew exponentially, seemingly out of the blue, overnight—Mane & Tail shampoo jumping from an animal care product to the traditional beauty market, or Avon Skin So Soft moisturizing lotion being adopted as insect repellent—waiting for the magic to happen is not a growth strategy. Creating a successful growth strategy is complicated and the path forward can be, at times, counterintuitive. If you’re charged with creating a growth strategy, here are five counterintuitive facts you should consider before finalizing your plans.

 

1.    You can’t hack your way to sustainable growth

There are myriad articles floating around the internet claiming growth is few simple “hacks” away. Growth hacking is a term coined in Silicon Valley that encompasses any number of ways to acquire users/customers/accounts with no regard for cost of acquisition, scalability or sustainability. The driving force behind growth hacking is that among certain investor communities, the growth itself determines value, not the underlying financial viability of the model. And if your plan is to secure a financial exit prior to the bottom falling out, it’s a seemingly logical choice for a budding startup. But enterprise level businesses that are concerned with creating sustainable and profitable growth should look more sound analysis and planning, and to less fairy dust and magical thinking. 

 

2.    You should actually be thinking more short term

If your business plan is the entire game of chess (5 years), your growth plan is more about executing your next few moves (90-days to 2 years). Your growth strategy needs to be aligned with your business strategy, of course, but they have different objectives. Your business plan may offer a high-level view of how to create a more sustainable and defensible long-term market position whereas growth planning should remain agile and adjust to fluctuating market conditions like increasing share or achieving specific revenue or profitability goals. 

 

3.    Sometimes you grow faster by saying “no”

At first blush, it’s easy to think that growth is simply about selling to more customers. But the truth is, not all customers are equally good for the business. No company has unlimited time and resources. Focusing time and resources against only those customers that can be most easily acquired and contribute most positively to the bottom line can not only improves returns, it can have an accelerating effect by signaling and clarifying market positioning to distribution partners and customers, alike.

 

4.    It’s nearly impossible to grow sustainably by reducing price

Frequently, businesses will effectively buy market share through price reductions. The thinking usually goes, “If we cut the price five percent, and we get a ten percent increase in sales, the reduction has more than paid for itself!” But where that reasoning is flawed is when you realize most businesses operate at profit margins of less than 10 percent of sales. In this case, assuming the theoretical company has a normal operating margin of ten percent if you reduce the price five percent, you actually need to double sales (using no additional manpower or resources) just to realize the same profit in real dollars they were achieving before the price reduction. Sometimes competition will force concessions on price, but it should be your last option.

 

5.    You don’t need end goals

Don’t assume this means you shouldn’t measure performance. Quite the opposite. But the measures that matter are more about ongoing momentum, direction and acceleration than an end state. Are increases in sales or revenue levels by product or service mix aligning with predictions? Is the number of accounts increasing at the expected rate? Are new customers renewing at an acceptable rate? In other words, are your company behaviors resulting in the ongoing market behaviors you need to maintain the desired growth trajectory? 

 

Ultimately, it’s a process

So, in the final metaphor for this post, while a long-term business strategy can be more a set-and-forget (the destination of your trip), your growth strategy is the ongoing monitoring of your speed, acceleration, RPM and mileage along the way.