Many companies approach growth management with no strategy other than to do what they did when they were new. New companies begin with a flourish. They have certain capabilities and knowledge. As they get caught up in short-term survival, they may cling to the same capabilities and knowledge. Or they may acquire the wrong kind of new knowledge and fail to grow the right capabilities. In the end, they may pour on new capabilities and knowledge — when it’s too late.
The key to a long, healthy corporate life is steady growth. According to a 1998 survey, of the companies that enjoyed greater than 10% sales growth per year, about 78% were still around six years after starting. Of the companies with flat or decreasing sales, only 27.5% survived for six years.1
To grow steadily and avoid stagnation, a company must learn how to scale up and extend its business, lengthen its expansion phase, and accumulate and apply new knowledge to new products and markets faster than competitors.
Managers can’t leave growth to chance. They must choose a plan that renders consistent sales growth for years, not just in short bursts. A good growth plan captures the vision for expanding the company. It addresses the product and market combinations the company intends to pursue, the size it hopes to achieve in a particular time frame, and most important, the know-how and organizational structures that will support expansion or diversification.
Such planning has an internal focus — rather than a focus on what competitors might do or what type of technological change might transform an industry. It is designed to help a company exert more control over its fate as it tackles outside challenges.2 Implementation is easier for startup companies but possible for established enterprises, too. Company size should not drive the growth plan. Companies of all sizes need systems for creating, acquiring and sharing knowledge. Consider Netigy, a San-Jose-based e-commerce service provider. Netigy has only 650 employees, but it already has invested in a chief knowledge officer and a knowledge-management system for 20,000 people. Netigy is prepared to handle its vision for growth.3
What does drive the growth plan is the company’s set of capabilities. Managers must choose a plan that fits with the knowledge, learning skills and assets that the organization possesses or plans to develop.