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Profitable Growth Is Everyone's Business:
10 Tools You Can Use Everyday

 
As an advisor to CEOs and senior executives in companies large and small, Ram Charan, author of Profitable Growth is Everyone's Business ( 成长力:持续获利的 10 大策略 ) , combines first-hand examples of how companies can grow their businesses with anecdotes illustrating specific examples of good and bad growth. This practical guide uses baseball metaphors to deliver its central message: steady base hits win more games, and are a surer way to advance business growth, than going for game-winning home runs.
Charan favors singles and doubles, which he defines as “small growth projects and ideas that can have huge impact cumulatively” over unpredictable home runs, which are “breakthrough products, the mega merger, or a world changing new technology.” The author points out that home runs occur only occasionally and cannot be counted on to produce the sustainable growth required for long-term business success. He explains that if revenue growth becomes part of every employee's business, singles and doubles can occur every day. These base hits require the participation of every layer of employee--from the CEO, to marketing and sales, to operations and services. Each is charged with the challenge of adapting to major changes in the marketplace as well as to small everyday business developments. He emphasizes that it is the practice of focusing on the gradual emergence of new customer needs that establishes the foundation -and the opportunity- for the eventual home runs.
Not all growth is good, according to Charan. He takes a stand against most mergers and acquisitions, one of the most common types of corporate growthā, claiming that they often lack strategic rationale and are based on a misconception of synergy between two companies. While a one-time cost reduction may result, sustainable revenue growth is rare. For instance, Sears Roebuck's, one of the world's largest retailers in the early 1970s, attempted to diversify through a series of acquisitions. Its purchases of Century 21, Coldwell Banker, Dean Witter, and Discover were designed to create a company that provided one-stop shopping. The failure of its strategy resulted in the divestiture over thirty years of all its non-retail companies, culminating in the sale of its credit and financial products businesses in 2003.
However, because fit between companies is crucial, small “bolt-on” acquisitions that fill strategic gaps can be effective. Charan defines these as acquisitions that supplement internal growth by providing a company with new markets, technology, distribution channels, or skills.
Charan also identifies another bad growth practice -- cutting prices to gain market share without an accompanying decrease in costs. He cites the example of a large building company that tried this approach to grow its market share. Rather than producing a competitive advantage, the company provoked price-cutting by competitors. The result was a general decline in industry revenues and a massive reduction in industry profits.
The author identifies good growth as organic growth, with new developments coming from within the company. He identifies Colgate's development of Total toothpaste as an example of a major success in this area. It was the company's expertise in oral-care products that enabled it to produce a patented product with a wide range of benefits, which its competitors have yet to match. Good growth is inevitablyā profitable, he argues, with both revenues and gross margins exceeding those of the overall market, because it is based on clearly differentiating products from competitor offerings. He cites Dell as an example of a company that has achieved profitable growth by creating a superior product line of low-priced computers, customized to meet client specifications. Finally, Charan defines good growth as sustainable, because it is based on strategies that provide continual, repeatable increases in revenues.
Charan views upstream marketing and cross-selling as critical tools of sustainable revenue growth. While downstream marketing focuses on such issues as branding, advertising, and public relations, upstream marketing identifies specific customer needs and helps shape competitive value propositions to persuade customers to bundle purchases. He sites the example of GE Plastics, which developed a technology that enabled the company to meet specific needs of individual customers in an industry with excess capacity. This approach led to both profitable revenue growth and competitive advantage. Companies that are notable for their focus on upstream marketing, according to Charan, are General Electric, Procter & Gamble, Colgate-Palmolive, and Avon.
The author believes that sharing ideas across the company is vital to the growth process. He explains that when employees from various functional areas constitute a “ social engine ” through which information flows, they facilitate profitable growth. When Southwest Airlines integrated its twelve basic functions into one at its terminals, it reduced the turnaround time of its flights to eighteen minutes, far below the industry average of forty minutes. As a result, the airline was able to add an additional flight per plane per day, substantially reducing costs and increasing revenues.
But building an efficient social engine within a company requires establishing a mind-set that is “customer-centric.” Charan suggests that by linking vāarious departments to the customer, specific information can be collected and used to produce profitable growth. Strong links to customer information encourages employees to talk about customers, assessing their problems, buying patterns, and new product needs. The author points to Wal-Mart as a prime example of this type of linkage. He also emphasizes the need for managers to collaborate to create a growth budget . Such a budget requires that departmental priorities be established, and that tradeoffs be made, to target the projects with the greatest revenue return for the company.
In a recent interview with HBR, Ram Charan elaborated on the concept of optimal growth . He emphasized the fact that optimal growth is profitable and sustainable over a long period of time. In response to a question about whether there is an optimal point of growth beyond which a company cannot manage efficiently, he pointed to the historical fact that human beings have always risen to a challenge. “There were companies that were very small a hundred years ago that are now extremely large, and we have not yet seen a limit to their size. It would have seemed inconceivable then that a company like General Electric would be approaching $150 billion in revenues. And it would have been impossible to foresee Wal-Mart, which was a $5 billion company in the early 1980s and is now a $260 billion company, moving toward a half a trillion in revenues. With 1.2 million employees and better than a six percent annual growth, it is the largest company in the world.”
The author believes that the trend toward mega-mergers will continue and that companies are going to be large. But, he said, “If a company has more than six or seven layers of management, is growing very fast, and has rapidly changing technology, the chances are that it will begin to lose momentum. Such companies often become unable to manage, as decision-making becomes removed from customer needs.”
Charan sums up his view of growth: “Growth is the juāice of life. Everybody in the company must participate in it. If you are not personally growing and your company is not growing, there will be a real problem going forward. But insist on profitable growth.”

Please kindly note:
Charan's credentials include co-authoring the bestseller "Execution". His writing is very much down-to-earth, no-nonsense, and straightforward. So when he says 10 tools for Monday morning, believe him! Here they are:

 
1. MAKE REVENUE GROWTH EVERYONE'S BUSINESS. ( 营收成长,人人有责 ) Just like a cost reduction agenda may be a permanent theme in daily conversations and meetings in all departments, so should revenue growth be. And it's not just for the management; it's for all employees to think in this direction (just like we try with the cost reduction agenda).
 
2. HIT MANY SINGLES AND DOUBLES, NOT JUST HOME RUNS. ( 对业绩要有积少成多的务实想法 ) While home runs provide the opportunity for a quantum leap, they are unpredictable and don't happen all the time. Singles and doubles, however, can happen every day of the year. This piece of advice may sound somewhat trivial. But for what it's worth, my experience from especially larger firms is that it may turn out to be the most important tool. Many big corporations tend to devote too much thinking into finding the big home run - and may give too little attention to the many small growth areas that short-term perhaps do not make an important contribution, but often keep the organization full of life and energy - and well-prepared for take-off...if the elusive home run should materialise.
 
3. SEEK GOOD GROWTH AND AVOID BAD GROWTH. ( 追求优质成长( good growth ) ) Good growth not only increases revenues but improves profits, is sustainable over time, and does not use unacceptable levels of capital. It is also primarily organic (internally generated) and based on differentiated products and services that fill new or unmet needs, creating value for customers. Charan constantly challenges leaāders that seek acquisitions as primary driver for revenue growth ... instead of organic growth.
 
4. DISPEL THE MYTHS THAT INHIBIT BOTH PEOPLE AND ORGANIZATIONS FROM GROWING. ( 消除组织内的迷思说法 ) Confront excuses such as: "We are in a no-growth industry, and no one is growing"; "Customers are buying only on price"; or "The distributors are the ones in direct contact with retailers, and there's not much I can do."
 
5. TURN THE IDEA OF PRODUCTIVITY ON ITS HEAD BY INCREASING REVENUE PRODUCTIVITY. ( 以现有资源提高「获利生产力」,加速「获利成长」 ) The old saw says, "We have to do more with less.”The problem, though, is that the focus is usually on the "less" and the "more" rarely happens. Revenue productivity is a tool for getting that elusive "more" by actively and creatively searching for ideas for revenue growth without using a disproportionate amount of resources.
 
6. DEVELOP AND IMPLEMENT A GROWTH BUDGET. ( 推动「成长预算」( growth budget ) ) All companies have a budget. It is, however, astonishing how little detail about revenue and sources of revenue growth you can find there. Almost all of the lines in the budget are cost-related. Few, if any, identify resources explicitly earmarked for growth. The growth budget provides a foundation that will allow a company to increase revenues instead of just talking about it.
 
7. BEEF UP STRATEGIC MARKETING. ( 扩建上游营销( upstream marketing ) ) One of the key missing links for generating revenue growth at most firms is strategic marketing. Most people visualize marketing as tactical tools such as advertising, promotion, and brand-building. Strategic marketing, on the other hand, takes place at a much earlier stage by identifying and precisely defining which customer segments to focus on. It analyzes how the end-user uses the product or service and what competitive advantage will be required to win the customer and at what price points. Charan is using the term "upstream marketing". But I find it a weird way of describing strategic marketing. So I changed it.
 
8. UNDERSTAND HOW TO DOā EFFECTIVE CROSS-SELLING (or value/solutions selling). ( 注重「交叉销售」( cross-selling ) ) Cross-selling can be a significant source of revenue growth, but most companies approach it from exactly the wrong perspective. They start by saying, "What else can we sell to our existing customer base?" Instead of looking inside-out your organization, you need to look outside-in. Successful cross-selling starts by selecting a segment of customers and then working backward to define precisely the mix of products and services they need and creatively shaping a value proposition unique to them.
 
9. CREATE A SOCIAL ENGINE TO ACCELERATE REVENUE GROWTH. ( 厚植成长加速器和引擎( growth engine )于企业文化 ) Every organization is a social system, the center of which is a way of thinking and acting that sets both day-to-day actions and the long-term agenda. When an organization has an explicit growth agenda understood by everyone, growth becomes a central focus--a social engine--during formal meetings as well as informal discussions. This tool is closely linked to tool no. 1.
 
10. OPERATIONALIZE INNOVATION BY CONVERTING IDEAS INTO REVENUE GROWTH. ( 把「创新」化为「营收成长」 ) Innovation is not the private property of lone geniuses working apart from the mainstream of the business. In any company of reasonable size, innovation is a social process that requires collaboration and communication for idea generation, selecting those ideas for revenue growth that are to be funded, and shaping those ideas into product prototypes and launching them into the marketplace.
本文作者 ---------- 成长力高级顾问 孙子辰 博士
 
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