How to Accelerate Profitable Growth to Drive Shareholder Value Creation

Carrie Shea

A recent study of publicly traded mid-market companies revealed a group of 500 companies that outperformed their peers over the last three years on both top- and bottom-line growth. This select group of “Profitable Growers” delivered cumulative shareholder returns of 109% over the three-year period in the form of dividends and share appreciation, compared to just 38% for “Low Profit Growers” and only 53% for “Cost Cutters.”

The Profitable Growers cohort covers a range of industries and included leading mid-market companies such as Boulder Brands, Acuity Brands, Polaris, AO Smith and Manitex. The Keystone Group, a Chicago-based management consulting boutique that conducted the analysis, delved deeper into understanding these Profitable Growers’ growth agendas. Digging into publicly available information, including analyst presentations, annual reports, and news releases, Keystone was able to identify 10 strategic best practices that these Profitable Growers employed.

“Success has as much to do with what you choose not to do as what you choose to pursue.”

These successful strategies for accelerating profitable growth included: Gaining a proprietary understanding of future demand, rigorously sizing growth platforms, capitalizing on close-to-core adjacencies, leveraging industry tailwinds, defining a clear reason for being, investing in brand health, building flexible cost structures, implementing demand-driven innovation, aligning the organization for growth, and, having a clearly defined growth agenda. The best practices these companies employed to accelerate profitable growth were industry agnostic. There is a lot to be learned from studying these profitable growers.

Here are 5 key takeaways.

Create a clear Growth Agenda and focus on no more than three to four growth initiatives at a time. Success has as much to do with what you choose not to do as what you choose to pursue. A good growth agenda clearly identifies where the company is going to play and where they are not going to play.

Invest in proprietary demand insights and predictive analytics. It is also important to invest to understand your consumer, customer, industry and competition in a way that your competition does not. It is critically important to invest time to understand not just what your customer’s current needs are, but also how their future needs are going to evolve.

Align with industry tailwinds. The best growth strategies identify emerging trends and align their growth agenda to take advantage of these key trends. Tailwinds may include macro-economic changes, demographic changes, technology breakthroughs, shifts in global demand, etc.

Ensure the company has a distinct reason for being. Too many companies do not have a clear point of differentiation. They are caught in no-man’s land and therefore do not have a unique value proposition to customers. Make sure you have a clear definition of your target customer and clearly articulate your unique value proposition vis-à-vis the competition.

Build flexibility into your operating model. Many of the profitable growers we studied had done an excellent job of building flexibility into their supply chains and manufacturing networks, as well as into their product development processes, so that they could react quickly to changes in demand.

These five suggestions can help improve your company’s growth trajectory. Emulating the playbooks of successful Profitable Growers can help your company deliver sustainable improvements in shareholder returns. The key is not just growing, but making sure you are growing more profitably than your peer set.

Carrie Shea

Carrie Shea is a Director of The Keystone Group, and specializes in strategic planning, growth strategy, innovation, and mergers and acquisitions. With 25 years of experience, Shea helps consumer products, retail, manufacturing and distribution clients accelerate profitable growth. The Keystone Group’s Todd Mowry also contributed to this article.

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