Four Fundamentals of Revenue Growth
With recovery from the recession still moving at a snail’s pace, how worried should you be about your company’s future revenue growth? In a word: very. “But wait,” you might say. “Corporate profits are at their highest levels in 60 years, with profitability as a percentage of GDP at an all-time high of 10.3 percent. Companies are holding trillions in cash reserves, and are looking stronger than ever after squeezing every dollar of cost they could find out of their operations over the past four years.” This is correct, but it fails to tell the whole story.
May 2 2013 by Laurie Brunner
Today’s economy is burdened by three decades of debt accumulation. Lower income growth has reduced consumer purchasing power and slowed their spending. And, taken together with uncertain government policies, these macro factors are exerting downward pressure on asset return amidst increasing labor costs and slowing productivity. As a result, corporations will find it increasingly difficult to achieve the financial returns expected by investors.
The result is an economy that lacks momentum, in which companies must determine how to generate revenue growth in an environment where nothing is moving. To capture growth in such a market, you must transform your company into a high-performance economic machine that’s adapted to these sluggish economic times. Revenue growth, more than any other metric, is the fundamental driver for long term corporate performance.
There are four key factors that will keep your business moving toward growth: corporate focus, customer alignment, pricing for value, and speed of execution.
The further a business departs from its core base of customers and products, the harder it is to achieve profitable growth. The ability to sharply focus on the core competencies of a business creates a firm connection between the organization and the customers that it serves. The net result: a business centered on what it does best and one that has the freedom to excel in doing what matters most.
When Steve Jobs returned for a second stint as Apple’s CEO in 1997, he found the company had been churning out multiple products across a myriad of segments. Within a few months, Jobs had slashed 70 percent of Apple’s product lines and eliminated positions in tangential businesses, such as printers and servers. Instead of more products for growth, Apple chose fewer, focusing on two markets — business and consumer — creating just two Mac products for each market. Apple was then able to fully exploit the growth opportunities within its core business, putting the full force of its product development teams into making its great products even greater. Apple’s customer-aligned focus enabled it to redefine its market and kick revenue growth into high gear. Killing misaligned projects and products is difficult, yet is as important as selecting what to do.
The Apple example shows the power that flows from deciding what not to do in a business. Pruning the extraneous requires a disciplined assessment of a company’s core competencies, and focuses squarely on those attributes that are best matched to customer preferences. Bluntly assessing competitive market position and spinning off any peripherals that are not primary to customer needs eliminates distractions. The business can then intensify its efforts on the lines where it can best excel — and derive the greatest return on product and marketing investments.
Sustainable, profitable growth is intentional. It is an easy to understand strategy with clear focus that creates greater competitive advantage, market differentiation and operating efficiencies. Conditions might put you sideways at times, but guided by strategic purpose, you can adapt your operation for each twisting curve of the race.