Article (PDFKB). What are the sources of corporate growth? If, like many executives, you take an average view of markets, the answers may surprise you: . While growth is a top priority for companies of all sizes, it can be extremely difficult to create and maintain—especially in today's competitive. The Granularity of Growth. 2. Where to compete + M&A. Growth Direction. Firing a growth MRI. 3. Growth Performance. Grow or go: Fast or slow.
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derscontcyptuhors.gq: The Granularity of Growth: How to Identify the Sources of Growth and Drive Enduring Company Performance (): Patrick Viguerie, . Access a free summary of The Granularity of Growth, by Patrick Viguerie et al. and other business, leadership and nonfiction books on getAbstract. Enduring Company Performance By Patrick Viguerie, Sven Smit, Mehrdad Baghai pdf download. The. Granularity Of Growth: How To Identify.
The key is to focus on granularity, to breakdown big-picture strategy into its smallest relevant components. To uncover pockets of opportunity, executives need to dig down to deeper levels of their businesses and organizations.
The seemingly counterintuitive findings in The Granularity Of Growth have important implications for management teams and the way they think about their companies' resources, not least of all, how they allocate their own time, as well as which businesses and market segments they chose to compete in.
Is Your Growth Strategy Flying Blind?
The authors' objective is to help leaders make strategic decisions on a granular level without increasing complexity providing a step-by-step method for understanding growth, delineating strategy, and building an organizational structure for carrying it out. The challenges large companies face in driving and sustaining growth are significant.
First there is the basic challenge of numbers: the bigger you are, the harder it is to achieve the next quantum of growth. Second, there is a problem of maturity.
As companies mature, they often become less wired for growth and innovation tends to wane. The sheer size of the organization begins to produce inertia and growth rates decline. A decade ago this thinking was captured in The Alchemy of Growth with the introduction of the three horizon framework. Over the past three years, McKinsey has undertaken a new extensive study of large company growth to deepen its insight and support its clients.
In The Granularity of Growth, the three horizon model is enhanced by integrating it with a more robust and granular understanding of the sources of revenue growth.
In The Granularity of Growth, the authors demonstrate a problem with the broad-brush way that many companies describe their business opportunities.
So far, few organizations have figured out how to turn the oceans of data available to them into islands of insight about their best opportunities for growth. Even fewer have attempted to structure and manage themselves with sufficient granularity to match the texture of the markets in which they play.
Therein lies largely untapped potential for companies to accelerate their growth and separate from the competition. In most cases, the new strategic direction will highlight a need for significant changes in how the company allocates resources, deploys people, and reviews results.
This additional granularity becomes especially important during economic downturns because it enables much more nuanced strategies, both in terms of cutting costs and of going on the offensive.
This article describes how the world has become more granular—through, for instance, the global expansion of markets and the impact of advanced information technologies—and the challenge that presents for companies as they try new ways of understanding their growth potential and then wrestle with the organizational implications of their enhanced understanding.
It is increasingly clear to us that granularity and economies of scale can—indeed must—coexist, and that mastering this balancing act will confer competitive advantage through the downturn and once the economy begins to recover.
During the early twentieth century, a new organizational form emerged in the United States: DuPont was an early pioneer, and Alfred Sloan took the form to fruition during the s, when he reorganized a hodgepodge of companies and brands into the General Motors Corporation.
By adopting this new structure, DuPont, GM, and many others honed their precision in making decisions, measuring performance, managing their workers, and organizing themselves. Our research suggests that firms today can benefit from an even more granular approach than Sloan could have imagined possible.
A snapshot of one large European manufacturer of personal-care products illustrates how the unnamed companies in this article are disguised examples. The company has three lines of business and appears at first glance to labor in a number of low-growth markets growth forecasts for the three divisions range from 1.
But a deeper look reveals a prodigious spread in anticipated growth rates among countries and product lines within each division. A large European multinational manufacturer of personal-care products has three divisions: Successively finer levels of disaggregation yield increasingly useful insights about revenue growth forecasts.
This is not an isolated phenomenon. We reviewed growth patterns of global firms from to and found that the correlation between overall growth rates and sector growth rates increased dramatically for companies that had taken a granular approach to management and analyzed smaller slices. Over the past decade or so, the rapid pace of innovation on the internet, and in the information and communication technology world more generally, has made that more feasible.
To understand why, consider the basic economic problem associated with greater granularity. As companies target finer-grained market segments, the sales benefits typically increase quite quickly but then start to taper off as smaller and smaller variations are tried. At the same time, adding complexity by catering to a broader range of customer needs can boost costs sharply.
However, as the cost of technology platforms drops, so does the cost of targeting ever-narrower segments of customers—as Chris Anderson argued in The Long Tail. A few examples show what we mean. site, the online retailer unconstrained by physical storefronts, has a scalable, sophisticated IT platform and infrastructure and delivers many of its books not from its own warehouses but via a virtual supply chain.
As a result, site can efficiently indulge the tastes of narrow customer segments, literally down to the individual downloader, at very low marginal cost. Technology also enables companies in emerging markets to build scale rapidly while continuing to take a granular approach. Similarly, packaged-goods companies in Latin America are increasingly tailoring their product and service offerings, displays, distribution approaches, promotions, and incentives to the needs of microsegments of mom-and-pop retail outlets: Salespeople armed with wireless devices feed information to headquarters in exchange for concise recommendations on tactics.
Despite such possibilities, our experience is that a great many companies continue to measure, manage, and organize themselves on the basis of relatively aggregated data. These companies are likely to miss important shifts in their performance and their markets. Excessive aggregation also leads to unrealistic performance targets, misinformed priorities, and misdirected leadership efforts.
Granularity of Growth
Take the following three examples:. To seize opportunities like these, firms must examine both market potential and company performance in greater detail. It is also about sizing up the sources of growth in a more precise manner. We see three distinct categories of growth: We used multivariate regression analysis to calculate the relative importance of these three elements. All are meaningful contributors to growth, but the most important at the more than companies we surveyed was portfolio momentum, which accounted for nearly half the total uptick.
Market share gains, a primary focus of many management teams, accounted for about one-fifth. Companies trying to understand market potential may look at their overall growth rates in specific customer segments. This diversified maker of construction equipment and, more recently, provider of logistics and project-management services has four main divisions that operate in the Americas, Europe, and Asia-Pacific. Its offerings range from light to heavy specialized excavation and earth-moving equipment and cranes; it also provides support services such as site lighting, power generation, and mobile offices.
When performance numbers are rolled up to the division level, it is difficult to identify either promising market segments to pursue more energetically or those from which the company could profitably withdraw. Only by taking a granular view of the entire portfolio of activities by individual product lines, customer segments, and regions does management get a telling picture of both opportunities and liabilities.
What other insights can leadership draw from this highly granular view? The former gives a feel for the strength of the wind at the back or in the face of each business unit.
Is it chronically underperforming in the market; is it still just wading in; has it achieved a viable foothold and earned the right to grow rapidly; or is it in a strong competitive position, such that maintaining its standing will be a key investment focus? Building an understanding of market potential is a good start, but companies can get far more rigorous by deploying a benchmarking approach that we have named the growth MRI after the high-resolution medical-scanning technology.
Anyone who has had a family member diagnosed with cancer will understand the importance of the MRI scan. For an oncologist to simply break the news that there is cancer would not be very helpful. Before deciding on the best course of treatment, the doctor must know what type of cancer it is, where it is, and how advanced it is.
The growth MRI provides the same degree of specificity for chief executives seeking to grow their companies. When we assessed this relationship in the companies we surveyed, we found that top-quartile performance in one growth component even if coupled with bottom-quartile performance in another was associated with greater shareholder-value creation than average performance across all three. Strength in more than one area, though rare, led to even better results for shareholders.
Over time we have evaluated alternative ways of looking at growth and found that one figure offers the best correlation with shareholder-value creation.
Create a “Heat Map” for Your Business
If you lead a large company, how can you make it grow? First, define growth broadly — it is any increase in profits, no matter how you acquire them. Revenue growth is essential for corporate survival. In a study of U. Marshall Cavendish , download the book.
Start getting smarter: Recommendation This is a useful, methodical book. In this summary, you will learn How to strategize in terms of growth drivers and granularity How to build strategies around three time horizons and five crucial organizational components How large corporations can continue to grow.For instance, one large European manufacturer of personal-care products went beyond an aggregated view of performance and discovered that some of its higher-growth segments were lurking in the unit with the lowest overall growth rate.
To find those opportunities, look at markets and performance under a microscope.
Before deciding on the best course of treatment, the doctor must know what type of cancer it is, where it is, and how advanced it is. Periodic operations reviews are a natural time for CEOs to get this view. Is it time to exit a market?
Comment on this summary contact us here if you have any questions. Please check your email for instructions on resetting your password. The portfolios of outperforming utilities, for example, enjoyed growth momentum that was two percentage points higher than the overall industry did.
In effect, there were nearly individual performance cells. Email or Customer ID.
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