The CEO’s guide to growth in challenging economic times

Jamie Dickinson, Head of Strategy Practice at management consultancy Cairnforth outlines the seven strategic steps to delivering growth in a market downturn

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We all know that markets are tough at the moment. We are facing unprecedented times, and the full impact of the downturn is yet to be felt. However, even in challenging times there are winners – businesses who are committed to driving growth in their business despite markets that are being ‘rocked’ by current conditions.

As CEO, of course, it is your challenge to deliver shareholder value whatever the economic climate, but the route forward doesn’t always seem to be clear, so where does the often lonely CEO go for help? Let us share our experience.

We have found that there are seven key steps to get you on the right track.

Focus beyond the year-end. Think 80-20
The role of the board is to think strategically, and to look to the longer-term future and success of the business. The board should be thinking 80 percent strategically and 20 percent operationally, and not the other way round, which is often the case. At the moment, we are seeing the split higher than at any point over the last 15 years – almost 95 percent of discussions in UK boardrooms are around short-term tactical issues, rather than long-term strategies.

There is often a real tendency to get caught up in the annual budget cycle, and we can often become obsessed with meeting short-term targets. However, this approach can serve to artificially limit growth. By focusing purely on meeting short-term internal expectations, you could be missing significantly greater market opportunities.

Instead of accepting a notional five percent growth, why shouldn’t your business be aiming for 20 percent? You certainly wouldn’t hear any arguments from shareholders. But to do this, you will need to focus on longer-term market opportunities, and you’ll need to get the buy-in and support of the board, to ensure you are all focused on delivering.

TwoLimit short term cutbacks – You can’t shrink your way to growth
When we encounter tougher economic times, or when businesses are looking at how to improve profitability, there is an instinct to look for immediate cost savings and ways of reducing overheads in order improve the bottom line.

Driving improved efficiency in the business in this way is often very relevant, and can add significantly to profits, however, beware, you cannot shrink your way to long-term growth. Cutting back too far and too hard will significantly limit your longer-term opportunities. Contrary to conventional wisdom, successful businesses often invest more heavily in the tough times to lay strong foundations for future growth. Of course it is not spend, spend, spend, but well focused and targeted investments that really count.

threeFocus for growth
As we struggle to meet targets our natural inclination is to go for any business (and often at any cost), but this is a high-risk strategy. Fundamentally, businesses that succeed are highly focused. They are very clear about which market opportunities are right for them, and they re-engineer their business in order to take advantage of these markets and customers. This may be their core business, but there can also be adjacent markets which offer significant development potential. Whichever the opportunity, having the board consistently clear about where our business will grow is key.

Being as clear about the markets we will not develop is equally as important. Focus your team’s time, effort and energy in the markets that will offer your business the best chances for growth. This could mean being brave… some parts of your portfolio might not cut it any more, and you may need to exit some business streams.

FourSet yourself apart
Put bluntly, the only way you will succeed in taking market share from your competitors is by offering a product or service, which is better and different. Simply being as good as the market is not good enough. You wouldn’t switch your domestic electricity supplier if all you were offered was the same price and the same level of customer service as you already had – just think of the hassle and time it would take, for no real benefit.

To weather the storm, and to drive long term and sustainable growth, quite simply, your business has to differentiate.

Often, in the boardroom, we convince ourselves that we already are different and better than the competitors… but are we really? If we were to ask 100 customers and prospective customers to compare our approach to that of our competitors, how would they rate us? Finding answers to these fundamental questions is, again, another key lever of growth.

FiveThe impact of change on existing resources
Once you have clarified your business focus, and are clear on how to differentiate, you need to look internally at the impact of the growth strategy on your business. What will your business need to look like in order to realise the plans you have in place, and what additional people, processes and resources will need to be made available?

Fundamental questions need to be asked about your business processes. Operational thinking might say: we need to invest in new plant, but strategic thinking might say we need to outsource the whole manufacturing process or licence production if we are to achieve the right volumes and reduce costs. In the retail sector, you might need to examine whether it makes sense to revamp your existing stores, to expand your chain, or if it would be more profitable to invest in an online model.

One thing is very clear, your business will need to change if it is to emerge from the current climate a real winner. The only question is, how much will we have to change?

SixPlan… Then make it happen
Creating our ‘route map’ for growth is almost complete and it has been a tough journey. However, now is when the hard work really begins. Unless we plan in great detail how to bring about the change very little will happen. Unless we devolve responsibility and accountability to the organisation to deliver the change, we will not achieve our targets. Unless we stay focused, we will dilute our great ideas and our strategy will become another ‘me too’ offering.

It’s a fact that over 80 percent of strategies are created and never implemented. They sit on a shelf gathering dust and are often never seen again. Don’t let that happen to your growth plans. Monitor progress and performance rigorously, communicate widely to the business and explain ‘what it means to me’, embed the strategy in the business and lead the organisation through an exciting transformation.

SevenIdentify the need for strategic direction
Face up to the fact that your business may very well need to change. Some symptoms of a company in need of a clear strategy are easy to spot. You might be struggling to hit sales targets and deliver improved return to shareholders, in which case the numbers speak for themselves. However, the need for a strategic rethink is not always so obvious. Hold up the mirror and ask yourself some key questions: Are you losing share? Are your board aligned and agreed on the way forward? Do they know where growth will come from and how to deliver it? At Cairnforth, we have a five minute, 20 question diagnostic tool that can help you find some of these answers. Take some time out to challenge the status quo.

Times are tough, but there are clear and methodical steps that can lead you to be a winner, even in uncertain markets. Take the challenge and guide your business to longer-term success, the view from the top is breath taking.