Revenue growth must supplement a cost reduction agenda, October 14, 2004

By 

Peter Leerskov “The Strategist, www.lace.dk” (Denmark) – See all my reviews

  

Charan’s credentials include co-authoring the bestseller “Execution”. His writing is very much down-to-earth, no-nonsense, and straightforward. So when he says 10 tools for Monday morning, believe him! Here they are:

1. MAKE REVENUE GROWTH EVERYONE’S BUSINESS. Just like a cost reduction agenda may be a permanent theme in daily conversations and meetings in all departments, so should revenue growth be. And it’s not just for the management, it’s for all employees to think in this direction (just like we try with the cost reduction agenda).

2. HIT MANY SINGLES AND DOUBLES, NOT JUST HOME RUNS. While home runs provide the opportunity for a quantum leap, they are unpredictable and don’t happen all the time. Singles and doubles, however, can happen every day of the year. This piece of advice may sound somewhat trivial. But for what it’s worth, my experience from especially larger firms is that it may turn out to be the most important tool. Many big corporations tend to devote too much thinking into finding the big home run – and may give too little attention to the many small growth areas that short-term perhaps do not make an important contribution, but often keep the organization full of life and energy – and well-prepared for take-off…if the elusive home run should materialise.

3. SEEK GOOD GROWTH AND AVOID BAD 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. Charan constantly challenges leaders that seek acquisitions as primary driver for revenue growth … instead of organic growth.

4. DISPEL THE MYTHS THAT INHIBIT BOTH PEOPLE AND ORGANIZATIONS FROM GROWING. 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.”

5. TURN THE IDEA OF PRODUCTIVITY ON ITS HEAD BY INCREASING REVENUE PRODUCTIVITY. The old saw says, “We have to do 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.

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 of the lines in the budget are cost-related. Few, if any, identify resources explicitly earmarked for growth. The growth budget provides a foundation that will allow a company to increase revenues instead of just talking about it.

7. BEEF UP STRATEGIC MARKETING. One of the key missing links for generating revenue growth at most firms is strategic marketing. Most people visualize marketing as tactical tools such as advertising, promotion, and brand-building. Strategic marketing, on the other hand, takes place at a much earlier stage by identifying and precisely defining which customer segments to focus on. It analyzes how the end-user uses the product or service and what competitive advantage will be required to win the customer and at what price points. Charan is using the term “upstream marketing”. But I find it a weird way of describing strategic marketing. So I changed it.

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?” Instead of looking inside-out your organization, you need to look outside-in. Successful cross-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 unique to them.

9. CREATE A SOCIAL ENGINE TO ACCELERATE REVENUE GROWTH. Every organization is a social system, the center 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. This tool is closely linked to tool no. 1.

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…

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Passionate, Practical, and Persuasive, February 11, 2004

By 

Robert Morris (Dallas, Texas) – See all my reviews

  

  

  

  

Charan co-authored Execution: The Discipline of Getting Things Done with Larry Bossidy and has written numerous articles in which he examines various causes and effects of what I view as organizational dysfunction. In this volume, he correctly insists that responsibility for profitable growth must be shared by everyone involved. He offers “Ten Tools” by which to achieve that important objective. First, he identifies three barriers to such growth: “First, the balance has gone too far in the direction of cost-cutting at the expense of revenue growth…Second, when most managers think about growth, it is in terms of home runs — the disruptive technology, the new revolutionary business model, the mega-merger — instead of the singles and doubles that, when executed at a steady pace, cumulatively can increase revenue substantially…Third, improving productivity and increasing revenues are seen as two separate issues, when they are, in fact, inseparable for long-term success. If managers concentrate only on raising productivity, they are only doing half their job.” To these I presume to add a fourth barrier which Jim O’Toole discusses in Leading Change: “the ideology of comfort and the tyranny of custom.” Charan obviously has this barrier in mind when correctly insisting that several mind-sets which endure as received wisdom are, in fact, dead wrong.

With regard to the “Ten Tools” which Charan recommends, no surprises there. My concern, frankly, is that some readers will cherry-pick a few, try them, and then “see what happens.” That would be serious mistake. Rather, they should see all ten as separate but interdependent core principles to guide and inform the design and implementation of a cohesive, comprehensive, and cost-effective system by which to achieve and then sustain profitable growth. At a time when so many business books are published which offer answers, I especially appreciate Charan’s inclusion of several lists of questions which are relevant to or evoked by a specific issue or problem. For example, in the Conclusion (pages 196-198), he poses a series of questions which will help a reader to determine whether or not she or he is now part of a growth business. My own opinion is that these are precisely the same questions which decision-makers in any organization (regardless of size or nature) should frequently ask. Why not dedicate a half-day, select a group of (let’s say 10-12 key people), distribute these questions in advance among them, and then meet in executive session to share responses? Then reach consensus on specific action steps to be taken…by whom…with each being assigned a deadline.

Those who share my high regard for this book are urged to check out Jim Collins’ Good to Great, Michael Hammer’s The Agenda, Paul Niven’s Balanced Scorecard Step by Step, and Chris Zook’s Beyond the Core.

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Practical and Timely, February 16, 2004

Having worked with Ram before, I immediately purchased and read the book in one sitting on flight from S.F. to Detroit. Highlighting the many practical steps that he uses to stimulate your thinking, it was easy to adapt these suggestions into actionable steps to achieve our company’s own growth plan.

However, I was cautious to write a summary of the book until I distributed some copies to my team and tested the acceptance of these basic principles to revenue growth. I have seen some people scoff at some of Ram’s recommendations because they appear to be too basic…too simple to really make a difference. For example: "Revenue Growth is everyone’s business, so make it part of everyone’s daily work routine." or "Seek good growth and avoid bad growth." Easy to just read over the titles…hard to really implement with every sales person, account manager…every employee on a equal understanding and commitment.

After discussing with the management team, getting each to focus not just on cost productivity, but also revenue generation and revenue productivity, we determined that getting back to basics would prove a cultural challenge, but one we must tackle. Too many companies have driven "cost focus" into the heads of every sales person, purchasing agent, accountant, middle-manager…and stopped focusing on the business survival requirement-all companies must grow or they die.

This book, along with Ram Charan’s other book, "Every Business is a Growth Business" should be must reads for your key employees.

I recommend to all leaders that you personally adopt this book as a personal coaching tool with your key growth engine-your employees.

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