In every organization, driving, maintaining and sustaining growth is a continuous challenge. With ever-accelerating rates of innovation, new market participants, evolving consumer and business buyer habits, human resources and management challenges there are dozens of constantly moving parts the impact a company’s ability to grow.
Corporate CEOs are tasked with the monumental challenge of driving growth (and returning shareholder value), while overseeing operational excellence, fiscal responsibility, human capital development and much more.
Great leaders know that results come from focusing on the right priorities - those areas that truly impact company performance. Too often however, the sheer volume of responsibilities, day-to-day tasks, and seemingly urgent issues serve as a distraction and take focus and energy away from the core areas that truly impact growth.
Based on our collective experience working with dozens of companies across industries we’ve observed the following 7 critical barriers to corporate revenue growth.
1. Market Forces
Markets are dynamic, not fixed and while plans are made and carried out market forces are shifting beyond our control. We see market barriers to growth taking a few forms:
- Fierce market competition - that either existed before we attempted to enter or new competitors emerged that served the market more effectively and captured a greater share while building greater defensibility
- Shrinking market - due to economic, political, or technological innovation
- Weak market - where demand for our product or service is low
- Too small a market - where the addressable needs are too few to generate sufficient revenue
- Un-ready market - where we are too early for the market
2. Human Capital Constraints
Despite innovation and technology, from machine learning to robotic manufacturing and automation, people are still at the core of both successful and failed companies and central to their growth. It is true that without a strong market desirable market a business is limited. But without the people to both identify the market(s) to focus on, develop, promote and sell products/services to address the market needs, there is no business. And yet, recruiting, training, managing and engaging an effective management team and workforce is both a sizable and critical task.
We see human capital barriers to growth taking the following forms:
Poor Adaptability - Stanford Graduate School of Business, Professor, Charles A. O’Reilly, and fellow researchers, found the most powerful corporate cultures embrace “nonuniform behaviors and adaptability in particular,” demonstrating they “perform better financially than will organizations characterized by lower consensus, lower intensity about adaptability, or both,” O’Reilly said. O’Reilly and his colleagues define culture as a social control system that drives certain kinds of behaviors.
“Adaptive” cultures are those that encourage:
- Risk-taking
- A willingness to experiment
- Innovation
- Personal initiative
- Fast decision-making and execution
- Ability to spot unique opportunities
Yet adaptive cultures are also notable for the behaviors they choose to minimize, O’Reilly notes. “There’s less emphasis on being careful, predictable, avoiding conflict, and making your numbers.”
Lack of Effective Prioritization - Verne Harnish, in his book, “Mastering The Rockefeller Habits”, based on the leadership and management principles used by John D. Rockefeller, founder of Standard Oil, specifies 3 pillars to the habits. The first is “Priorities”. Most companies set goals using and yet many fail to communicate those goals across the organization and also ensure that each department, manager and employee has goals that roll up and support the overarching corporate goals.
But goal setting is only one part of it. The goal setting without a clear criteria for ongoing prioritization often leads to employees and teams spending time on low priority, low value efforts ahead of higher value and therefore higher priority initiatives. Make sure you have a clear and consistent model for continuous evaluation and adjustment of priorities on a week by week basis.
Ineffective or Unfocused Human Capital Strategies - Gallup has reported that four human capital strategies combine in a powerful way to add up to 59% more growth in revenue per employee with some companies seeing 147% higher EPS than their rivals.
The strategies are:
- A focus on strengths
- Engaged workforce
- Talented employees
- Great managers
Employing all of these strategies effectively has an additive effect leading to higher growth and revenue per employee with the most important and effective being ensuring great managers.
3. Positioning Deficiencies
Buyers of products and services are so overwhelmed by choices today that clearly differentiated products and services specifically aligned with market needs are more critical than ever. Often barriers to growth arise when market forces turn a differentiated product or service into a commodity or a new product or service was launched into a crowded market without a clear differentiation readily apparent to the buyer.
Buyers will not work hard to understand the value and differences between your product and another. If they cannot easily see, qualify and in many cases quantify the value of your product or service over another, they’ll look for other differentiating factors that are often far less desirable to the business (such as price) that can have long term negative effects on growth.
4. Operational Vulnerabilities
Depending on the industry segment, this may take the form of product manufacturing and supply chain issues - where either product quality, cost or availability are affecting revenue and limiting growth.
Or, business process, systems and data capabilities are outdated or not fully implemented, managed and continuously refined, resulting in the efficient flow of accurate and reliable information across the organization. This lack of visibility limits the availability of actionable insight, hampering the organization from responding quickly to market forces, customer demands, supply issues and untapped opportunities for growth!
According to research by Andrew McAfee and Erik Brynjolfsson, of MIT, companies that inject big data and analytics into their operations show productivity rates and profitability that are 5% to 6% higher than those of their peers. Companies with limited capabilities to understand (from a data-driven perspective) what is currently happening in the business as well as predict the potential future of the business are at a severe disadvantage to those that don’t.
5. Customer Acquisition Challenges
Of course we look at driving growth from increasing revenue from existing customers, or lowering delivery costs to improve profitability. Growth may even come in the form of M&A activity. Still, new customer acquisition is a critical area and is often impacted by all of the barriers cited above. In addition, we tend to see the customer acquisition challenges falling into the following three areas:
- Channels - Identification, measurement and optimization. With the proliferation of digital channels and the complexities that go along with measuring the impact and cost of each, companies often struggle with where to focus efforts, budget and resources and miss opportunities for identifying new channels or optimizing existing channels.
- Message - Customer-centric, differentiated, and consistent. Effective messaging is the outcome of insight from market research, customer development, strategic positioning and product development. Frequently however, there are issues with consistency and quality of messaging with results showing feature-driven rather than customer-centric messaging that fails to resonate with customers. Further, when the messaging that “works” is not shared and utilized across all channels and platforms, effectiveness suffers.
- Sales and Marketing Capability - Often organizations lack an area of expertise, experience or capacity and end up weighted too heavily in one direction or another - for example, too many “closers” in the sales team but not enough “hunters” and with limited marketing support. Or, lots of marketing output but limited ability to measure and gain insight from the activities. Just industries, markets and consumer and B2B buying behaviors are constantly shifting, so too are the practices (and technologies) associated with sales and marketing. Too often however, companies are still utilizing antiquated practices and outdated technologies.
6. Capital Constraints
This is often the symptom rather than the cause of growth challenges but becomes a cyclical problem that snowballs upon itself. The growth barriers from the other key areas listed in this article often result in potentially significant capital constraints such as reduced revenue and/or profitability, longer time to cash, customer chargebacks, high-carrying costs, as well as limited access to growth and operating capital from lenders and investors.
7. Customer Loyalty and Satisfaction Issues
Much has been written about the economic value of customer loyalty. This loyalty has a direct impact on growth - as loyal customers are one of the best sources of new customers from both a customer quality as well as a customer acquisition cost standpoint. Rob Markey and Fred Reichheld, authors of The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World, recommend examining the following areas to gauge the current impact of loyalty in a business
- Retention
- Pricing
- Annual spending
- Cost efficiencies
- Word-of-mouth
Their work is based on the Net Promoter System which gauges a customer's likelihood of recommending the business/product/service to others on scale of 1-10. According to research by Bain & Company “On average, an industry’s NPS leader outgrew its competitors by a factor greater than two times.”
That said, a high NPS is score in and of itself is not enough to indicate a company’s ability to grow. All of the above barriers and risks to growth must be mitigated or the opportunity presented by a loyal customer base will be squandered.
For help overcoming these barriers and unlocking your company’s potential for growth - contact us - for a consultation.
