Research Shows How Growth Strategies Earn 2.8X More Revenue

Highlights

  • Research revealed that most companies do not have a formal and active growth strategy. However, those who did achieved 2.8 times greater year over year revenue growth than those who did not.
  • The research also found that companies with an optimized growth strategy achieved 67% higher revenue growth than those with less mature strategies.
  • The highest growth companies (i.e., the top 15 percent) were 6.3 times more likely to adopt and actively manage an optimized growth strategy when compared to all other companies.
Johnny Grow Revenue Growth Consulting

My father used to remind me, "Well begun is half done." I think that adage is quite relevant to strategic planning.

A growth strategy defines the pathway to achieve targeted revenue results in the shortest time and least cost. It's bigger than the sales plan because it considers all sources of company revenue, not just the sales force. Many high growth companies refer to it as their revenue engine.

It designs and communicates the goal, identifies the actions to achieve the goal, mobilizes resources to execute the actions and rigorously measures progress.

The strategy includes specific objectives, prescriptive methods, resource allocation and real-time analytics that collectively create more favorable outcomes than would occur otherwise. But just how much more favorable?

Research performed for the Business Growth Report set out to identify if and how growth strategies impact revenue results.

We structured the questions to analyze data from three perspectives. We first wanted to know how these strategies were used by participants. For example, was the strategy a planning exercise or a rigorous management tool?

We then wanted to measure the participants strategy maturity and correlate varying levels of maturity to revenue growth results.

Finally, we wanted to measure adoption by performance archetype.

Data from the research survey surfaced these findings.

Growth Strategy Adoption

We asked participants to describe their growth strategy. We also correlated revenue growth for each type. Note that the annual growth rate was an average over the prior three fiscal years. The results are shown below.

Growth Strategy Research Results

In the above chart, the second category of one and done exercises were quite often created near the beginning of the fiscal year and seldom or never updated thereafter. That differed from the third category where growth strategies were actively measured and adjusted throughout the fiscal year.

And as the bar chart shows, changes to annual revenue differed as well. Respondents with active growth strategies achieved 2.8 times higher revenue growth than all other respondents.

Research shows that companies who actively managed a Growth Strategy achieved 2.8 times greater year over year revenue growth than those who did not.

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Program Effectiveness

We wanted to further assess company revenue performance based on the maturity of the strategy.

We know that not all strategies are equally effective and continuously refined programs improve results.

Participants were given maturity levels with descriptions for each. They were asked to designate their programs into one of four categories of Ad Hoc, Informal, Formal and Optimized.

Maturity levels were based on factors such as departmental alignment with the corporate growth plan, the ability for the strategy to accurately forecast revenue measures, the frequency of strategy reviews and updates, whether the strategy was customer or product focused, and how well the strategy integrates with the Go-to-Market Plan.

We then compared maturity levels with revenue growth (over the prior three-year period). And the results were revealing.

Growth Strategy Plan Maturity

Those companies with optimized growth strategies achieved 67% higher revenue growth than all others.

This very high double-digit increase makes it clear that more mature programs drive increased revenue performance.

Performance by Archetype

We then drilled further into the data to correlate performance archetypes with maturity levels. The results in the below chart show respondents with optimized growth strategies by archetype.

Optimized Growth Strategy

While it's no surprise the Best-in-Class archetype (i.e., the top 15 percent) was more likely to manage optimized growth strategies, the disparity between this cohort and the others was startling. The Best-in-Class were 6.3 times more likely to manage an optimized growth strategy. Seldom does one archetype stand so far above others.

The data was clear that mature and optimized strategies highly correlate with increased revenue growth over a three-year period.

One More Point

The research relied on a statistically significant but smaller sample size than other findings in the Business Growth Report.

That's because 37 percent of survey participants do not produce an annual growth strategy. That was an unexpectedly high figure.

When we correlated these participants to business performance this group fell almost entirely into the Laggard archetype. That was expected.

Without proper planning, actions become more of a year-to-year continuation of the status quo. Business execution reverts from high impact revenue accelerators to piecemeal tactics or best guess explorations. Performance results often arrive as more of a surprise than a predicted outcome. And when revenue growth isn't forecasted pursuant to a strategy and plan, it's difficult if not impossible to measure in real-time and intervene with timely course corrections as needed.

As Lawrence Freedman writes in his book Strategy: A History, "Without a strategy, facing up to any problem or striving for any objective would be considered negligent. … There is a call for strategy every time the path to a given destination is not straightforward."