- October 8, 2019
- Posted by: Ramkumar
- Category: Strategy
Growth in Business transformation
Growth is critical in business transformation. In the current market environment, companies that grow their top line while at the same time expand their margins are successful. These companies are the market leaders in their respective industries.
It is challenging to grow the topline and expand the bottom line at the same time.This is because companies need to execute a strategy that revolves around maximising growth and at the same time resort to cost cutting initiatives.
Balanced approach during Business Transformation
When companies decide to undergo transformation, then it is critical to have a balance between growth and cost cutting.
Firms that tend to focus more towards margins expansion and performance tend to struggle.There are very few companies that manage to grow their topline while at the same time expand their margins.
Winning formula in Business transformation
- These companies follow a structured approach for revenue growth while reducing costs.These companies incorporate growth strategy at the beginning of the transaction.Many companies find it easy to expand margins by resorting to cost cutting initiatives including layoffs.The rationale behind this move is that margin improvement increases shareholder value. This thinking is myopic and works only in the short term.
- Successful companies reallocate their resources towards high growth initiatives.They allocate operating expenses and capital expenditures towards the high growth business units and in areas where there is high scope for growth in the market place.
- Another critical factor for the success of these companies in achieving growth is Employee engagement.When a company starts doing cost cutting at the initial phase of the transformation, employees tend to become anxious and do not buy the company’s transformation idea.Instead of that, when companies addresses growth at the start of the transformation, it can create a great reinvestment storyline ahead.
Embedding Growth into Business Transformation
- Companies undergoing transformation should perform an independent due diligence on it’s own business similar to how an acquirer will buy an asset.The company can even engage an independent management consultant to perform this assessment.
- The entire due diligence study should be rigorous and comprehensive taking somewhere between 10-15 weeks.The scope of this study should be to identify every available growth lever – obvious and not so obvious ones.
- Some of the predictable growth levers include improving marketing performance, pricing and revenue management and boosting customer experience.
- The not so predictable levers should be – identifying success factors in improving digital business, competing effectively to retain and increase market share and expand into new products and services which customers want as opposed to what is delivered currently.
- Companies undergoing business transformation should take a balanced approach on improving growth and reducing costs.
- Successful firms focus on growth at initial stage of their transformation.This allows companies to understand its near term marketing and sales performance levers along with the medium to long term transformational strategies.