5 steps to create a path toward profitable growth

Understand today

In theory, this should be the easiest step in the growth process. Financial statements would seem to provide plenty of detail on the status of a company, and risk management functions under the Three Lines Model should have a strong handle on an organization’s risks and opportunities. Internal audit should be identifying potential areas of concern, and human resources should have a strong understanding of the skills of a company’s people as well as their engagement levels.

Understanding today requires an objective look at:

• Business results and financial performance.
• Feedback from customers.
• Feedback from internal stakeholders, including employees.
• Gaps or shortcomings in people, processes or technology that need to be addressed regardless of the growth strategy that is created.
• Comparison of performance against competitors and market trends.

“It’s a combination of internal and external information that you gather and try to triangulate around,” said Grant Thornton Growth Advisory Principal Jonathan Eaton. “This tells you whether your operating model is adequately supporting your current operations.”

It’s critical, though, that this assessment be objective and not viewed through rose-colored glasses. Analysts of executive leadership surveys routinely observe that respondents rate their own business prospects more optimistically than they view the overall economy.

This tendency to be overconfident in an organization’s current state is one reason that companies seek help from third parties in building their growth strategy. An outsourced provider can provide a more objective perspective for analyzing where a company stands today.

Align on the future environment

The history of the Dow Jones Industrial Average shows the difficulty that successful companies have in perpetuating long-term growth. None of the original 12 companies in the Dow in 1896 remains in the iconic stock index. General Electric, the last of the Dow originals, was removed from the index in 2018.

A continually refreshed focus on the future is the best path to sustaining growth, and it often requires market research and high-quality forecasting.

“Aligning on the future environment requires an understanding of industry trends and also a company’s own strengths and weaknesses,” Eaton said. “You also need to understand the opportunities and threats that exist.”

Gaining insight into the future is a challenge, but it requires considering:

• A company’s differentiation plays and how leadership can lean into them and invest in them.
• How the strengths and differentiators will align with customer needs within the markets in which a company competes.
• Potential regulatory impacts and other threats.

“If you don’t understand where markets are moving, what’s trending and what regulators may do that could affect your business, then you’re falling behind,” Eaton said.

Define your future

This is the phase where company leaders begin really leaning into the strategy. This is where they consider how they can execute on their strategy relative to the competitive landscape.

“If we think about defining the future, where might we make investments?” Eaton said. “What are the things we need to recalibrate from a strategy perspective in terms of how we intend to grow and how we’re going to differentiate? How are we going to protect the core and at the same time expand and hit the compound annual growth rate that investors or shareholders are expecting?”

When organizations define the future, they begin to think about the impact of the strategy on the operating model. What will the strategy mean for people, processes, technologies, data and governance? Leaders should assess:

• What needs to be changed to accommodate the strategy?
• What does the company need to build that doesn’t already exist?
• Is the organization aligned properly with the appropriate priorities knowing the budgets will be limited?

“For example, if you need to onboard new customers, you might need a number of different capabilities in the organization to make that real,” Koppy said. “To close the gap with where you’re trying to go, you need to strengthen some of these capabilities, which you can do in a number of different ways including investing in people or technology, and establishing new processes.”

Leadership should take inventory of the people, processes and technology it possesses and compare it to what it will need to operate in its aspirational future state under the operating model it plans to build.

“Ideally your organizational design is not specifically built upon the talent you have, but on where you want to go,” Koppy said. “And from there you can start to make decisions. If these are the people you have, is the talent suitable to flow within the organizational design to make the future state operating model real?”

Walk the future back

Once the future is defined, the organization can work to establish the timelines and milestones needed to deliver on the growth goals by the target date.

“When you walk the future back, you establish the different milestones and thresholds you must achieve along the way,” Eaton said.

This process often results in a multiyear road map with business cases and for each initiative in the growth strategy. The road map creates milestones at different altitudes, and accomplishing one goal along the way unlocks the next set of work.

Responsibilities and traceability are established based on the strategic intent, and flexibility is built in to accommodate changes that weren’t envisioned when the strategy was conceived.

“The methodology informs the larger direction, but it’s not the same as a recipe,” Koppy said. “It doesn’t necessarily need to be followed exactly. Some organizations may dig in hard to enforce the planned maturity of capabilities, but others are more comfortable with a broad brush that’s used as a general marker to inform the maturity of the capabilities.”