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 / Winter 2005 / Issue 41(originally published by Booz & Company)


Pay Attention to Revenue Growth. But How?

There are scores of frameworks, tools, transaction models, and organizational structures for evaluating revenue growth, and most of them suffer from the same weakness: They drive companies to pursue random avenues of growth without assessing the inherent growth potential of these new businesses (or the company’s existing business line). In our view, that’s akin to the blind leading the blind. Only by first identifying actual and inherent growth rates can a company have enough insight to know where and how to grow.

To identify growth rates, start by analyzing the limits to inherent growth for your company’s portfolio. What are the individual growth rates for your company’s products and services, given the geographies in which you operate? How is the population expanding (or contracting)? What is the potential impact of inflation or other pricing pressures on the revenues you would expect?

With a more specific and precise analysis, you may discover, as many companies do, that you’re actually doing better than you think. That is, you have realized more growth than predicted given your portfolio’s limits. Or perhaps you’ll discover the opposite — that the relatively high growth you’ve achieved is not living up to the inherent growth of your business. In either case, understanding how your existing portfolio can be adjusted or better managed is a clear priority before pursuing more “desperate measures” that might diminish your profitability.

What can the executive team do to improve your company’s ability to reach and surpass its potential? Are acquisitions, chancy as they may be, the only answer? Or can you improve your portfolio by reprioritizing, expanding the geographic reach of successful products, improving the performance of lagging brands, or deemphasizing money-losing businesses? These are the questions that must be the focus of a solid growth plan grounded in a better understanding of the true growth potential of your business.

Author Profiles:

Paul Leinwand ([email protected]) is a principal with Booz Allen Hamilton in the Chicago office. Mr. Leinwand’s primary area of focus is strategy development for consumer packaged-goods companies.

John Loehr ([email protected]) is a senior associate with Booz Allen Hamilton in Chicago. He specializes in product strategy and innovation for automotive, aerospace, and other manufacturing companies.

Kolinjuwa Shriram ([email protected]) is a senior associate with Booz Allen Hamilton in Chicago. He focuses on strategy development and innovation in consumer-focused industries.
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