A winning playbook for profitable growth
By Tim Breene and Michael R. Sutcliff
A common characteristic of high-performance businesses is theability to consistently generate new sources of revenue growth whiledelivering profitability from their core business. Critical to creating this 英國dissertation網(wǎng)capability inside large organizations: a disciplined approach and sustained effort from the senior management teamCorporations across industries perenniallystruggle to generate and maintain profitablegrowth rates that match the expectations ofinvestors and other stakeholders. This challengeincreases in complexity as organizationsand markets mature over time. And becausesustained, profitable growth is a key requisitefor high performance, avoiding the traps ofgrowth without profit or stalled revenuegrowth remains a top priority with seniorexecutive teams as they manage throughchanging market conditions, customer expectationsand competitive threats.Choosingbetween investing for growth and deliveringprofitability from the existing business hasalways been a source of tension for managementteams. High-performance businesseshave met this challenge with a commitmentto consistently deliver both expected financialresults from the existing businesses and revenuegrowth through new business initiatives.General Electric Company, Procter & Gambleand UPS are just a few of the companiesactively working to improve the processesand discipline needed to successfully deliveron this commitment.
Growth modelsAt GE, a recent review of the company’s businessunits demonstrated that the groups thathave been managed for both growth andprofitability have done the best over the pastdecade. The company has developed a modelfor creating a disciplined process that can
The journal ofhigh-performance businessThis article originally appearedin the January 2007 issue of
A winning playbookfor profitable growthBy Tim Breene and Michael R. Sutcliff
國際商務(wù)管理留學(xué)生畢業(yè)dissertationA common characteristic of high-performance businesses is theability to consistently generate new sources of revenue growth whiledeliveringprofitability from their core business. Critical to creatingthis capability inside large organizations: a disciplined approachandsustained effort from the senior management team.reliably draw new revenue streams
from existing businesses.1P&G also has made considerableprogress in reinvigorating growthacross products and geographies byadopting a new “Connect + Develop”model. The model enables new businessinitiatives by helping the companylearn from both proprietary andopen networks of customers, suppliers,technology leaders and innovators.P&G is working with externalorganizations such as NineSigma andInnoCentive to create technology andscientific problem briefs that can beshared with its network of thousandsof possible solution providers worldwide.#p#分頁標(biāo)題#e#
The company is also workingwith YourEncore to connect withhundreds of top retired scientistsand engineers from more than 150companies with client businesses.Since P&G adopted the model in
2000, the number of new productsdeveloped with external assistance
http://www.400190.com/dissertation_sample/Australia_Dissertation_Sample/has more than doubled. More important,
the initiative has given P&G
a richer understanding of how thecompany can solve tough customerproblems that have not previouslybeen addressed.
The experiences of these and othercompanies that are actively developingnew sources of revenue—bypushing the boundaries with newservices, new business models andnew revenue models—suggest thatthere are five things to get right.Setting the right levelof ambitionDelivering on growth objectives isone of the most difficult assignmentsa management team can take on.
Although it is important to squeezecontinuous growth out of existingproducts and services, the commoncharacteristic of top performers inthis regard is an aspiration to havea significant impact on the business.Working on ideas that generate onlyincremental growth within the coreis not likely to lead to the kindof sustained level of energy andcommitment required to achievehigh performance.
The focus at GE on “ImaginationBreakthroughs”—ideas that can generate$100 million in revenues withinthree years—is a good example of
developing new growth platforms. UPSprovides another with the developmentof its Service Parts Logistics and SupplyChain Solutions businesses (see“Inside the values-driven culture atUPS,” Outlook, September 2006).Accenture itself is taking a similar
approach, identifying a small numberof potentially high-impact growthplatforms to build new businessesaround. Each new business platformmay require a transfer of existing skillsfrom the core business, the acquisitionof specific capabilities from externalsources and the development of multiplenew businesses around a keytheme or industry problem set.Creating a team capable of
delivering the desired resultBuilding a team capable of meetingsubstantial new revenue growthobjectives requires a serious commitmentof talent,a sustained focusfrom the management team andflexibility in providing the teamwith skills over time.One of the most consistent lessonsfrom research related to growththrough new businesses is the importanceof creating a full-time team ledby a respected business leader capableof working across the entire managementteam to get things done. Itis not possible to achieve the desiredresults without dynamic leadership,adequate funding and the particular2Outlook 2007Number 1
Evaluating individualdeas should start witha high-level assessmentof the potential revenuesavailable in the event
that the idea can, infact, be executed.1 Jeffrey Immelt, “Growth as a process,” Harvard Business Review, June 2006.(Continued on page 4)3#p#分頁標(biāo)題#e#
Outlook 2007
Number 1
2 Stalled growth occurs when real revenue CAGR drops below 6 percent during any 10-year period or whenthe maximum difference between growth rates in any two consecutive periods exceeds 4 percentage points.
3 Companies that were able to restore growth to at least 1 percentage point above real GDP growththrough the end of the period.
Delivering revenue growth alone is not too difficult for most companies. A combinationof acquisitions, product expansions, marketing programs to attract customers with lossleaders and other techniques can usually move the revenue needle over time.
Delivering profitable growth is an entirely different matter.Accenture research reveals that companies have found it exceedingly difficult to sustainabove-market profitable growth over the long term. For example, we recently conductedan analysis to examine the track record of all global publicly traded companies anddetermine how many had achieved at least 8 percent annual growth every year since1995. This growth threshold represents roughly a 50 percent premium on average GDPgrowth rates during the period.Of the 6,670 global public companies in the survey universe with more than $500million in revenue in 2004, only 225—or 3.3 percent—were profitable and exceeded
8 percent growth every year between 1995 and 2004.The Corporate Strategy Board discovered similar performance over an even longertime period. The organization’s landmark study of 172 industrial and comparablysized service companies that had been members of the Fortune 50 during the past40 years found that only 9 percent were able to avoid “stalled growth” throughoutthe 1955–1995 period.2 Of this group, 4 percent were able to reignite some degreeof growth after stalling during this time,3 while the remaining 5 percent—an “allstar” group—remarkably sustained above-average growth over the entire fourdecades. The far more common story lies with the balance—the 91 percent ofFortune 50-size companies that stalled during the past four decades and neverrecovered to above-market growth.
Not surprisingly, the equity markets have been particularly unforgiving when presentedwith stalled growth. More than two-thirds of these stalled companies lost more than50 percent of their market cap relative to the stock price high achieved during theirhigh-growth era.Much easier said than doneskills required to successfully completea very complex assignment.
Active engagement from the entiresenior management team, including
the CEO, will significantly increase
the chances for success. Indeed,
the management team should beactively involved right across theboard—learning about new opportunities,helping to shape solutionsto problems and accepting a widerrange of risk than individual businessunit managers would be willingto support.Choosing the playing field
Most companies we have studiedseem to quickly reach the conclusion
that the best place to look forgrowth is not in new white spacesbut in places near their core businesses,a space UPS refers to as#p#分頁標(biāo)題#e#
“market adjacencies.” The probabilityof success is much higher when newventures can leverage the core capabilitiesresident within these existingbusiness. At the same time, however,it is often difficult to be truly innovativeif the team views customerproblems and industry boundariessolely through the lens of the existingbusiness.
As one screening criterion forchoosing the playing fields of thefuture, Accenture chose to focuson the time horizons during whichwe expect to solve different typesof problems. We also consideredmacroeconomic trends, specificchanges in industry boundaries andcustomer values, and competitivelandscapes.
Identifying, developing andtesting individual ideasOne of the most difficult steps infinding new revenue growth is the
identification of new opportunitiesto solve customer problems or defineentirely new market segments.Internal employees are not alwaysable to see the potential leveragepoints for applying existing capabilitiesin innovative ways to create newsolutions, because they are trained touse those capabilities to deliver predictableresults on a recurring basis.
At the same time, however, employeesfrequently have lots of ideas abouthow the company could innovateusing existing internal capabilities to
generate new revenue streams. A disciplinedprocess for collecting newideas from both internal and externalnetworks and scoring those ideasagainst common criteria is a criticalenabler to systematically finding the
best opportunities.Evaluating individual ideas shouldstart with a high-level assessmentof the potential revenues available
in the event the idea can, in fact,be executed. A reverse incomestatement that tests the assumptions
about market size, market share,pricing and customer take-up ratescan quickly eliminate ideas that lacksufficient growth potential. Completingthis type of rapid analysis beforespending time on developing operatingmodels, projected income statementsand investment requirements,and other planning assumptions canhelp the company quickly focus onthose ideas that can generate newgrowth platforms.
The ability to connect the dotsbetween ideas and to group ideasaround the strategic decisions topursue specific new growth platformsis important for any companyseeking the kind of innovativethat GE would describeas true imagination breakthroughs.
Typically, managers from the corebusiness weigh in with an informedpoint of view.
But each idea requires substantialwork to develop it further. Mar-shallMcLuhan once observed that “a pointof view can be a dangerous luxurywhen substituted for insight an4
Outlook 2007
Number 1(Continued from page 2)understanding.” This is particularlyrelevant as a company’s teams takeon the task of actively learning howeach opportunity can be shaped forsuccess in the markets.
The processes used to test anddevelop new businesses differsubstantially from those requiredto consistently deliver expectedresults from existing businesses. Newbusinesses often require an activelearning approach, which, in turn, is#p#分頁標(biāo)題#e#
likely to involve higher failure ratesthan the core business. It is important
that companies create a teamcapable of operating in this type ofenvironment and not assume thatmeasures of success from the corebusiness will apply to the opportunitiesunder development.
The development of individual ideasshould be managed using a stagegateprocess to test key assumptionsand actively shape the idea with aclearunderstanding of what worksand what doesn’t in specific markets.
The management team involved inthis type of development work mustbe comfortable with rapidly adjustingassumptions andcontinuingtoshapetheideaasnew insight and
knowledge is acquired.
Leveraging the core business
It is critically important that theteams charged with developing newbusiness opportunities achieve apractical balance between separatinga new business opportunity from thecore business during developmentand incubation activities, and leveragingthe internal capabilities thatcould be used to increase the probabilityof success of generating newrevenue streams.
As a new business is being shaped tofit the needs of the market, it isoften necessary to make sourcingdecisions, change marketing andsales strategies, test pricing modelsand move quickly to change thebusiness model. Therefore, shieldingthe new business teams from the
company’s standard managementand business processes is essential;indeed, research from multiple studiessuggests that this autonomy isa key success factor.
Independence from the core businessdoes not necessarily mean separationfrom existing capabilities, however;these could be leveraged tocreate a competitive advantageas a new business opportunity ispursued. For example, P&G assumes
that existing distribution channelsand trusted relationships within theconsumer products supply chain canbe leveraged to support growth formany new business opportunities.Plans to leverage that capability areone of the screening criteria usedto choose new business ideas fordevelopment. Active planning toleverage core capabilities is an earlyindicator that development teamsare creating a balanced plan forfuture success.
The ability to consistently identify,develop and bring new growth platformsto market is difficult to
develop within corporate processesdesigned to sustain profitability andincremental growth. Successfullybringing new solutions to marketrequires distinct skills, substantialeffort and continuous focus overmultiple financial cycles.Management teams intent oncreatingnewgrowthplatformsmustoftentake a leap of faith as they investahead of the market. They must bewilling to experiment and disruptexisting solutions. They must beconfident in maintaining investmentsacross fiscal reporting periods evenin the face of financial pressures inthe core business. The rewards forsuccess are high performance, sustainedmarket leadership over timeand satisfied customers looking forwardto the next round of innovationand value delivered.
Number 1About the authors#p#分頁標(biāo)題#e#
Tim Breene is Accenture's chief strategyand corporate development officer.
Since joining the company in 1995,Mr. Breene has held a number of seniorpositions, including group chief executiveof Accenture Business Consulting,managing partner of AccentureStrategic Services and managing partnerof the company's global service lines.
Mr. Breene, who is based in Wellesley,Massachusetts, is a member of the
Accenture Executive Leadership [email protected]
Atlanta-based Michael R. Sutcliff isthe senior executive responsible forworking with organizations across
Accenture to identify, create and
incubate new businesses. His careerexperience includes global assignmentsacross industries in strategy, transformational
change, systems integrationand outsourcing projects. Prior toassuming responsibility for new businessgrowth initiatives at Accenture,
Mr. Sutcliff helped build and lead thecompany’s Finance & PerformanceManagement service line. He is the
coauthor of the 2006 book CFOInsights: Delivering High Performance.
[email protected]
Outlook is published by Accenture.
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