Why Companies Fail to Grow

The Top 5 Reasons

Highlights

  • Companies frequently fail to grow based on one or more of five reasons. Preventing or quickly resolving these obstacles will accelerate your revenue growth.
  • Each revenue growth challenge can be systemically prevented, minimized or remedied with a proven framework or best practice.
  • While it is impossible to anticipate every business growth challenge, mitigating the most common challenges will reduce the likelihood that big problems will occur, and that concerns can be dealt with before they become crisis.
Johnny Grow Revenue Growth Consulting

I've been helping companies grow their revenues for over two decades. Most projects start with an assessment to learn what's holding them back. That's important because a full and accurate diagnosis gets past symptoms, surfaces the root causes and gets to an accurate prescription.

Experience shows there's a relatively small number of obstacles that frequently contribute to stalled company performance.

Here are 5 of the most common factors that hold back company growth and the prescriptions to breakthrough those barriers.

1

No Prescriptive Growth Strategy

I've never had to help a company grow if that company had a prescriptive growth strategy. Many companies have planning documents and almost all of them have budgets. But those tend to be control documents and are quite often created to pacify stakeholders; not systemically grow the company.

The absence of a data-driven growth strategy is a missed opportunity.

A ten-year research study by Harvard Business School found that companies with clearly defined revenue growth strategies outperformed competitors by 332% in sales, 304% in profits and 883% in total shareholder returns.

Similar growth strategy research performed for the Business Growth Report found companies that actively managed a Revenue Growth Strategy achieved 2.8 times greater year over year revenue growth than those who did not.

No CEO would drive to a destination they've never been without a map. Yet pursuing a new and presumably never before achieved revenue target without a data-driven growth strategy is like driving to a destination without having the address.

So how do you achieve the right revenue growth strategy?

What's needed is a business growth strategy that defines a calculated approach to achieve a slated growth objective. Most often that means a defined pathway to grow revenue or market share at the least cost and in the shortest time.

The best revenue growth strategies capitalize on core competencies and design competitive advantages that create differentiation. They show how the company will win customers, position the brand relative to competitors, and make the needed investment to achieve the revenue goal.

Growth strategies surface many avenues to company growth. For example, you can expand your customer base, penetrate new markets or launch an innovate product. That's why the best revenue growth strategies apply data and predictive analytics to measure and compare alternatives, understand tradeoffs and put a laser focus on the roadmap that leads to a defined destination.

Company Growth Formula Predictive Model
2

Piecemeal Operations

Many companies I help can't understand why something they think they are doing well isn't working. For example, most have stepped up their investments in the sales organization. But many only achieve incremental and oftentimes temporary sales gains. Sometimes, these small financial gains don't cover the investment.

Their disappointment can usually be traced to one of two causes.

First, they make incomplete investments. Many hire more salespeople. But without also investing in sales coaching, sale methodologies, improved sales processes or other tactics that lead to higher win rates, they get more of the same. They also get frustrated because two out of three new hires will be gone within about 18 months. The better approach is to diversify their investment among labor, sales performance best practices and technology automation.

Second, they manage piecemeal operations. They invest big in the sales organization but not so much in R&D for innovation, or customer service for increased customer share, or marketing for lead generation.

They focus in one area of business growth but overlook or discount related areas. They don't see how all the pieces fit together. They don't operate a holistic or closed loop revenue process. The portion that gets their attention and investments operates well but by itself cannot sustain revenue growth.

The lack of coordination results in different departments doing their own things and driving toward their own performance measures. They are not in alignment. They are not helping each other and creating synergy to support the company's revenue growth objective. Their revenue formula is fragmented and incomplete.

It's no different than an 8-cylinder car engine operating of 4 or fewer cylinders.

What's needed is a holistic and integrated revenue process. The best revenue cycles are not defined with departmental transfers from marketing to sales to customer service. Instead they are defined pursuant to the customer journey. They show how every department can contribute to any point in the journey in a coordinated fashion.

Unless and until departmental goals are aligned, coordinated and symbiotic, the company will incur suboptimization and challenged revenue growth.

3

A Lack of Repeatable and Predictable Processes

Repeatable business processes are a prerequisite for predictable results and scale.

Most companies have consistent processes for most departments. Human Resources, procurement and finance organizations have refined their processes to achieve expected outcomes. However, sales and marketing are oftentimes different.

Most growth challenged companies do not have documented, consistent and measurable sales and marketing processes. And the simple truth is you can't refine a process until it is consistent, and you can't improve it until it's measurable.

Without streamlined processes the company will incur perpetual fire drills and fail to scale.

The goal of business process improvement is to make processes streamlined and automated and make outcomes efficient, effective and predictable.

If you are seeking a business process improvement method, I have found agile value stream mapping is well suited for sales and marketing.

Agile Value Stream Mapping

The upside is that streamlined and consistent processes remove chaos and create their own positive momentum, much like a spinning flywheel.

4

Fragmented Data and Technology

Scaled revenue growth requires data and technology. But most companies are data rich and information poor. They have either too little technology or too many fragmented applications.

Their technology procurement is generally a response to a current problem and not a long-term technology strategy. Customer data resides in multiple data siloes, making workflow automation and information reporting much more difficult. Because systems are fragmented, scarce IT resources are needed for system integration and retrieving data for analysis.

The remedy is to acquire technology pursuant to a technology strategy, focus on growth technologies that are designed to grow revenues, and adopt an analytics strategy that converts data into your most valuable asset.

And more thing. Bad processes are not helped by technology. Which is why I positioned process design ahead of technology automation.

Business Process Automation
5

Poor Customer Growth

Many companies fail to maximize revenues because they focus on a prospect until they become a customer and then they focus on the next prospect. Once the prospect is acquired, they are essentially ignored.

The two ways to increase revenue are to acquire more customers and increase sales to existing customers. Business growth will be reduced if you ignore the later.

However, most companies have a bias toward new customer acquisitions. In my consulting work with clients, I find many have overly broad revenue reporting. They view sales in the aggregate. When sales rise, everything looks good.

However, many times under-performing areas get buried and exacerbate. This often occurs as new client acquisitions may grow revenues while existing client cross-sell is in decline. When client share or customer lifetime value (CLV) fail to rise, it drives increased client churn in future periods and is then very time consuming to resolve.

The solution here is to maintain focus on growing existing customers. That means continuously communicating with customers, letting them know of additional solutions that deliver additional benefits, and proactively upselling and cross-selling customers to drive incremental revenues and increase CLV.

Management reports should include revenue along with cross-selling, customer share, CLV and retention metrics. And they should all increase every period.

See the top 5 reasons why companies fail to grow and the prescriptions to breakthrough those barriers.

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