3. The growth imperative
● Pursuing growth in a company is imperative
● Not pursuing growth in a company may yield one of the
two outcomes.
○ A sale of the company to another parent, or eventually
decline and debt.
● There are four reasons as to why a company should pursue
growth
1. “When your competitors are growing but you are
not then your company is losing market share.”
2. “No growth means the company cannot attract or
retain top talent.”
3. “Pursuing growth can stand as a ‘powerful trigger’
for both the innovation and efficiency of a
company.”
4. “Growth is one of the key drivers of the market
value of a companies shares.”
Reasons to Grow
1. Gain and maintain market share
2. Attract and retain top talent
3. Boost innovation and efficiency
4. Drive Value
4. Why profitable
growth is hard
● Sustaining growth is brutally hard for companies
○ Limits to market dominance make it hard for
businesses to sustain historical growth rates
○ When company’s try maintaining their cultural
strength it eventually gets in the way of sustaining
historically high growth rates
○ When a company's strength begins to dissipate it
then causes the company to lose the competitive
advantage they had
● Company’s may sustain or retain high growth rates by
making bigger acquisitions
○ Although, bigger acquisitions do require a larger
pool of capital from the company and are said to
be harder to integrate
Sum up
“Other than small family-run businesses, every company
faces the imperatives to grow. Yet it is extremely hard to
sustain profitable growth on an ongoing basis.”
5. Disaggregating and
Reaggergating
● Unbundling, in this circumstance, is defined as the
unpacking of the bundle of tangible and intangible
strengths that account for and in the company’s success in
the current business and picking a subset of these strengths
to carry over to the new line of business
● Rebundling, in this circumstance, is defined as the
assembling of a complete bundle of tangible and
intangible strengths in a company that are essential for the
success of the company in the new line of business
● A new bundle would include the strengths that were
carried over from that existing business with the addition
of the other new strengths that need to be built from either
the ground up or acquired externally
● Both the bundling and rebundling processes must be
planned and managed wisely
7. Identifying high-
potential opportunities
● When a company diversifies into a business that it
knows little about is coating disaster
● When a business wishes to pursue new growth
opportunities, the company should consider building
on from their historical strengths all while putting
the business into new marketplaces
● When a company decides to build on their ideas
from existing core strengths this will present
excellent opportunities for profitable growth
Sum up
It is not a good idea to engage in random brainstorming when
generating options for future growth. Brainstorming should be
guided by the two dimensional framework. This approach
reduces the risk of overlooking potentially good opportunities,
while preventing corporate leaders from distraction by red
herrings.
8. Creating new
offerings for existing
customers
● For companies to have better profitable growth they
should consider building on their existing customer
relationships
● Companies should consider how to expand their
portfolio of products and services that are offered to
their current customers
● There are two pathways that companies should
consider when brainstorming
○ Pathway #1: Companies should brainstorm what
complementary products and services the customers
may need in order to use what you currently sell
○ Pathway #2: Companies should brainstorm what
products and services might substitute the ones they
they currently sell.
● Diversifying into substitutes can yield two benefits
○ Offers opportunities for growth
○ Reduces the risk that a newcomer could do an end run
around you
9. Finding new
customers for existing
offerings
● There are two pathways companies should
consider when trying to find new customers
○ Search for new customer segments within
the geographic regions where the company
currently competes
○ Search for opportunities to expand
geographically into new regions
● Companies must be careful when pursuing
multiple growth avenues at one time. This can be
very risky because the company could
potentially take on too much complexity at one
time
10. Creating new
offerings for new
customers
● When a company pursues growth by radical
diversification the company is creating or
acquiring the business where they offer entirely
new products and services to an entirely new
target of customers; this can potentially be a
high-risk strategy
○ The largeness of the risks depends on the
extent to which the new business leverages
the core capabilities of the company’s
existing operations
● It is important that all opportunities and
capabilities are analyzed fully to determine if
they should be pursued or not
11. Using assessment
screens to choose the
best opportunity
● At any point in time, a business may choose to pursue growth
by diversifying. This growth may:
○ Create new offerings for existing customers
○ Target current offerings at new customer segments
○ Engage in radical diversification by leveraging some core
capabilities to create entirely new products and services for new
customer segments
● Companies should never try diversifying multiple pathways at
the same time
● Anil Gupta states that there are three assessment screens to
evaluate potential options for new growth
1. How attractive is each growth option in terms of size,
growth rate, and opportunities for differentiation?
2. What are your chances of emerging as one of the
leading players in each of the various growth options?
a. If two opportunities are both highly attractive, it is
much wiser to pursue the one where your prospects of
winning are better
3. If the company were to pursue each of the various
options, would the economic benefits from winning be
greater than the cost of entering the new arena, and if
so, by how much?
13. Assembling the right
capabilities
● In a business, success requires a company to assemble the
needed set of capabilities in a way that the capability
bundle would ultimately give the company a competitive
advantage over over competitors.
● Approaches for assembling the needed bundle of
capabilities varies from one context to another
● Gaps that are in the require capability bundle for a new
business may be filled in three different ways
1. Build the capabilities from scratch
2. Engage in a strategic alliance with a complimentary
partner
3. Acquire a company with the needed capabilities
14. Deciding to go alone
or partner
● When a company begins contemplating expanding
into a new line of business it must address one major
challenge
○ “How to build, acquire, or gain access to those
capabilities which are essential to the new business,
but are different from those which essentially underlie
the company’s current activities
● There are two, big ways a company can go about
helping the (above) situation
○ Companies can use strategic alliances
○ Companies can build their capabilities from the
ground up
Reminders
● Building capabilities from the ground up requires larger capital
● Because strategic alliances require ongoing collaboration between
two or more independent companies whether or not an alliance
succeeded depends also on several other factors, such as choice of
alliance partners, the governing structure through which the alliance
will be managed, agreements regarding the roles and
responsibilities of alliance partners, and early investment in
building trust among the alliance partners.
15. Growing through
acquisitions
● Acquisitions are one of the three mechanisms in which a
company may fill the capability gaps when deciding how
to enter a new market space and grow the business
● With acquisitions, companies need to watch out for two
particular, potential pitfalls
○ Avoid the overpaying for bigger and better
acquisition
○ Manage the post-merger integration well
● Companies need to let their strategic logic drive the
decisions rather than their ego
17. Cultivating a
culture for growth
● When creating a culture of growth in a company it is important
to start out by making sure “the key performance indicators
that drive performance assessments for senior executives and
business unit heads include expectations regarding growth,
growth in market share, in revenues, and in earnings”
● It is highly important for a company to create a culture that
drives and pushes for innovation
○ No company can sustain growth without
innovation
● There are six ways to create and nurture a culture of innovation
1. Commit to planning for three different time horizons
simultaneously
2. Build appropriate organizational ecosystems for each
type of horizon
3. Anticipate and embrace the idea that experimentation
will always result in some failures
4. Make sure that the reward structure in the company
fosters innovation
5. Actively cultivate open-source innovation
6. Build the ability to identify and scale up the promising
innovations
18. Leading for growth
● It is important that when a company is on the path of growth is has
a leadership team that is a mix of explorers as well as exploiters
○ “Explorers are more likely to have demonstrated a track
record of growing the business that they were managing,
and for driving disruptive innovations”
○ “Exploiters are people who tend to be somewhat
conservative and less comfortable with risk taking and
change. Exploiters are more likely to have demonstrated a
preference for incremental innovations, and for driving
efficiencies within existing businesses”
● It is important that leaders of a company are well-rounded in
understanding each part of the business. It is important that the
leaders (senior leaders) are up-to-date with what is happening in
each department of the company
● Having a good mix of leadership in a company, good/dedicated
employees, and having all employees (workers and leaders) being
up-to-date will help keep the innovation in the organization
Sum up
Those who sit at the apex of the organization have an outsized impact on
whether or not the company is able to grow profitably on a sustained basis.
They have the power to select key personnel, to establish incentive
systems, and to allocate resources. It matters who they are, how they spend
their time, and the signals sent by their statements and behavior.
