What Are The Four Major Growth Strategies

What Are The Four Major Growth Strategies – Despite what many believe, a massive growth strategy is not just about acquiring more customers and selling more products. I mean, getting customers is very important, but there’s more

If what you are looking for is to learn about different ways to target more customers and expand your existing business, I recommend you to download my book for free

What Are The Four Major Growth Strategies

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But if you’re looking for a comprehensive strategic growth plan, you’re on the right page, read on.

As we explain in Principles of Business Strategy, the first business of any executive is to control the core business, which means securing a profitable and profitable market position for the business’s products and services.

Once you achieve this, you can turn your attention to growth and start thinking about different ways to maximize the value of your business in the near future.

In an ideal world, we’d expect executives to pursue growth initiatives that are only good for their organizations, but in reality, we’ve all seen how pressure and perverse incentives from shareholder and investor demands can sometimes lead companies to pursue increase.

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In general, we say a growth strategy is comprehensive if a combination of the following conditions is met:

For this reason, you must pay particular attention to the “cost” of your growth efforts (both financial and non-financial) and how sustainable you expect those efforts to be over the long term.

In this article, we explore the different ways to grow your business and offer some ideas to help you plan your growth. These are some of the things we will cover:

We’ve included some charts, links, and other references to help you better understand what makes a good growth strategy. We’ve created a mind map with all the growth options we cover, so you can download it and take notes as you read this article.

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This mind map provides a visual representation of the strategic choices you, as a business executive, must make when developing a new growth strategy.

) or “free cash flow” (often shortened to FCF), we review these concepts in more detail in the financial analysis section.

As a business executive, it’s your job to explore how this list relates to your organization and make educated decisions about which paths you believe will have the greatest impact on your bottom line.

Your chosen collection of paths is at the heart of your growth strategy, and together with your strategic positioning plan and execution system, it provides you with everything you need to successfully create and execute your organizational strategy.

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While a growth strategy can often be described as a set of business plans designed to improve a company’s bottom line, I prefer to speak in terms of an execution plan.

Organizational growth, including the initiatives selected by the executive team to maximize value in the near future.

Not all growth paths will have the same impact on a business, so you must narrow down your plans for them.

Pursue the few who have the greatest impact over a period of time with the least effort and resources.

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This is why your growth plans must be strategic in nature, because at the end of the day, no company has unlimited resources or management bandwidth to pursue all opportunities that arise, so you have to choose carefully what and what resources to spend. .

This translates into a growth plan that strives to do more of what works, do it better, and find new ways to create value, resulting in a synergistic and balanced approach to growth.

I find this categorization useful in executive meetings to explain sources of growth and make better resource allocation decisions.

But beyond the categorization of growth opportunities, a more fundamental problem you often face is actually choosing which growth initiatives to focus your efforts 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 business.

For example, suppose you are planning your strategy for the next five years and your goal is to grow by 15% per year. If your operating businesses are expected to generate $100 million in net income this year, and you expect them to grow at 9% per year, you can easily calculate how much new business you need to generate each year. .

Having an index of income disparity can help you better understand the types of growth initiatives you need to pursue.

For example, in the example above, you would know that your chosen growth strategy plan should be able to deliver $47 million in net income at the end of 5 years, which can help you prioritize and facilitate their selection.

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A great way to start brainstorming is to go through each of the growth paths we mentioned earlier and ask simple questions like:

Ideas showing the greatest potential can be further developed to better understand what kind of profits they can generate, levels of investment, partnerships and capabilities to build, etc.

There is no perfect way to select strategic growth opportunities, as selection must align with various company preferences (including returns) and align with immediate strategic goals.

Our advice is to pick some of the investment parameters that matter most to your company (such as net income, investment need, returns, inventory selection, or simply strategic reasons) and then “close the growth gap” with committed to executing initiatives that don’t close the gap. By far the best of these parameters.

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In an ideal world, you would end up with a balanced growth strategy across all three dimensions of McKinsey (expansion, creation, and optimization), but in reality, you could end up with a strong bias towards a particular market segment based on existing strategies Target. In our experience, this is fine.

The next step is to make your 5-year template, which is the subject of the next section.

Mindset, you try to maximize the value generated by the portfolio as a whole over a period of time (usually five years).

It gives you a 5-year growth template that will help you better 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 risky, and while many companies do win big bets on new products and technologies, there is a difference between “big bets” and “all” bets on growth initiatives.

Growth plans that you may launch across multiple markets, business units, or products at various times in the future.

By creating such a map, you can easily track all opportunities in the pipeline, balancing resources for each opportunity.

If you can’t judge how much each effort contributes to your company’s growth, you won’t get the most out of it. You know, when Peter Drucker said “

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When you understand how each business unit, product, or optimization test contributes to your company’s growth, you can double down on what’s working, focus on what’s not, and identify opportunities for improvement.

, created by Michael Tracy and Jim Sims, which allows you to create a beautiful waterfall showing how your income breaks down over time, which is useful for gauging growth efforts and reallocating resources.

We describe this tool in detail in our book, where we provide a step-by-step process for creating waterfalls.

You could do a similar breakdown for profit or net income if you have enough information to allocate costs and some account amounts, but this sales statement can give us a good starting point for understanding where profits come from.

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Mindset, you try to maximize the strategic growth generated by your entire portfolio over time.

This will help you better balance efforts across different business units and make better capital allocation decisions, resulting in better growth strategies.

You do this by placing business units in a four-by-four matrix based on their competitiveness and market strategic growth potential.

In the early days of Boston Consulting Group (BCG), we used competitiveness and market potential as proxies for key dimensions.

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Following BCG’s naming convention for each quadrant, we can define each business unit as one of the following:

To choose each business’s position in the matrix, you evaluate its competitiveness based on its ability to maintain a profitable position.