Rating Qualities

9
Analytical
Well Structured
Concrete Examples

Profitable Growth Is Everyone's Business

10 Tools You Can Use Monday Morning
Ram Charan | Copyright © 2004 by Ram Charan
Published by arrangement with Crown Business, a division of Random House, Inc.

This excellent, short work is a classic in its genre. Author Ram Charan outlines in no-nonsense,
albeit sometimes prolix, style the essentials that all managers need to know to make their
businesses and their revenues grow. Charan offers 10 basic principles, explains each one clearly,
and provides anecdotal examples. The author readily admits that the principles are mostly
common sense, and even perhaps widely understood (in part, from his other popular works).
However, he says that the problem for most businesses is not having the right ideas, but rather
turning the ideas into action. getAbstract recommends this mainstay for any business manager's
bookshelf. It will help you face the challenge of growth.

Take-Aways
• Growth demands focus.
• Revenue growth must be part of every employee's job.
• Too often, managers pursue only big growth initiatives and ignore small initiatives that
ultimately can be more productive.
• Managers must know the difference between good growth and bad growth.
• Many organizations fail to grow because they handicap themselves with outdated myths and
false conventional wisdom.
• Revenue productivity means finding ways to grow by using your existing resources.
• Every company needs a growth budget that identifies the specific resources tagged for growth.
• Know your customer base in detail and understand what segments of your targeted audience
can generate the most growth.
• Cross-selling depends on your value proposition.
• Growth and innovation are social processes.

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 Summary

The Big Challenge

Why is achieving revenue growth so hard? Three things have gone wrong. Companies have taken
attention away from growth to cut costs and pursue “restructuring.” Leaders have become so
intent on finding that one dramatic win that they miss all the small steady things they could do to
grow. And, managers have severed productivity from earning more money, when in fact they are
indivisible. To grow, your company needs the right “tools” and “building blocks.” Like these:

1. “Make Revenue Growth Everyone’s Business”

Revenue growth is not just the leader’s job. Every employee and manager has a stake in the
company’s growth. Eventually, companies that do not grow cannot compete, and uncompetitive
companies are not good employers. Every employee has a stake in growth and can help growth,
one way or another. For example, call center employees have a feel for the pulse of the customers.
They know what needs are met and unmet, and what makes customers angry, upset or happy
when they call. Repair people know which components break most often and under what usage.
Salespeople can gather intelligence. Enlist every employee in the drive for revenue growth so that
you take advantage of every available source of information. Turn every customer contact - even a
complaint - into a growth opportunity. The leader’s first task is to make sure that growth is every
employee’s job.

2. “Hit Many Singles and Doubles, Not Just Home Runs”

Many managers make the mistake of trying to hit only home runs. At some companies, managers
have refused to even consider growth opportunities that did not meet a specific threshold. This is
a mistake, because home runs can be few and far between. But if your company develops a good
understanding of its customers’ needs, it will find many small growth opportunities. A focus on
hitting singles and doubles, in the aggregate, will produce more growth than a focus on home runs.

“Managers at all levels need to examine every activity, they - and their people - carry out,
and ask what needs to be changed to increase profitable revenue growth.”

The Avery Dennison company accepted the challenge of developing a new adhesive for Procter
& Gamble, even though the new product would generate only $250,000 in revenue. Many
companies might have decided to ignore such a small opportunity. But Avery Dennison’s
management recognized that small opportunities like this create the foundation for remarkable
growth.

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 3. “Seek Good Growth and Avoid Bad Growth”

Not all growth is good. For example, mergers and acquisitions often produce revenue growth,
but destroy the company’s market value at the same time. Price wars and the pursuit of market
share can also lead to bad growth. Sears, once the world’s leading retailer, faltered because of a
bad growth strategy. To be good, growth must first be profitable. That is, the revenues must more
than compensate for the expenses of earning them.

“These tools can seem like common sense, but all too often, the biggest challenge in
business is the translation of ideas into action.”

Good growth is organic; it grows naturally out of the company’s ongoing business. Good growth is
differentiated. Even in commodity industries, businesses can and must find ways to differentiate.
Dell, for example, differentiates by allowing customers to assemble computers of their own
choosing. Even though personal computers are commodities, Dell’s approach to differentiation
drives its market share gains. Finally, good growth is sustainable. It endures. It is not a one-shot
gain.

4. “Dispel the Myths that Inhibit Both People and Organizations from Growing”

Organizations first tend to make excuses when they don’t grow. It’s easy to say, “This is not
a growing industry and therefore we cannot expect to grow.” However, every allegedly low-
growth industry has high-growth competitors. The Detroit car companies may say that they are
in a no-growth business, but that doesn’t seem to bother Toyota. Southwest Airlines is another
example of great growth in a tough business. Leading in revenue growth means understanding
better than anyone else what customers need, and finding ways to deliver it more economically
and conveniently than anyone else. Every industry has growth opportunities, and some
segments that thrive even when others falter. As Honeywell’s Larry Bossidy said, “No market
is ever fully penetrated.” Yet growth invariably involves risk - more in some industries than
others. Understand the risk-reward trade-off in any growth initiative. High-risk, high-reward
opportunities require your company’s leaders to ask:

• If this initiative fails, will the company fail? - Sometimes it’s worth betting the company on a
great opportunity, but know the stakes before you make the bet.
• What’s the worst that can happen? - Perhaps the company’s survival is not at stake, but its
competitiveness may be. Know the downside.
• What “hinge assumption” is the company making? - The hinge assumption is the one
assumption that, if it is wrong, dooms the project. Your hinge assumption may be that your
customers unquestionably demand a certain product, or that a key employee will stay with you.
Whatever it is, identify it and grapple with it.

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 5. “Turn the Idea of Productivity on Its Head by Increasing Revenue Productivity”

In most popular discussions, productivity refers to cutting costs and doing more with less.
Although cost cutting has its place, it alone cannot generate growth. For revenue productivity,
examine every facet of your operation to find out how you can derive greater growth from existing
resources. This requires a totally different way of thinking about productivity. That is, call center
employees should think about how well they satisfy each caller, instead of thinking of how many
calls they handle in a day. Sales managers and human resource people should be willing to pay top
dollar for the best salespeople if those salespeople can more than compensate for each top dollar
paid. Everyone contributes to revenue productivity and bang for the buck. Cutting costs is a dead-
end street; revenue productivity is a broad, promising boulevard.

6. “Develop and Implement a Growth Budget”

Many companies invest in growth, but they are not disciplined or effective about it. Instead,
every company needs a growth budget: a specific, detailed plan for financing growth. Use careful
measurement and auditing to ensure that each investment earns the growth expected. To develop
a growth budget, list every source of growth, prioritize the items on the list, specify each project’s
cost, and identify and allocate personnel. Corporations can get the money to fund growth by
cutting or selling lagging brands or product lines, redeploying resources from other areas, taking
funds from stagnant or shrinking business units, or raising capital through borrowing or equity
issues. The last alternative may take guts, especially if increasing spending means telling Wall
Street that earnings will be down.

7. “Beef Up Strategic Marketing”

Upstream marketing requires a detailed, comprehensive understanding of your customers.

Most businesses focus on downstream marketing. They build brands, spend on advertising and
promotion, provide customer service and invest in logistics. Now, such companies as GE, Colgate-
Palmolive, Thompson Corporation and Avon have discovered the power of upstream marketing.
Mapping the market makes it possible for managers to compare market segments and identify
otherwise unseen relationships. Upstream marketing depends on excellent customer information.
One easy way to gather this data is to arrange regular phone conversations with key salespeople to
find out what customers are thinking about and saying.

“Improving productivity means that a business finds a better way to do something

that results in the enhancement of its competitive position, and (or) the creation of new
opportunity, while at the same time producing funding that can fuel its growth.”

Cultivate an understanding of your customer’s customer. For example, office product makers
sell to big box office supply stores, but they must bypass that middleman to understand the

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 customer. The customer isn’t the retailer. The customers are people who use office supplies. Yes,
an office supply maker must understand the retailer’s demands, but it’s as critical to understand
the end user’s needs. Some progressive upstream marketers have go beyond getting close to the
customer. They embed salespeople in their customers’ firms, and even make recommendations
to the customer on how to innovate and grow. Helping customers grow is one of the best ways
to generate new growth for your company. The ultimate goals is your sales team’s complete
integration with your customer’s firm.

8. “Understand How to Do Effective Cross-selling”

Cross-selling sounds easy enough: just get existing customers to do a broader range of business.
However, cross-selling is harder than it sounds. The AOL Time Warner fiasco was a spectacular
cross-selling failure. Many silos proved incapable of creating a value proposition that customers
wanted. Most cross-selling disappointments happen because companies do not offer customers a
really good reason to buy, they fail to understand which customer segments are most suitable to
cross-selling or their sales forces fail to cooperate. Poor training often results in a sales team that
does not really understand its new products or how they might be relevant to its existing market.
Naturally, salespeople are reluctant to sell a product that they do not understand. Since continuing
to do what they have always done is a fairly safe route to success, that’s what they do.

“Risk is inherent when you try to do anything new, and by definition trying to increase
revenue calls for new ways of thinking.”

Develop a value proposition based on a clear, detailed, accurate understanding of your customers
and their needs; then take the following steps to improve your cross-selling:

• Collect intelligence so you totally understand your customers’ problems and needs.
• Identify the people who make decisions at the customer’s organization.
• Craft a value proposition based on that information and intelligence.
• Show the customer the benefits of your value proposition in dollars-and-cents terms.

9. “Create a Social Engine to Accelerate Revenue Growth”

Organizations are social. Ideas come from dialogue among people, which is shaped by their habits
and attitudes. The growth manager’s task is to ensure that growth is a priority in such discussions.
The flow of information must be direct, unbiased, prompt, simultaneously distributed, pointed
and clear. Of course, growth requires budgets and resources. Yet without collaboration,
communication, information flow, decisions, accountability and responsibility, growth goes
nowhere. People don’t simply change because the CEO tells them they must.

“You need to understand the needs of both the person who buys from you and the end
user, if they are two different people.”

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 The social organization has to change. Consider Southwest Airlines. A dozen different
departments must collaborate every time Southwest turns a plane around. When a plane lands
at an airport, cleaning crews swing into action. So do mechanics, fuel pump crews and baggage
crews, caterers, boarding and ticketing agents, and more. It takes most airlines an average of 40
minutes to turn a plane around. Southwest does it in less than half that time. As a result, over the
course of the business day, each of Southwest Airlines plane squeezes out one more flight than the
competition. Result: lower costs, higher revenues.

“The most critical skill a marketer can have is an uncanny ability to find and define a
customer need with enough specificity so that his organization can design products and
services to satisfy the customer, making a profit in the process.”

To drive growth, you need a social engine focused on your customer. Begin by being sure
you understand your customers, and organize yourself according to customer segments. In a
customer-centric social engine, everyone talks about customer needs constantly. Creating the right
social engine depends on having a clear, unfiltered flow of information, on having the right people
in the right places, and on collaborating and coordinating effectively.

10. “Operationalize Innovation by Converting Ideas into Revenue Growth”

An idea is the starting point for revenue growth. Yet an idea is only an idea until it turns into
action. The leader’s job is to ensure that all good ideas get a fair hearing and that all great ideas are
turned into action. A social engine can improve the generation and enactment of good ideas. To
get ideas your company can activate, make generating ideas into a priority. Ask for new ideas at
every meeting from every person. Good ideas don’t require genius. In fact, innovation can come
from anyone.

“All top-line growth is not created equal.”

Be sure employees know that your company appreciates and rewards ideas. Of course, the
company must screen ideas, but don’t make an immediate return on investment your first
criteria. That is unrealistic. Instead, focus on whether the idea is good, whether the strategy
works and whether it can be developed or positioned. Focus on future possibilities. Don’t expend
infinite patience. If an idea doesn’t fit your strategy, has no promise of ever pulling its weight,
or was eclipsed by better ideas, kill it quickly. Do not allow mediocre or bad ideas to assemble
organizational support, political stakeholders or a claim on resources. Killing bad ideas can be as
crucial as nurturing good ones. It’s a form of honesty.

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 About the Author
Ram Charan is co-author of Execution: The Discipline of Getting Things Done. For 35 years,
he has been advisor to executives in a wide range of companies. He has taught at the Harvard
Business School and at the Kellogg School of Management at Northwestern University.

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