BusinessDeveloping a growth catalyst that funds itself Published 1 month agoon June 21, 2019By Vaultz Publisher Share Tweet To drive growth, one has to first find the fuel—and for many companies, that’s not so straightforward. Internal and external obstacles, including onerous approval processes, and short-term stock-market impact, can make it hard to fund promising ventures. But that doesn’t have to be the case.Research shows that many companies that consistently post top-line growth operate with what we call an investor mind-set. They continually squeeze funds from underperforming areas and allocate the savings to new ventures or existing programs that have the potential to scale. In other words, they fund their own growth.As simple as that might sound, this investor approach is a significant departure for many executives, who tend to be consumed with cutting costs and playing it safe by banking marginal gains. They fall victim to a common behaviour that drives only short-term profit: taking the savings from often highly disciplined cost-cutting programs and dropping the cash to the bottom line.Growth leaders are different. They constantly scour for savings across the business. They know exactly where each incremental dollar of savings should be reinvested to drive new growth, and they know the ROI of every dollar invested. In our experience, it often takes a significant event, such as a new CEO or business-unit leader, an acquisition, or a transformation to turn around a declining business, to jolt the business into action. While these catalysts are effective motivators, business leaders intent on driving growth (and in some industries or sectors facing stiff headwinds, investing only in growth might not be the best option) don’t have to wait for them to occur to build the Investor DNA into their organization.This Investor approach is most effective as part of a purposeful and diversified approach to driving growth (Exhibit 1).The Performer approach, where businesses continually optimize commercial functions (marketing, sales, and pricing) can yield a massive source of investment funding. The Creator approach pours those investments into new products, services, or business models to drive future growth.Thinking and Acting like an InvestorFor companies looking to jump-start their growth ambitions, the Investor approach can be a fast way to achieve results. Investing in proven winners—initiatives that are already driving growth but may be underfunded—can put points on the board quickly. Sustaining that, however, requires leaders to be intentional in making the necessary commitments to change the business’s growth trajectory. That includes making a number of “big moves to improve productivity and dynamically reallocate funds. It also requires putting in place new processes and using data to make better decisions. In fact, data and analytics are the top differentiating capabilities between high-growth Investor companies and their peers, according research (Exhibit 2).FIND THE MONEY AND SQUEEZEInvestor companies can uncover hundreds of millions of dollars in savings. This isn’t some theoretical pot of money that will materialize in the distant future; often, companies can begin banking the new funds in a matter of weeks or months. Here are three steps high-performing companies take to find the biggest savings opportunities:Get real about transparencyFor growth leaders, there’s no such thing as black-box spending, in which you invest money in a service or program and wait to see how it works out. Instead, these companies insist on radical transparency, demanding to know the exact purpose of each dollar spent as well as the anticipated return. They put in place processes, metrics, and simple dashboards that allow them to get a clearer view of how their ‘spend’ is performing.Drive maximum productivityJust as underperforming programs sometimes continue to receive funding out of inertia, some processes may continue to churn along even though there are faster, cheaper alternatives. High-performing Investor companies continually scour their organization for outdated, inefficient ways of operating. To get the full benefits of productivity, each process should be in the top 30 percent for the industry.A few of the most promising areas of focus are:Efficiency. Leading companies engage in detailed process mapping, looking for opportunities to streamline operations, eliminate redundant processes, and hunt down opportunities to rationalize partnerships. Advanced analytics has emerged as a powerful capability in driving new levels of efficiency. Simplification can also be useful in improving efficiency.Procurement. Adding rigor to procurement of products and services by benchmarking prices, soliciting bids, moving some services in house, and driving for transparency can unlock significant savings. When it comes to marketing, it’s been found that by analysing ongoing costs such as agency and overhead, companies can uncover savings of 10 to 20 percent on marketing spend. Digital has the potential to radically increase savings as well.Automation. Advances in analytics have allowed companies to unlock significant efficiencies, resulting in enormous savings through reduced time, errors, and personnel costs (often while also improving the customer experience and overall performance). Robotic process automation, for example, is able to cut policy conversion time by 50 percent for insurance companies.Trim the excessIn most organizations, general and administration expenses (G&A) and personnel are likely to yield the biggest cost-saving opportunities. The most effective personnel savings are based on rethinking processes and ways you work as well as revisiting strategic priorities, rather than simply letting go of people. When done correctly, best-in-class businesses reduce overlaps in activities, eliminate inefficiencies, and focus personnel on growth activities. Cuts must be approached with care. G&A includes some critical activities, such as enabling innovation and developing talent. When done correctly, however, the impact can be profound.FIND AND FUND THE OPPORTUNITIESThe most successful companies prioritize the opportunities they uncover so that they can quickly allocate funds and people to them as they become available. Those opportunities generally come in two flavors: first are proven winners—existing programs that could outperform with greater investment. The second are promising new areas that require funding to acquire or launch. Every company’s growth drivers are different; the important thing is to find what drives growth for your company—and fund it.To be ready to allocate funds quickly to the most promising opportunities, successful companies take the following steps:Identify and fund the high-potential opportunitiesMost companies have plenty of data on hand to pinpoint the areas of greatest potential. This should yield insights both on where to invest for immediate growth and where investments are most likely to pay off over the long term. As companies search for opportunities, they should also mine their frontline workers, who can be an important source of intelligence on trends and opportunities. Many businesses find it helpful to create an “opportunity map” of potentially lucrative hot spots. The best companies, however, run advanced analytics against internal and external data sets from a variety of sources to build a picture of the future opportunity, not the historical reality.Reallocate funds and people dynamicallyHigh-performing Investor companies have mastered the art of dynamic allocation. Research shows that dynamic reallocators, those that reallocate at least 49 percent of the previous year’s budget, achieve a compound annual growth rate in total return to shareholders of 10 percent, compared with just 6.1 percent for static allocators. It’s not just about putting funds to use; it’s about focusing your best talent on where the growth is. Effective allocation, however, requires discipline to follow through and a clear set of metrics that decision makers are aligned around. Leadership alignment on priority markets, in fact, is the top Investor activity for top-quartile growth companies.Fund a continuous, systematic stream of acquisitions.Programmatic M&A can be a powerful lever for growth. Companies that use it well invest up to 30 percent of their market cap each year in acquisitions that mesh with their strengths. To do that, however, requires constant work to maintain a healthy pipeline of target companies.Be disciplined in prioritizing opportunitiesTo keep the process untainted by bias or territorial thinking, it must be rigorous and transparent, taking into account both the opportunities and the needs of the organization as a whole.EMBED THE CAPABILITIESTo fund your own growth, disciplined decision making must become the new normal rather than a one-off exercise. Here are some critical steps to take:Build a rigorous budgeting processRigor in budgeting requires clarity about current budget performance and a commitment to allocating spend to drive growth. Zero-based budgeting (ZBB), for example, requires teams to rebuild their annual budgets from zero, with no carryover from the previous year. This process helps to identify small and not-so-small pockets of waste that can add up to big savings. While it is common for budget owners to use bottom-up budgeting, for truly breakthrough results, they need systematic visibility into budgets, clarity about what to measure, accountability for ambitious targets, and governance mechanisms to challenge budgets and reallocate resources.Build mechanisms to surface investment opportunitiesFinding opportunities to save and reinvest requires engagement from across the enterprise, from finance experts to product owners to business-unit leaders. But while the spirit of cooperation may be strong, without dedicated mechanisms to surface opportunities, those good intentions often amount to little.Support data-driven decision-makingInvestors of any sort are only as effective as the data they rely on. Many bring in data scientists to set up a robust analytics capability. Once they identify the highest-potential areas for investment, they use analytics to develop a more granular view of where—and how—to double down, investigating by city, segment, region, product, or even demographics, using a mix of methods. In developing effective analytics, it’s important to focus on rationalizing data and creating common standards (for KPIs, metrics) so that investment performance across activities is comparable. Related Topics: Don't MissGrowing faster than the market: Three questions the C-suite should ask Continue Reading Advertisement You may like Click to comment BusinessGrowing faster than the market: Three questions the C-suite should ask Published 3 months agoon April 25, 2019By Vaultz Publisher Leaders who are most successful at driving growth in their organizations are deliberate, persistent, and disciplined in the way they go about it. Growing a business is a matter of do or die. Companies with high organic growth also return a better stock price.But growth is getting tougher in the face of new market dynamics: rising consumer expectations, increasing competition, and digital disruption. That has turned growth into more of a contact sport, rewarding businesses that can spot opportunities at hyper granular levels and then capture them quickly.Most business leaders understand the need to change, but making it happen is easier said than done. In our experience, those leaders who are most successful at driving growth in their organizations are deliberate and disciplined in the way they do it. To help instill that approach, top growth leaders are methodical in asking and answering three crucial questions:Where is my growth going to come from?How do I grow now and tomorrow?How do I set up my growth engine? Let’s take a closer look at these questions:Where Is My Growth Going To Come From?There’s no point optimizing your growth engine until you’re clear about the opportunity you’re going after. That means investing in sound analysis to identify where the growth is today and where it will be tomorrow, whether that’s in your current sector or an adjacent one. Top growth leaders, once armed with a realistic picture of their company’s growth situation, take care to set their priorities in the corporate mission, knowing growth initiatives can easily misfire if they aren’t anchored in strategic business priorities. In some cases, companies will articulate or refine their corporate mission and vision in line with what they learn about growth in their industry.Leaders map a view of their growth initiatives across two dimensions:Scanning for growth opportunities. This involves understanding how your industry and category is structured, how customers navigate it, where the profit pools are, and what trends are emerging. Then you figure out how your portfolio stacks up against it all.Getting granular with customer segmentation. Our research on revenue growth at large companies suggests that executives should “de-average” their view of markets and develop a granular perspective on trends, future growth rates, and market structures. Insights into subindustries, segments, categories, micro markets, and even pockets of growth within existing large accounts are the building blocks of portfolio choice and a critical factor in making sound decisions about where to compete. In the past few years, the use of advanced analytics to track behavior and preferences has made it possible to segment markets down to the level of individual customers. By pursuing mass personalization at scale, companies can lift revenues 5 to 15 percent while also improving the efficiency of their marketing spend and reducing acquisition costs. How Do I Grow Now And Tomorrow?Every growth journey is different, but there are three broad fronts: Invest, Perform, and Create.Investing in growth is something companies can start doing immediately by diverting funds from activities that are not performing efficiently or effectively into the right opportunities.Performing optimally in commercial functions allows companies to generate new revenues from growth in the medium term. AndCreating new offerings and business models custom-designed to satisfy unmet needs more completely, quickly, and flexibly than before enables companies to build a pipeline that fuels growth far into the future.The best companies use a combination of these three approaches to drive growth quickly, and reinvest released funds into future opportunities to support longer-term growth. Invest: Put your money where the growth isLarge companies can capture significant incremental revenue through a relentless search for efficiencies and then reallocating those resources to promising new initiatives or proven winners. Research shows that “dynamic reallocators”—companies that reallocate at least 49 percent of the previous year’s budget—achieve a compound annual growth rate of 10 percent in total return to shareholders (TRS). By contrast, “static allocators” that simply adjust last year’s spending achieve TRS growth of just 6.1 percent. Within 20 years, the dynamic reallocator will be worth twice as much as its less agile counterpart—a lead that is likely only to increase as digital disruption and geopolitical uncertainty make nimble reallocation even more important.Central to this Invest approach is a thorough and rigorous approach to rooting out savings and a disciplined method of funneling funds to short- and long-term growth opportunities. Successful growth leaders have robust metrics and processes for identifying areas where they can squeeze out cost and a clear idea of where to invest every incremental dollar they find to drive growth.Companies with the right mind-set can release tens or even hundreds of millions of dollars for reinvestment in a matter of months by optimizing their commercial functions. Savings can be captured from many sources, such as general and administrative expenses, but marketing is a prime candidate. Many companies can save 10 to 20 percent of their marketing budgets by making processes leaner and more efficient, paying the right price for a given service (and paying only for what they really need), and figuring out who does the work. By breaking open the black box around agency fees, for example, companies can save money and improve agility and quality. By optimizing consumer promotions and engagement (CPE) through better targeting, simpler programs, and better measurement, they can save 10 to 30 percent of their marketing spend.Tracking marketing return on investment (MROI) helps companies identify underperforming marketing spend that can be reallocated to activities that deliver a better return on investment. Advanced analytics allows companies to measure the impact on customer behavior of offers and messages across multiple channels by combining media-mix modeling with digital-attribution modeling. Perform: Optimize your commercial capabilitiesGreat growth companies constantly optimize their commercial capabilities in marketing, sales, pricing, and promotions. This approach helps to get much more growth from existing capabilities while also generating more revenue that can then be invested in growth opportunities.Customer experience (CX) is one potent driver of growth. Successful CX enhancements can increase sales, facilitate cross-selling, and boost revenues by as much as 15 to 20 percent. Similarly, reducing the complexity of CX—for instance, by optimizing online self-help features such as FAQ pages so that customers don’t have to make unnecessary calls to call centers—can free up savings in cost to serve on the order of 15 to 50 percent.Introducing automated algorithm-driven dynamic pricing is another important source of growth. Companies can achieve sustainable price increases without damaging customer satisfaction by focusing resources on specific groups, such as more-profitable customers.Similar growth opportunities exist in sales. Adopting omnichannel sales and analytics can be a crucial enabler of growth for B2B companies that understand when and when not to use digital. These companies achieve five times more revenue than their peers, eight times more operating profit, and twice the return to shareholders. Adopting new digital channels can reduce the cost to acquire a new customer and the cost to serve an existing one, changing the commercial efficiency of the future channels that can be reinvested into current or new opportunities. From research and experience, three traits have emerged that should be core ingredients of every company’s optimal human-digital blend: speed, transparency, and expertise. Create: Innovate by design with the customer at the centerTo build things that customers want, a business needs to out-innovate its competitors—not just uncovering unmet customer needs to find profitable white spaces but also using technology to enter new markets or go to market in new ways.New sources of growth come from redesigning business models, creating something new, and exploring disruptive services. New business models don’t have to be complex; they could involve tapping into new sales channels to reach different customers, for instance, or introducing new services to support an existing product.When exploring new opportunities, winners go beyond standard focus groups and surveys and pull in data on macro trends, marketplace analyses, ground-level performance metrics, and a host of other sources. Thanks to digitally enabled techniques such as social listening, sentiment analysis, digital ethnography, and online-consumer cocreation, research into unmet needs is more effective, more flexible, and faster than ever before. Companies can assemble an online focus group of B2B buyers in as little as ten minutes. Mobile ethnographies can be completed in a weekend; quantitative surveys can be fielded and analyzed in days.Having equipped themselves with a deep understanding of customer purchase journeys, leading companies employ design thinking to create new products and services that will address unmet needs, reach unserved segments, or support entry into adjacent markets. At a time when consumers can choose from the best products that global marketplaces have to offer, design has become a key source of differentiation and a C-suite topic.To help get ideas to market quickly, winning innovators increasingly rely on “speedboats”: small launches where a product is tested and refined in a real market setting.The ability to scale up rapidly is critical to getting new products to market before competitors can. Leading consumer-goods innovators have reaped substantial rewards by scanning the market for promising ideas, watching for emerging consumer acceptance and new behaviors, and then jumping in before the market landscape has fully evolved.Merger & acquisition (M&A) functions can play an important role as well, though they need to become much more dynamic on reading the evolution of market trends, competitor moves, and the entry of new attackers. This requires greater focus on the return on capital in the current business areas and on future growth opportunities, and oftentimes an ecosystem of partners to deliver. How Do I Set Up My Growth Engine?Markets shift, so businesses must keep finding and pursuing new sources of growth. To do that, they need a growth engine: an operating model underpinned by analytics and top talent, and built around the core blocks of organization-wide alignment, focused capability building, an agile culture, and a leadership mind-set.To launch a growth transformation, the most important element will be dedicating sufficient resources and being rigorous in driving the process. That means putting in place a well-supported growth-transformation office that has the authority and resources to rigorously track and manage the transformation. It establishes a baseline and manages output to that baseline. This kind of central resource is crucial because it can drive and coordinate change across the entire business. It also provides a stable backbone with well-oiled processes for tracking implementation, driving initiatives, removing barriers, and managing trade-offs for short-term earnings targets. Without a dedicated team in place, change tends to be piecemeal or incremental, which inevitably leads to impact far below expectations.The transformation office has an important role in focusing on developing the right capabilities. Research has found that top growers beat their peers by differentiating themselves in key capabilities such as data and analytics, and by developing products, services, and processes such as agile working and cross-functional collaboration. In developing those growth capabilities, research has shown that it’s crucial to sequence their development thoughtfully. If you are moving from the bottom to the third quartile, for example, you might focus on aligning priority markets, building a product strategy and portfolio, and systematically measuring the voice of your consumer. If you move from the second to the top quartile, some examples of capabilities to develop include improving core offerings, introducing innovation awards, or improving processes to shorten commercialization cycles.Developing these capabilities clearly has implications for talent and skills. Recent research by the found that digitization and automation are beginning to make new demands on workforce skills, with marketing and sales likely to be among the functions most affected. Up to 40 percent of sales activities can be automated with today’s technology, and that number can go up to 50 percent as technology advances. Overall, the greatest need will be for advanced technological capabilities and basic digital skills, followed by social and emotional skills.For new capabilities to take full effect, businesses need to reinvent how work gets done. That means making offices more like workshops, with employees working together to build something great. A survey reported that 71 percent of high-growth companies have adopted agile processes such as scrum, sprints, cross-functional collaboration, and colocated teams.Agile ways of working need to become a fact of life, embedded in every aspect of a company’s operating model from innovation and product development through to marketing. Indeed, agile approaches are critical in enabling companies to target micro-markets, test ideas at speed, run hundreds of campaigns simultaneously, personalize offers on a truly granular scale, use data to drive decisions, and maximize MROI. This applies to embedding design thinking into how companies work.The final piece of the growth puzzle is a leadership mind-set. Top growth leaders are obsessed with growth and committed to keeping their business on a growth trajectory. They have a key role in developing a well-crafted story to help people at all levels understand what changes are in store, what the company is striving to create, and how new ways of working will affect what they do every day. Then they must communicate that clearly and continuously to the organization. They are also disciplined in the way they go about orienting the business to growth, constantly asking themselves and their peers’ questions such as:Do I use language that emphasizes growth rather than productivity?Do I and my top team role model the behavior we want to see from our employees?Should I carve out a lighthouse organization that focuses purely on growth?Growth today drives not just performance, but survival itself. The companies with the brightest prospects are those that know where to find pockets of growth, how to capture that growth now and in the future, and how to build a growth engine for sustainable success.By Biljana Cvetanovski, et al Continue Reading Advertisement LatestPopular Africa1 month agoRepublic of Namibia Insights1 month agoBorn agile or journey to an agile organization Economy1 month agoGlobal Economic Growth Becomes Fragile as Trade Tensions Persist LN | Business1 month agoThe 2019 Toyota RAV4 SUV, a masterpiece for all! Banking1 month agoWhy are local banks lagging behind in quality customer service delivery Vogue & Style1 month agoThe Ultimate First Impression Technology1 month agoThe Future with Internet of Things Business1 month agoDeveloping a growth catalyst that funds itself Finance1 month agoBuilding a Sustainable Competitive Advantage in the Financial Market Real Estate1 month agoBUY OR BUILD A HOME? 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