Growth Stall Points

Growth Stall Points

It is common for companies of all sizes to reach a plateau where their revenue growth stalls out. Political, regulatory, and economic factors beyond our direct control can have an impact on company growth, of course, but research documented in the book Stall Points claims that 87% of growth stalls are preventable, and are related to the strategic decisions you made in the past.

To drive growth, it is vitally important to measure the right Metrics (Key Performance Indicators); the critical success factors that drive your current operating model on a daily, weekly, and monthly basis. These metrics track “business as usual” – the things you do every day to create leads, make sales, provide your products and services, keep your customers happy, grow cash and make profits. Ideally, you are measuring your Metrics in real-time, capturing live data, graphing the trends, and meeting every week to discuss performance and take action to improve your scores.

Keeping a close eye on your metrics may not alert you to significant changes occurring in your industry or marketplace, however. Many business leaders are too inward-focused and get blindsided by what is happening outside their company walls.

If you are not using a disciplined process to regularly analyze your industry you could miss key “inflection points” that are occurring or are likely to occur in the future. Inflection points are the points in time where the prevailing trends in your industry change.

“The truly important events on the outside are not the trends. They are the changes in the trends. These determine ultimately the success or failure of an organization.” (Peter Drucker)

Why does growth stall?

Most growth stalls occur because a strategic assumption that may have been true once no longer applies to your industry or to your operating model. Usually, it is the assumptions that you hold most deeply that pose the greatest threat to your long-term growth and survival; the things you have believed for so long that you no longer question them. The tendency for a group of people to cling to obsolete or incorrect ideas is often referred to as “groupthink”.

If you fail to spot a key inflection point occurring (or about to occur) in your industry and fail to make wise strategic choices in a timely fashion, it can be extremely difficult to kick-start things to get your company growing again. In fact, the author’s research shows that the odds are against you ever returning to growth!

How many times have you heard this story?

The incumbent market leader enjoys a long run of success with their existing business model. Over time, the leaders start to believe their own hype. They overestimate their abilities, thinking they “caused” their past success; discounting the role that luck and good timing may have played in their growth. They become closed-minded and reject anyone on the team who questions their decisions. There is peer pressure toward uniformity in the leadership team. They fail to consider alternative options and filter out new information that does not match their existing view of the world. They keep expanding the features of their current product and service offerings, adding more costs, rather than more revenues. Their companies and product lines become bloated and unfocused. They fail to spot that some of their target market customers are becoming attracted to new entrant firms with disruptive ideas and new business models. They mistakenly think their brand name will protect them from these “inferior” competitors. This classic trap is called the “Innovator’s Dilemma”. Revenue growth stalls out and begins to decline. 

Every year we read about the death or decline of well-known brands who failed to adapt to new entrant upstarts with innovative business models. Industry change comes at you quicker than you think, and leaders have to be what I call “smart agile” when it comes to responding to these changes. Questioning your strategic assumptions on a regular basis is critical, but this is something leaders do poorly (if at all) in my experience. At a minimum, I recommend organizations undertake a thorough industry analysis once per year. This exercise should be done even more frequently if your industry is experiencing significant change.

A disciplined strategic thinking process helps clients to identify:

  • What competitive forces will determine how your industry is likely to play out in the coming years (e.g. competitors, new entrants, substitute offerings, suppliers, customers)? What moves are they likely to make? What threats or opportunities do you see? What moves do you need to make?
  • What macro forces will impact your business environment (e.g. political, economic, social, technology)? What changes do you see coming up? What threats or opportunities do you see? What moves do you need to make?
  • What core activities do you need to invest resources in, build your capabilities, and perform in a truly excellent fashion? What activities will create a competitive advantage and differentiate you in the mind of your target market customer?
  • What non-core activities do you need to stop doing, sell-off, outsource, or not get into at all? What projects do you need to abandon?

I take clients through this comprehensive strategic thinking process and yes, it takes time and discipline to work through each exercise, but the insights they gain are worth it. Only then, do leaders have the proper context to make wise strategic decisions.

In essence, strategy is understanding how your industry is likely to play out, and getting very clear on the few, key strategic moves your company needs to make in order to position yourself for future success

How long has it been since you took a deep dive, analyzed your industry thoroughly, challenged your current assumptions, and clarified the strategic moves you need to make to position your organization for future success? Here is my recommended cadence for strategic planning.

Need help? Contact me to discuss your strategic planning needs.

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Until next time…
Stephen

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