Business Strategy Pdf – Despite what many people believe, a comprehensive growth strategy is not just about getting more customers and selling more products. I mean, getting clients is key but there’s a lot more to it
If you want to learn about different ways to target more customers and expand your existing businesses, I encourage you to download a free copy of my book.
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, where I explain how established businesses and startups are leveraging artificial intelligence and other technologies in their sales outreach.
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But if you’re looking for a comprehensive strategic growth plan, you’re on the right page, so read on.
As we explained in our principles of business strategy, the first order of business for any executive is to control the core business, which means ensuring that the firm’s products and services are profitable and have a profitable market position.
Once you achieve that, you can turn your attention to growth, and start thinking about different ways to increase the value of your business for the foreseeable future.
In an ideal world, we would expect executives to only initiate growth beneficial to their organization, but in reality, we have all seen that pressure from shareholders and investors, and misguided incentives, can sometimes subvert company guidelines. Continue to grow
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Generally, we say that a growth strategy is comprehensive if a combination of the following conditions are met:
For this reason, you should always look at the “cost” of your development efforts (both financial and non-financial) and how sustainable you expect these efforts to be in the long term.
In this article, we explore the different ways you can grow any business and offer some ideas to help you plan your growth. Here are some of the things we will cover:
We have included some charts, links and other references to help improve your understanding of a good growth strategy. We’ve also created a mind map with all the growing options we cover so you can download it and make notes as you go through this article.
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This mind map is also a visual representation of the strategic choices you need to make as a business executive when developing a new growth strategy.
) or “free cash flow” (commonly known as FCF), concepts we review in more detail in our Financial Analysis section.
Your job as a business executive is to explore the relevance of this list to your organization and make educated decisions about which avenues you believe will have the greatest impact on your bottom line.
A collection of handpicked channels is the centerpiece of your growth strategy, which together with your strategic positioning plan and execution system gives you everything you need to successfully create and deliver your organization’s strategy. implementation.
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While a growth strategy can generally be described as a group of business initiatives aimed at increasing a company’s bottom line, I prefer to talk in terms of an executive plan for an organization.
Organizational development, including initiatives selected by the executive team to add value in the near future.
Not all growth paths will have the same impact on the business, and for that reason, you need to narrow the universe of initiatives.
Stick to the few that have the most impact in a given period of time, with the least amount of effort and resources.
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That’s why your growth plan needs to be strategic in nature, because ultimately, no company has unlimited resources or management bandwidth to pursue all the opportunities presented, so you need to focus on the things you need and choose the resources carefully. is .
That translates into a growth plan that seeks to find new ways to do more of what works, improve it, and create value, resulting in a synergistic and balanced approach to growth.
I also found this classification useful for explaining sources of growth in executive meetings and making better resource allocation decisions.
But rather than sorting out growth opportunities, the more fundamental problem you often face is choosing which growth initiatives you should focus your strengths on.
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The best way to start a growth plan is to estimate the growth “gap” we need to fill with new businesses.
For example, let’s say you are planning your strategy for the next five years and your goal is to grow 15 percent every year. If your operating businesses are expected to generate $100 million in net income this year, and you expect to grow at a rate of 9 percent per year, you can create the kind of income your new businesses need to generate. Each year can be easily calculated. .
Having an indicative number for the earnings gap can help you better understand the types of growth initiatives you need to pursue.
For example, in the above scenario you will know that the growth strategy initiatives you have chosen must be able to deliver $47 million in net income by the end of five years, which will help you prioritize and facilitate their selection.
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A good way to brainstorm possible initiatives is to go through each of the growth channels we mentioned earlier, asking simple questions like:
The ideas that show the most potential can then be developed to better understand what kind of profit they can generate, the level of investment required, partnership and building capabilities, etc.
There is no one-size-fits-all approach to selecting strategic growth opportunities because the selection must be tailored to the company’s various preferences (including outcomes) and meet the strategic goals of the moment.
Our recommendation is to select some of the most important investment criteria for your company (e.g. net earnings, required investment, returns, inventory options or simply for strategic reasons), then “fill the growth gap” by starting with the promised initiatives. Best on those dimensions until the gap closes.
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In an ideal situation, you’d have a growth strategy balanced across the three McKinsey buckets (grow, create, and optimize), but in reality, you might have a strong bias toward certain categories, depending on that. Current strategic goals of the moment, which is good in our experience.
The next step is to work on your 5 year sample which is the subject of the next section.
Perspective, where you try to maximize the value created by the portfolio over a period of time, usually five years.
This provides you with a 5-year growth model, which will help you balance efforts across different business units and make better capital allocation decisions.
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Putting all your eggs in one basket is always a risk, and while it’s true that many companies bet big on new products and technologies, there’s a difference between betting “big” on growth initiatives and betting “all”.
Your growth initiatives include multiple markets, business units or products that may be launched at different times in the future.
By creating such a map, you can easily keep track of all your opportunities, better balancing resources in each.
If you can’t tell how much each effort is contributing to your company’s growth, you won’t be able to get the most out of it. You know, when Peter Drucker said “
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By understanding how each optimized business unit, product, or experiment is contributing to your company’s growth, you can replicate what’s working, notice what’s not, and find opportunities for improvement.
, created by Michael Tracy and Jim Sims allows you to create a nice waterfall that shows how your revenue breaks down over a period of time, which is very useful for measuring growth efforts and reallocating resources.
We describe this tool in detail in the book where we provide a step-by-step process for creating a waterfall.
You can do a similar breakdown of profit or net income if you have enough information to allocate costs and prototype some accounts, but this sales statement can give us a good starting point to understand where our profits are coming in.
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Perspective, where you try to maximize the strategic growth generated by the entire portfolio over a period of time.
This will help you better balance efforts across different business units and make better capital allocation decisions that will lead to a better growth strategy.
You can do this by placing business units into four or four metrics based on their competitiveness and the strategic growth potential of their markets.
Introduced by the Boston Consulting Group (BCG) in its early days, we are using competitiveness and market potential as proxies for the underlying parameters.
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Following the BCG naming convention for each quadrant, we can define each business unit as one of the following:
To choose where each business fits into the matrix, you can assess its competitiveness based on its ability to defend a profitable position.