Monday, June 25, 2012

Book review: Profitable Growth Is Everyone’s Business

Profitable Growth  Is  Everyone’s Business-10 tools you can use Monday morning

Author: Ram Charan  (What the CEO Wants you to know and coauthor of Execution)

The Ten tools of Profitable Revenue Growth

1st Revenue growth is everyone’s business, so make it part of everyone’s daily work routine.  Every employee wants to be part of company’s growth agenda, but most don’t know how. Managers nned to provide them with both information and tools, starting with making revenue growth an inherent part of daily conversations, meetings, and presentations.
Just as everyone participates in cost reduction, so must everyone be engaged in growth agenda of the business.  Every contact of every employee with a customer is an opportunity for revenue growth: The people answering the phones in the call-center can provide valuable information on unmet customer needs. The appliance repair person can discover patterns and timing of demand for replacement of appliances. Salespeople can extract market intelligence and ensure that it is communicated to the product development ,operations, service departments. Logistics people,through on –time deliveries, can help stores avoid stock-outs, thus on-time deliveries, can help stores avoid stock-outs, thus enhancing  customer satisfaction, an important foundation of future revenue growth.

The fruits of these efforts for revenue growth energize people and enhance their self-confidence. Growth taps into all their latent energy to generate ideas that can carry the organization to higher levels of growth. Growth truly is everyone’s business, not something that is solely  the concern of management. Every employee at every level can be doing something for a customer.

2nd Hit many singles  and doubles, not just home runs.
While home runs provide the opportunity for a quantum increase in the growth trajectory, they are unpredictable and don’t happen all the time. Singles and doubles, however, can happen every day of the year. They result from a determined, day-in and day-out improvement in the activities and social processes of a company; they form the drivers of profitable revenue growth.
Increasing revenues through singles and doubles build a growth mind-set throughout the business, so that when the opportunity for a home run does come along, you’ll be better prepared for a home run does come along, you’ll be better prepared to take advantage of it.
For example, Dell’s efforts, beginning in 1993, to improve inventory turns to use less cash and reduce price and product obsolescence began as a single. The company initial goal was to increase inventory turns, which were averaging six a year, to ten. Over the last ten years, Dell has continuously improved the totality of its supply chain so that its inventory turns over one hundred times a year, or once less than every four days. The result is higher revenue growth and what has become lethal competitive weapon against all PC manufacturers. In addition this supply chain enables Dell to accelerate revenue growth by entering into a new market opportunities like printers, servers, and storage.

3. Seek  good growth and avoid bad growth.
A framework for distinguishing good from bad growth is a crucial element in generating revenue growth. Good growth not only increases revenues but improves profits, is sustainable  over time, and does not use unacceptable levels of capital. It is also primarily organic (internally generated) and based on differentiated products and services that fill new or unmet needs, creating value for customers.
The ability to generate internal growth separates leaders who build their businesses on a solid foundation of long-term profitable growth form those who, through acquisitions and financial engineering, increase revenues like crazy but who create that growth on shaky footings that ultimately crumble.  Many acquisitions provide a one-shot improvement, as duplicative cost are removed from the  combined companies. But few, if any, demonstrate any significant improvement in the rate of growth of revenues.

4. Dispel the myths  that inhibit both people and organizations from growing.
An important part of any leader’s role is to realistically confront excuses such as:”We are in a no-growth industry, and no one is growing”;”Customers are buying only on price”; or “The distributors are the ones in direct contact with retailers, and there’s not much I can do.” Every leader needs a  growth agenda and the ability to communicate an urgency about the need to  increase revenues and build the business so that action-oriented people within the organization find out what needs to be done today.

5. Turn the idea of productivity on its head by increasing revenue productivity.
The old saw says “ we have to more with less”. The problem though, is that the focus is usually on the “less” and the “more” rarely happens. Revenue productivity is a tool for getting that elusive “more” by actively and creatively searching for ideas for revenue growth without using a disproportionate amount of resources. It shows how to invest your current level of resources in a way that leads to increased sales by analyzing everything a business does, from the seemingly mundane to the vitally important.

6.Develop and implement a growth budget.
All companies have a budget. It is, however, astonishing how little detail about revenue and sources of revenue growth you can find there. Almost all the lines in the budget are cost-related. Few, if any, identify resources explicity earmarked for growth. The growth budget provides a foundation that will allow a company to critical actions over the short, medium, and long terms that require resources to achieve revenue growth goals. And there is follow-though that includes rewards for success and penalties for poor performance.
7. Beef up upstream marketing.
One of the key missing links for generating revenue growth at most companies is upstream marketing. What most people visualize as marketing involves advertising, promotion, brand-building, and communicating with customers through public relations, trade shows, and instore displays. Those activities are obviously of great importance but primarily “downstream” in nature-that is , they enhance the acceptance of a product or service that already exists. Upstream marketing, on the other hand , takes place at a much earlier stage by developing a clear market segmentation map and then identifying and precisely  defining which customer segments to focus on. It analyzes  how the end-uses the product or service and what competitive advantage will be  required to win the customer and at what price points.

8. Understand how to do effective cross-selling ( or value/solutions selling).
Cross-selling can be a significant source of  revenue growth, but most companies approach it from exactly the wrong perspective. They start by saying, “What else can we  sell to our existing customer base?” However, instead of looking inside-out your organization, you need to look outside-in. Successful crosss-selling starts by selecting a segment of customers and then  working backward to define precisely the mix of products and services they need and creatively  shaping a value proposition is presented to the right decision makers in the language of the customer and spells out the financial, physical, and post purchase benefits of the offering.

9. Create a social engine to accelerate revenue growth.
Every organization is a social system, the centre of which is a  way of thinking and acting that sets both day-to-day actions and the long-term agenda. When an organization has an explicit growth agenda understood by everyone,  growth becomes a central focus-a social engine-during formal meetings as well as informal discussions. The social engine is then fuelled by growth ideas as one growth initiative builds on another. People at all levels then  see growths as everyone’s job. The social engine and its associated tools provide the mechanism for making revenue growth a reality by developing a laser-sharp focus, aligning individual silo priorities and making the right tradeoffs.

10. Operationalize  innovation by converting ideas into revenue growth.
Innovation is not the private property of lone geniuses working apart from the mainstream of the business. In any company of reasonable size, innovation is a social process that requires collaboration and communication for idea generation, selecting those ideas for revenue growth that are to be funded, and shaping those ideas into product prototypes and  launching them into the marketplace.

Excerpt from the book  Profitable Growth  Is  Everyone’s Business,-10 tools you can use Monday morning.

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