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Growing Better Business

Growing Better Business. The Challenge of Sustainable Business Growth. Growth – The great statistical anomaly. We live in a growth addicted world. Purveyors : Analysts, journalists, boards consultants and academics. No such thing as mature businesses only mature

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Growing Better Business

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  1. Growing Better Business The Challenge of Sustainable Business Growth

  2. Growth – The great statistical anomaly We live in a growth addicted world Purveyors : Analysts, journalists, boards consultants and academics No such thing as mature businesses only mature mindsets. Innovation and blue sky (disruptive ) strategies are the key to sustainable growth We need different growth frameworks, thinking tools analytical techniques and mindsets The Pursuit of Growth Significant amounts of shareholder value is destroyed in the legitimate pursuit of revenue and earnings growth Significant amounts of time, money and energy are invested in initiatives aimed at growing businesses Study after study reiterates that never ending growth is a delusion, a statistical anomaly that very few companies achieve

  3. The Presentation at a Glance What do the stats tell us about growth Potential interpretations Approaches to business growth Growth and the business lifecycle Thinking Tools: Selecting opportunities that fit Strategic Growth Assessment

  4. What do the Stats Tell Us 1 in 17 companies world wide are able to sustainably grow both Rev + Earnings in real terms for 10 consecutive years Less than 1% companies world wide are able to sustainably grow both Rev + Earnings in real terms for > 10 consecutive years 3700 US/Non US co’s – Rev > $500m 3.3% profitably grow top and bottom line for 7 consecutive years 21 of 3700 companies could achieve this over 20 years Corporate Strategy Board Less than 20% of new corporate ventures generate returns > WACC of the parent Earnings growth rates are exceeding revenue growth rates (mid 90+) “ I am prepared to wager a very significant sum that fewer than 5% of profitable companies in 2000 will attain 15% annual growth in EPS over the next 20 years” Warren Buffet

  5. What do the Stats Tell Us Performance Category Number of Companies (Highest Performers 12.8%) Superior Performance 138 30 Superior Performance By Revenue Growth Superior Performance By Profitability 99 Strongly preferred organic growth with acquisitions never being transformative Superior Performance by both Revenue and Profitability 9 Higher than average market – to – book value Sample – 1070 companies, across 17 industries, revenue > $5b, 1994 – 2004 Profit Measurement (Industry Specific ) EBIT, ROCE, ROE The Mckinsey Quarterly: April 2007 – Devan, Klusas, Ruefli

  6. Growth Options Organically New Markets Extensions Complimentary New Segments New Products New Profit Pools Indirect Strategic Alliance Product Market New Channels Adjacencies Core Business New Ventures Direct Joint Venture Diversification Cust Geo Area On-Line New Customers National Acquisition Micro Segmentation International New Segments Value Chain Backward Forward Minority Stake Sell Capabilities

  7. Why is Growth So Tough “Position yourself correctly and manage the operational fundamentals and growth will occur” Markets Profit Pools Where you compete Understanding all the options is complex Making good choices, consistently Contextual and Lifecycle Specific Imperfect Information Expected at all costs How you compete What you use to compete Business Model Offerings Competencies Capabilities

  8. Competitive Advantage Competitiveness • Durability • Transparency (Identifiable) • Transferability • Replicability (Complexity) • Non substitutability Exploit internal capabilities relative to external opportunities Companies are unique collections of resources capabilities and distinctive competencies Distinctive Capabilities Resources + Capabilities Isolating Mechanisms Diffusion Protection Rare skills that your company has that are valued and paid for by clients Sustainability

  9. Focus - Develop the Core Role in Value Creation H Non Core Inner Core Focus Core Insufficient clarity of what the core capabilities need to be/are Non Essential L L H Degree of Differentiation Are they valued by customers Are they difficult to acquire Are they difficult to imitate Sustainable competitive advantage Underpinned by causal ambiguity (Tacit skills - complexity - specificity)

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