Can you grow your business? For many corporate leaders, the answer is “of course.” The reality, however, is that roughly one in four businesses simply aren’t growing. From 2010 to 2019, only one in eight businesses grew their revenues by more than 10 percent. That’s according to consulting firm McKinsey & Company, which has analyzed metrics of more than 4,000 companies in the past 15 years and surveyed executives to help business leaders run their companies more efficiently, more effectively, and with better outcomes.
So, what separates those companies that can reliably grow their revenues year after year from those that can’t? One factor may simply be that leaders of high-growth companies are prioritizing growth, a choice that shapes behavior, mindset, risk appetite, and investment decisions across the organization—and have taken decisive action to build a culture that supports bold growth aspirations. “No CEO wakes up in the morning and says they don’t want to grow,” says Jill Zucker, senior partner at McKinsey & Company. “Growth-oriented leaders act decisively to short-term disruptions that can be turned into opportunities, and that means embracing both a mindset to grow and a set of actions that are required.”
Leaders can follow a blueprint to turn their growth mindsets into actions that drive impact.
1. Know where to grow.
“The very first thing we ask executives is, ‘Do you have a growth ambition, and what does that look like?’” says Erik Roth, senior partner at McKinsey & Company. That growth destination should be quantifiable—it can be a revenue target over a specific timeline or a group of key performance indicators (KPIs) that will give leaders confidence that the company is in growth mode. Once that target is chosen, leaders can start allocating resources to make that target a reality.
2. Build organizational buy-in.
Allocating resources is a vote of confidence in these growth plans. It’s one thing for a CEO to make grand declarations about the company’s growth trajectory. It’s another to actually outline a plan to reach those growth targets. Roth notes that employees who know what role they’ll play in driving the company’s growth are more likely to be engaged in the process. “Organizations committed to growing are the ones that take the next step to figure out how to reallocate resources and develop people to have the right capabilities to make it happen,” he says.
3. Turbocharge the core . . .
Companies have several choices to drive sustained revenue growth. The most common is to fall back on what you already do well: McKinsey & Company research has found that some 80% of growth comes from expanding the core of the business. For instance, a company might push resources into finding more customers for its tentpole product line or to expand the market for its key platform. Companies often rely on data to identify opportunities for core growth, from how efficiently a manufacturing plant can be run to the return on investment of marketing. “It’s these operating metrics that can tell you to maximize in the core, so finding a way to unlock growth in the core needs to be a top priority,” Zucker says.
4. . . . but don’t stop there.
“Eighty percent of growth comes from the core, but 20% does not,” Zucker says. “And that 20% is really important, so leaders should look beyond the core.” In fact, McKinsey & Company research notes that companies are 97% more likely to outperform when they invest in multiple pathways for growth. So, what does that look like? For some, it’s taking their business model into new geographical markets or adapting their products and services to another industry. In time, the 20% of new growth that comes from outside the core may provide a much larger slice of the overall company’s growth.
5. Make strategic, programmatic acquisitions.
Mergers and acquisitions account for approximately one-third of the revenue growth among companies in our data set. Buying or merging with another firm can immediately boost a company’s market share or catapult it into new markets more quickly than if it had tried to grow into that space organically. That doesn’t mean, however, that one acquisition is all it will take to change a company’s fortunes. “Big-bang, one-time M&A is not the source of long-term value creation,” Zucker says. “Instead, we found that companies that augment their pursuit of large deals with a programmatic approach to M&A outperform their peers.”
6. Allocate resources built for growth.
Many companies get stuck in a fiscal rut that limits their growth potential. When they set their annual budgets, they simply base those numbers on the previous years’ budget. The problem is that this kind of static resource allocation doesn’t give companies enough financial flexibility to fund innovation that translates to real growth. “Companies that struggle to allocate resources to the best opportunities in the highest growth spaces are the ones that struggle to grow,” Roth says.
7. Embrace change.
Efforts to drive sustained growth can uncover operational gaps that need fixing. Roth recalls one company’s shift to an overseas market that led the firm’s leaders to recognize that they didn’t have the resources they needed. The company needed to overhaul its supply chain process, its manufacturing capabilities, and its business development engine. It also needed to hire hundreds of new employees to support that shift into a new market. It’s the talent question that is often overlooked by companies focusing on driving growth by pumping cash into a new venture. “I would argue that how you allocate talent is equally important,” Zucker says. “And in many ways, talent is a much scarcer asset than capital.”
Recognize your brand’s excellence by applying to this year’s Brands That Matter Awards before the early-rate deadline, May 3.
