Most organisations have an ambition to accelerate their growth. Most fail dismally.
Strategic processes often result in plans that are remarkably similar to the previous year and ultimately result in similar growth performances.
Our experience suggests that most executive teams are asking themselves the right questions but answering them in the wrong way. Roger L. Martin in his book Playing to Win talks about the power of ‘where’ and ‘how’ as questions when it comes to creating a business strategy, but many organisations start too narrow and as a result, fail to consider many of the growth opportunities available to them.
Introducing the Growth Map, a tool that radically changes the way an organisation envisions, plans and executes a growth strategy.
Growth Ambition
Every strategy starts with setting a strategic time horizon. This often comes as a surprise to organisations but the chosen strategic time horizon is the factor that has the biggest impact on growth ambitions. Indeed, the level of ambition and the available strategic options are going to be radically different if the planning horizon is the next 18 months or the next 10 years. An 18-month planning horizon anchors everything in the here and now, allowing only minor tweaks to the core business. A 10-year horizon enables seeds to be planted for long-term shifts that leverage emerging trends. But in most organisations a 10-year horizon is too far away.
We typically recommend at least a 5-year planning horizon, depending on the level of disruption risk a company or industry is facing. Choosing a minimum 5-year strategic planning horizon has many benefits; silencing the distracting noise of the here and now whilst increasing the awareness of faint signals and emerging trends that could become transformative growth opportunities. This doesn't mean ignoring more immediate term obligations and execution realities, but it simply ensures that short term priorities are not pulling in the opposite direction to a substantially bigger picture.
In this first step we also align on the key measure for the growth ambition. It is usually expressed as revenue, although other metrics such as customer volume can also work.
Growth Gap
Once the growth ambition is set, we can look at the ‘natural gradient’ based on historic growth rates for the company and the industry, extending out from today to the end of the focus period.
This helps make the “growth gap” explicit – the difference between where an organisation aspires to be and where it will end up on current course and speed.
Fig 1. Growth Gap
Growth Map
With the growth gap defined, we can then explore the options available to fill it.
When we ask clients to describe their growth options, we rarely get the same answer as they lack a consistent structure or language with which to explore growth options and communicate them across the organisation.
Enter the Growth Map. The Growth Map stands on the shoulders of other thought leaders by combining the two critical dimensions of strategy - the ‘Where’ and ‘How’ - into a 3x3 map.
Fig 2. Growth Map
Dimension 1 – Where to grow
We can derive growth from our Core business
We can unlock growth from Adjacent areas to our core business
We can explore completely New areas outside of our current focus
Dimension 2 – How to grow
We can Build it ourselves
We can Partner with others (think joint-ventures and building ‘ecosystems’)
We can Buy or invest in others (think ‘M&A’)
By combining the dimensions of ‘Where’ and ‘How’, executives can actively explore the opportunities that exist at each intersection ('terrains') such as:
Build-Core: Building something yourself within your core, e.g. an enhanced customer experience or product/service variation. Think Amazon introducing Amazon Prime as a membership service offering free two-day shipping within the United States in 2005.
Partner-Adjacent: Establishing strategic partnerships with other organisations to extend your product or service into new markets. Think Amazon partnering with Best Buy on Amazon Fire TV Edition smart TVs in 2018, providing potential buyers in North America with a bricks-and-mortar location to check out the product before making a purchase.
Buy-New: Acquiring a start-up or an established company to take the first step in exploring a whole new industry or establish yourself in a new sector. Think Amazon acquiring Twitch in 2014 to step into the gaming industry.
Very few organisations engage in this conversation about the nine potential terrains and make active choices. Most simply default to familiar growth levers such as operational excellence in core business or digital and data initiatives to enhance existing experiences and unwittingly ignore the other growth options at their disposal.
The Growth Map helps expose the blind spots that inevitably constrain an organisation’s ability to realise their growth aspirations. Instead of lifting the strategy conversation up a level to truly consider the growth options available to a company, most strategy discussions start from a position of constraint that anchors them towards the important but rarely transformational Build-Core terrain.
Given the incentive plans of most senior executives, this is not overly surprising. Rarely does a growth strategy specify what quantum of growth will come from partnerships and the associated risks and returns. Likewise, we rarely see organisations that have actively considered the percentage of growth that needs to come from adjacent or completely new types of business. In other words, most growth strategies only consider a few of the nine potential areas of the Growth Map therefore limiting the true quantum of opportunity.
Closing The Growth Gap
How to close the growth gap is where the Growth Map plays an important strategic role.
Executives need to align on where they think growth will come from. There are different ways to facilitate this alignment (e.g. surveys, workshop exercises, facilitated conversations) and populate the nine boxes of the Growth Map, but precision is not the end goal here. Rather, it is to surface unspoken assumptions and biases to facilitate a dialogue. At the end of the dialogue, executives have agreed on a dollar target (or comparable metric) across each of the nine terrains on the Growth Map.
This can be an uncomfortable process. For example, a Head of Innovation we worked with who was focused on Adjacent and New growth areas initially resented having a target on her back. However, attributing a growth target to these areas in the context of a whole of organisation ambition suddenly allowed her to challenge the executive team on how little resource she had allocated.
It was alarming in this particular case (a mature incumbent in a stagnant market) just how much of the growth gap needed to be filled by new areas of growth, and yet almost all resources were focused on growth from the core. It also allowed her to reconsider her own team composition and augment largely digital and data profiles executing on new features in adjacent areas with M&A capabilities to actively pursue acquisitions in new growth areas.
Fig 3. Closing The Growth Gap
While identifying and aligning around the sources of future growth and how to close the growth gap is incredibly important, it is not in of itself a guarantee of achieving growth.
There is a pesky little thing called execution that can never be taken for granted.
The choices an organisation makes in the next phases of the Growth Orienteering strategy approach have a significant impact on its ability to realise growth. We will explore these more deeply in a series of future articles.
In summary, the Growth Map helps executive teams design a better strategy by:
Engaging in a richer conversation on the growth aspiration, the growth gap and where future growth could come from,
Exposing the blind spots that inevitably constrain an organisation’s ability to realise its growth ambition,
Exploring all options to close the growth gap by considering all potential sources of growth in nine terrains across the Growth Map
Source: Playing to Win by Roger L. Martin, A.G. Lafley. The Innovator's Guide to Growth: Putting Disruptive Innovation to Work by Scott D. Anthony, Mark W. Johnson, Joseph V. Sinfield, and Elizabeth J. Altman. The Invincible Company by Alex Osterwalder, Yves Pigneur, Fred Etiemble and Alan Smith
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