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Published: August 27, 2013
 / Autumn 2013 / Issue 72

 
 

How Ready Are You for Growth?

Implications for Management

Three messages emerge from our research. First is the clear relationship between the index scores and market performance. Doing well on the attributes of the index matters.

Second, the majority of companies we analyzed have some distance to go before they can be considered truly ready for sustainable growth. Only about a fifth of our sample fell under a strongly positive archetype (“In the Game” or “Ready for Growth”). To close this gap, the other companies would need to fine-tune their strategies, raise their differentiating capabilities to world-class levels, back up those capabilities with judicious cost restructuring and sustained and focused investment, and redesign their organization to be truly “fit for purpose.”

Third, the archetypes reveal specific factors that appear to matter more than others in explaining performance. In a world of tough choices, these constitute the logical places where companies should focus their attention first.

To chart a path forward, a company can calculate its own index score and determine the archetype that most closely matches its situation. Then, it can develop an action plan, focusing on the highest-return levers, to improve performance. For leaders of most companies—those that fall under the “Distracted” archetype—an action path could include:

  • A rigorous review of the capabilities needed to achieve a leading position in their industry, versus those that are secondary
  • A dispassionate assessment of where they stand against these capabilities on two fronts: their level of effectiveness, and their relative levels of funding and investment
  • An action plan to scale back in the less-critical areas, and a corresponding plan to redirect funds from these areas to more critical needs
  • A series of targeted organizational interventions to increase speed and quality of decision making throughout the enterprise

In the final analysis, most business leaders would agree that robust strategies, cost and investment management, and fine-tuned organizations are critical to performance. But they may not be aware of how much these factors can reinforce one another if the conditions are right. Mastering all three is the hard part; and our research shows that few companies do so. Making improvements requires a clear-headedness about one’s strengths and weaknesses, an understanding of the links to performance, and the development of a detailed plan of attack to reap the benefits. As is often the case, a good portion of the answer ultimately lies in focus and execution. 

What a “Ready for Growth” Company Looks Like

Although every company is different, our analysis revealed a set of common characteristics that underpin many of the companies in the strongest “Ready for Growth” archetype. Consider these elements across the three building blocks of the framework.

•Strategic clarity and coherence: At “Ready for Growth” companies, strategic priorities are specific, actionable, and—most critically—widely understood at all levels of the company. Leaders make clear choices, striving for “best-in-class” prowess only in the distinctive capabilities that create sustainable competitive advantage, and accepting “good enough” in other areas. Through rigorous, forward-looking review processes, they are able to keep their strategies relevant, sensing and rapidly adapting to market changes. They’re quicker to innovate, are willing to make calculated big bets, and feel no qualms about killing investments that aren’t paying off.

• Resource alignment: In the area of resource allocation, “Ready for Growth” companies employ a disciplined process that ensures adequate funding for high-growth, core activities. Clear and objective investment criteria prevent department rivalries and other parochial concerns from interfering with the allocation of funds to top corporate priorities. These companies manage spending strategically, making rigorous trade-offs based on cost transparency and a deep understanding of how they earn money. Acquisitions are made only if they advance the company’s strategic positioning, and never if the target won’t be a good cultural fit.

• Supportive organization: “Ready for Growth” companies are organizationally efficient, flexible, and lean. They align their power structures and allocate decision rights in ways that best serve strategic priorities and business realities, rather than aligning them with historical legacies or individual agendas. They create nimble mechanisms for governance and collaboration across business units. Talent management practices support key capabilities by moving the best people into pivotal roles. A coherent culture sets norms and expectations that reflect the requirements for success in the marketplace. An ethos of excellence and continuous improvement prevails, reinforced by systems that reward performance.

 
 
 
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Resources

  1. Online Fit for Growth Index Profiler: For an assessment tool from Booz & Company designed to help evaluate your company’s readiness for growth, visit booz.com/ffgindexprofiler.
  2. Deniz Caglar, Jaya Pandrangi, and John Plansky, “Is Your Company Fit for Growth?s+b, Summer 2012: Manifesto of the three-part prescription to make companies ready for sustained expansion.
  3. Paul Leinwand and Cesare Mainardi, The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Harvard Business Review Press, 2011): Chapter 9 spells out a process for cutting costs while growing stronger.
  4. Deniz Caglar, Marco Kesteloo, and Art Kleiner, “How Ikea Reassembled Its Growth Strategy,” s+b (online only), May 7, 2012: Interview with Ian Worling, Ikea’s director of business navigation, on the way this highly capable and frugal retailer moved forward after the Great Recession.
  5. For more thought leadership on this topic, see the s+b website at: strategy-business.com/strategy_and_leadership.
 
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