1. Look past the myths
Since growth transformations present significant challenges, business owners often are deterred from attempting them because of a few persistent myths.
One such myth is that pursuing growth during a crisis is a distraction from the issues at hand.
However, while businesses need to focus on short-term issues related to a downturn, waiting for the economy to recover could mean missing chances to gain a competitive edge.
Moreover, there’s no perfect time to embark on a transformational growth journey. Therefore, waiting serves no purpose.
That’s why a recent analysis by strategy consulting firm McKinsey & Company shows that investing in growth during a downturn delivers the best results for organizations with healthy cash positions and balance sheets.
Another myth is that a growth transformation will take too long and cost too much. Although growth transformations do require investment, the full payoff may not come until year two. Considered, disciplined organizations can quickly unlock significant efficiencies (such as improving the efficiency of direct response channels like paid search) and capturing short-term revenue wins (for example, by adjusting prices).
Additionally, another myth circulating is that growth isn’t something leaders can control; it’s the result of market forces, competitive dynamics, customer preferences, or sheer luck. While this is true, and external factors & good fortune do play their part, it’s also equally true that almost every business can improve its growth position.
For example, it’s not uncommon for a significant spread in growth performance among companies to take place in almost every sector, further indicating that there is ample room for growth.
2. Cleansheet a bold growth goal
There’s an all-too-familiar approach to setting growth targets that goes like this:
“Taking last year’s figures and adding or subtracting a few percentage points based on experience or gut feeling.”
However, this has always been counterproductive.
Now, while the global pandemic has rendered year-on-year comparisons meaningless, it is sheer folly.
The acceleration of the mass migration to digital triggered by COVID-19 requires businesses to cast a skeptical eye on trend lines and historical precedents. Meanwhile, also setting goals that reflect the new landscape’s potential.
Moreover, a McKinsey analysis confirms a 15-30% jump in consumers who purchase online across 20 different industries. Although, the data is much more impressive in industries such as OTC medicine and groceries, with growth at 44% and 41%, respectively.
Time and again, businesses use this zero-based approach to set and meet goals 40 percent higher than they previously achieved with their traditional strategies.
A zero-based approach to cost planning is well understood, but how does it work for growth? Elite-performing companies start by breaking down the business into its four primary components:
- Customer journeys
- Product lines
- Commercial activities
Afterward, they set a peak-performance goal for each revenue driver along each journey. For example, generating demand, converting demand to sales, retaining customers, and expanding customer relationships over time.
When setting these goals, they look for examples from top-performing units inside of the organization and gather external benchmarks from market leaders, experts, and innovators in other sectors.
Now they are guided by curiosity and an open mind while also analyzing how new technologies can support more ambitious goals, challenging institutional norms, and refusing to blame external factors for past performance issues.
Research by Mckinsey & Company involving over 238 companies revealed that, for one large retailer, adopting a zero-based approach to growth helped overturn long-held assumptions that its core brick-and-mortar business could not grow.
While its stores had endured years of decreasing revenues, its much smaller online business grew at a double-digit pace. Prior forecasts predicted continuing decline for in-store business, along with a gradual slowing of growth in e-commerce.
But leaders decided to set aside these trend lines, along with their gut feelings about the company’s likely trajectory. Instead, they looked afresh at marketing strategy, sales-team performance, customer loyalty programs, and potential synergies between the physical and virtual sides of the business.
Armed with this broader perspective, the leaders reset their ambitions:
a double-digit improvement in the company’s overall growth rate.
Twelve months later, they achieved it. This newly implemented strategy resulted in the company meeting its goals 40% higher than using their previous strategies.
It certainly pays to adopt a zero-based approach to cost-planning.
3. Drive significant impact from multiple moves
Rarely does growth come in one big bang. In most cases, targeting a comprehensive set of modest increments is a better strategy over the long run.
Companies that regularly drive double-digit impact do so by identifying a few key revenue drivers, applying best practices to each one, and stacking up a series of small wins along the way.
Although “breaking down the opportunity” into smaller wins is more manageable, many business owners are still unsure how to proceed. However, there is a body of empirical evidence on how businesses can drive commercial excellence.
It stems from boosting marketing effectiveness, motivating sales teams, and even testing & scaling pricing innovations.
The challenge, therefore, is not to invent new ways to improve performance but to take the time to look outside your business for proven methods & emerging solutions and apply them with both discipline and velocity to the key drivers that push the needle for growth.
One example of this is an educational services company that was reviewing its marketing effectiveness.
The educational-services company found it had neglected brand awareness and overemphasized performance-marketing tactics.
Drawing upon empirical evidence and bottom-up analysis, the company reset its marketing budget and reallocated investments. This resulted in boosting high-conversion inquiries by 24 percent.
Working along the customer journey, the team enhanced the website’s user experience to increase inquiry flow. Moreover, they also intensified coaching and adopted performance-management “nudges” to improve frontline sales.
Additionally, they introduced multichannel communications and peer-mentorship programs to support student success.
Collectively, these efforts reversed five years of sales decline, propelling the company to double-digit growth in new sales in less than a year.
4. Institute a constant flow of growth
Sustained growth comes from both creating and replenishing a pipeline of high-level initiatives that deliver a constant flow of growth over time.
Successful growth transformations strike a balance between quick wins (within three months), midterm operational improvements (three to nine months), and long-term strategic advantages (up to three years+).
They also identify a comprehensive set of growth opportunities using the zero-based approach described previously in this article.
Afterward, these successful growth transformations constantly review, reprioritize, and renew the mix of initiatives as the change progresses and its impact becomes apparent.
Quick wins are crucial in this practice because they can generate savings or revenue that can then be allocated towards the funding of the growth program or even pay for the entire program itself.
For example, cutting spend on non-working media or low-ROI trade shows could release funding for effective new digital marketing campaigns.
In addition, quick wins provide visible proof that the transformation is working, which can boost confidence, motivation, and momentum for longer-term efforts.
For example, one international payments company kickstarted its growth transformation by analyzing price points across multiple products and services. It found room for growth, such as in high principal payments, and quickly lowered prices to gain share.
In the medium term, it used granular geographic analytics to improve yield, reduce prices at locations with competitors nearby, and raise them where competitors were more distant.
The new pricing model delivered $100 million in incremental revenue as measured against comparable locations using the old model.
The company is now exploring more radical changes to capture long-term growth, such as moving from transaction fees to subscription-based pricing.
5. Turn data into a competitive advantage
A military strategist once proclaimed, “No plan survives contact with the enemy.”
Moreover, no growth transformation ever unfolds precisely as intended.
Changes in customer sentiment, competitor behavior, or market conditions will inevitably threaten to throw plans off course.
Therefore, having the means to measure progress systematically and the stomach to act decisively—is a significant asset in your business.
Such measurement also yields insights that help business owners double down on successes, ditch failures, and adjust implementation for maximum impact.
Measuring growth is no easy task, however.
Multiple variables are in play, and quantifying the impact of critical growth drivers such as brand building and sales force effectiveness, are notoriously tricky.
To tackle this challenge, companies can apply new digital metrics, such as share of branded search, to assess the impact of marketing campaigns and apply advanced analytics to compile operational and survey data.
By doing this, you help link customer experience improvements to hard dollar revenue gains.
Now, having mapped customer decision journeys, identified revenue drivers, and developed initiatives, businesses can determine which metric to track, such as lead volume, win rate, or deal size, to assess the progress of each initiative.
In particular, one industrial company used account penetration, new product growth, and new-market entry as its key metrics and linked them to Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) systems to provide real-time visibility and performance updates for each driver set of initiatives.
Transformation leaders evaluated data from these systems in monthly progress reviews to decide when and where to reallocate resources. The effort paid off with incremental revenue growth of 4.5 percent in a declining market.
With growth drivers challenging to pin down or slow to change, like brand awareness or customer experience, companies can use new concepts, such as share of branded search, to measure progress.
Additionally, they can also take advantage of the increasing power of advanced analytics to build predictive models that highlight the relationships between customer behaviors and sales.
For example, one wellness company calculated how customer lifetime value (LTV) correlated with satisfaction scores, guest services, and interaction with personalized nudges.
Armed with insights from this analysis, it made changes in its stores and CRM tactics that increased average LTV by more than 8 percent.
One of the thorniest challenges in measuring growth comes in weighing multiple metrics for multiple initiatives.
Simultaneously, brand building can drive more web traffic that yields more sales, but it can also increase sales conversion rates on performance-marketing channels, such as paid search.
An accurate way of tracking impact is to compare the results from an integrated package of changes in a given country or customer segment with the results from a control group.
Namely, one online job-search company decided to run a matched-market experiment to assess the effectiveness of a new marketing campaign—the campaign combined investments in brand media with efforts to optimize performance-marketing channels.
The test showed a substantial ROI, so substantial that the company decided to launch the campaign nationally.
Advanced measurement techniques helped the business quantify the impact and nurture a collaborative, data-driven culture focused on metrics & test results — not on anecdotes and finger-pointing.
Because these methods capture the impact of factors that take longer to play out, such as improvements in product or service experience, they also can help businesses balance their set of initiatives to drive sustained growth over the long haul.
As we can see, transformations are uncertain in the best of times. Moreover, transformations are the most challenging of them all. Although following the five principles outlined above can’t guarantee success, it should help tilt the odds in your favor.