Companies which don’t grow have the risk to leave the market very fast. That’s why they need efficiency outperformance. Optimization of business processes in order to improve company effectiveness can be used. But how to find resources? Statistics shows that about 80% of differences in rates of company growth are explained by the choice of competitive area, in other words, in what segments of the market they work and how active is the process of mergers and acquisitions.
Without any growth there is no chance for a company to enlarge its profitability and profitability of investments. Chiefs of companies know very well that there’s something else except effective work and optimized business processes is needed in this situation. Professionalism and effectiveness are perceived by the market as a matter of course and aren’t taken into consideration. What you need is efficiency outperformance. How to find resources for it?
Choose your industry
One of the main practical conclusions of many chiefs is that the notion of expanding industry doesn’t exist in fact. In most so-called expanding industries there are certain sub-industries where there’s no growth. At the same time, there are at least several fast growing segments on many “mature” markets. You don’t need to give up your current direction and start new ones with higher rates of growth, even if you have such an opportunity. Instead of it, it’s better to optimize business processes of your company, to study your industry better, to define areas of potential growth and to focus your resources on the development of these fast growing and more profitable segments.
Engines of growth
In order to define sources of growth, you should use decomposition method. There are three engines:
- Potential of own company assets (the growth of segments of the market where a company works and optimization of business processes of a company);
- Mergers and acquisitions (getting and losing of profits when acquiring and selling of assets);
- Enlarging of the market share (capturing of market shares of competitors).
Statistics shows that the first two engines of growth define almost 80% of company growth rate, and enlarging of the market share is about 20%. This means that changing of the market share don’t have a significant effect on company growth. It depends mostly on segments in which a company works.
Company effectiveness can be developed by optimization of business processes of a company, by developing of core business as well as new directions of it. But, if your company has a significant potential, try not to go beyond your business except cases when it can bring you a significant growth of profitability. Choosing your direction, don’t follow the temptation to switch to fast growing segments of business where you don’t have any special advantages. Improve and optimize business processes of your company, pay more attention to internal processes of your business. Such an approach will help you to stay competitive and to have a sustainable development.