Good growth is profitable, organic, differentiated and sustainable.ProfitableGood growth is profitable.
It is also
capital-efficient, that is, it needs to earn a return on its investment greater than what the company could have received by putting its money in something ultra-safe, such as a Treasury bill.
There is
growth in revenues and steady improvement in profitability. Gross margin is an important indicator of a company's profitability and often not given the due it deserves.
Increasing gross margin and at the same time growing revenues at a rate better than the overall market is what makes for a great growth company.
There is a direct relationship between improved productivity and profitable growth.
The improvement in gross margin also reflects the company's ability to innovate ahead of its competitors.
A company's rapid growth attracts the best managers in the industry - managers who are committed to growth.
OrganicOrganic growth is the most efficient way to create revenue growth.
When people work with customers in the search for new ideas, translating those ideas into reality requires them to cut across silos and come together to make trade-offs and decisions in launching new products. It also builds the organization's self-confidence. Knowing that it has created a successful growth project makes it easier to tackle the next challenge, and the momentum feeds on itself.
Organic growth can also be based on filling an additional customer need and/or exploiting an organization's existing expertise in products, customer segments, or geographic regions, to capture new markets.
While good growth is PRIMARILY organic, there are times when it makes sense to supplement organic growth with smaller "bolt-on" acquisitions to fill strategic gaps, such as gaining a beachhead in a geographic region, obtaining a new technology, filling an adjacent need, or adding a new distribution channel.
Differentiated
No matter how "commoditized" your business is, good-growth companies find a way to differentiate themselves.
Winners in the quest for profitable growth pay attention to differentiation, however razor-thin.
To do that, they see things through the eyes of their customers and potential customers, detect what these buyers prefer, and hook the customer through products, services, and relationships that are better differentiated than those of the competition.
Dell offers a commodity: personal computers. Yet Dell differentiated its product line by making sure its product are reliable, low-priced, and customizable - that is, customers can design their PCs exactly the way they want.
Lexus truly differentiated itself in the post-purchase experience and in mechanical reliability.
Differentiation can also take place in the service that a manufacturer provides to retailers like Wal-Mart. By helping the customer increase its sales, the manufacturer has differentiated itself from being just another firm that the customer does business with.
Sustainable
Good growth continues over time. It has a sustainable trajectory.
It is not a quick spike upward in revenues, caused by cutting prices or by throwing substantial resources against a one-shot opportunity. The goal is to have the growth continue year after year.
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The only way this growth is going to occur is if everyone in the organization believes in it to be possible. It is up to the organization's leadership to create the right mind-set.
